Broadside for Patel's 'competition meddling'

Economic Development Minister Ebrahim Patel: An "activist, interventionist and micromanaging minister", according to David Lewis. (Image: GCIS)

Patel was an "activist, interventionist and micromanaging minister", Lewis said last week at a workshop on the Wal-Mart deal at the Wits Law School.

Wal-Mart's multibillion-rand acquisition of Massmart has been marred by controversy from the start, with three Cabinet ministers intervening and delaying processes originally set by the competition authorities.

Lewis, now head of the Congress of South African Trade Unions' Corruption Watch, said the handling of the Wal-Mart transaction had not been an "edifying process" for SA.

Back to the days of apartheid

He said it certainly had not strengthened the hand of the competition authorities, but rather had shoved them back into the apartheid years when deals were made behind closed doors in "smoked-filled rooms".

Saleem Mowzer, acting director-general of the Department of Economic Development, said Lewis's views were "flatly contradicted" by the facts and the emerging jurisprudence from the Competition Appeal Court.

"But for the government's involvement, the (Wal-Mart) transaction would have gone through without conditions, at the expense of the public interest," he said.

Lewis said the hostile merger of Japanese firm Kansai Paints and SA's Freeworld Coatings, in which he had been an adviser, illustrated how Patel applied leverage to "extort" concessions that were not merger-specific. The same happened in the Wal-Mart transaction.

Interventions

In both cases, Patel intervened in the proceedings, but first tried to negotiate a separate process that had been conducted independently from his own authorities' processes. Lewis expressed concern about this form of managing industrial policy.

He said it was akin to highwaymen who guarded the narrowest part of a gorge stopping passing coaches and extracting goods before allowing them through.

Such intervention made for bad law, bad competition law and bad industrial policy, he said. There was no clarity, no transparency and a lack of urgency.

"The most dangerous portent was the suggestion that if the parties wanted their merger to go through, they had to speak to the minister, who could leverage his position with the competition authorities to get it through expeditiously, or he could hold the proceedings until the parties reached an agreement with him," Lewis said.

Unfair accusation

Heather Irvine, director at law firm Norton Rose, who represented Patel and his Cabinet colleagues in their appeal against the Competition Commission's passage of the Wal-Mart deal, said it was unfair to say that Patel had impinged on the independence of the competition authorities.

"There is no basis to suggest that his intervention was an abuse of the process. He certainly did not raise spurious issues, but legitimate and important issues in terms of public interest," Irvine said. Issues raised at the Competition Appeal Court had led to the imposition of conditions.

Lewis said Patel had appointed a team of experts to advise him on the effect of Wal-Mart's entrance in the economy.

"I am surprised that nobody demanded to see the report by the team of experts, and I ask myself if there ever was such a report."

'Not all the water had gone through the sewers'

Now a second round of three experts was about to be enrolled, by order of the Competition Appeal Court. They would have to compile yet another report on the transaction and present it to the court, Lewis said.

It was clear that not "all the water had gone through the sewers" in the Wal-Mart matter and it could well be that the US retail giant would be negotiating with the government until the "cows come home", Lewis warned.

Tembinkosi Bonakele, deputy commissioner of the Competition Commission, told the workshop that SA did not have a manufacturing sector to defend in terms of competition law.

He said the Wal-Mart transaction certainly helped SA to realise this fact, and political players needed to recognise that the country had to deal with the deficiencies in the manufacturing sector.

He said during the commission's investigation of the R16bn takeover of Massmart, it found the retailer imported almost all of its merchandise, and only two brands were made locally.

Source: Business Day via I-Net Bridge