Zimbabwean merger control thresholds slashed
On 5 June 2020, the Zimbabwean Minister of Trade and Commerce introduced new financial thresholds for the Zimbabwean merger control regime. Merger notifications will now be required when parties have combined turnover or assets in Zimbabwe of ZWD 10m or more. As the previous thresholds were set at USD 1.2m, the new thresholds have been significantly reduced even on a conservative basis using official exchange rates. While the reduced thresholds will undoubtedly lead to more notifiable mergers, the only comfort for merging parties is that there has been a similar reduction in the filing fees.
The Zimbabwean merger control regime has been operational since 2001. As the regime is suspensory and mandatory in nature, parties meeting financial thresholds must obtain the approval of the Competition and Tariff Commission (CTC) prior to implementing a merger. Following the dollarisation of the Zimbabwean economy in 2009, USD-denominated thresholds were introduced according to which notifications were required when merging parties had turnover or assets in Zimbabwe of USD1.2m or more.
In June 2019, the Zimbabwe government reintroduced the Zimbabwean dollar. Despite the fact that all foreign currency was no longer legal tender, the Finance Act 2019 stated, as a matter of interpretation, that the pre-existing currency value (in the case of the thresholds, US Dollars) shall only be adjusted on the date of promulgation of the subsequent statutory instruments. Since no such statutory instruments have been adopted, the US-denominated merger control thresholds have continued to apply until now.
According to the thresholds adopted in June 2020, merging parties are required to notify mergers to the CTC where they have combined turnover or assets in Zimbabwe of ZWD 10m or more. The hyper-inflation currently experienced by Zimbabwe, with year-on-year inflation of over 800% according to the Reserve Bank of Zimbabwe, and the deteriorating exchange rate have significantly eroded the real value of the new thresholds. Even based on official exchange rates as at 26 August 2020, the new threshold amounts to around USD 200,000, an effective reduction of over 80%. However, based on the market prevailing exchange rates, the new thresholds amount to only USD 27,000, a reduction of approximately 98%.
Simultaneous to the introduction of the new thresholds, the Minister of Trade and Commerce has also amended the merger filing fees. While the fees remain at 0.5% of the parties’ combined assets or turnover (whichever is higher) in Zimbabwe, the minimum and maximum fees have been changed to ZWD 100,000 and ZWD 800,000 respectively. Regardless of applying official or market exchange rates, the new fees are significantly lower than the previous minimum and maximum amounts of USD 10,000 and USD 50,000 respectively.
The lower merger control thresholds will undoubtedly lead to an increased number of transactions being notifiable to the CTC. This comes at a time when the CTC is asserting its merger control mandate with the recent prohibition and gun-jumping ruling on the Innscor/Profeeds merger. The only comfort is that merging parties will pay significantly reduced fees as part of merger notifications going forward.