Competition laws are now being enforced in most African countries, and in the past year several new national and regional competition regulators became operational across the continent. Plans are also underway for the African Continental Free Trade Area (AfCFTA) Agreement to harmonise competition law across the continent.
While these are positive developments to promote fair markets, the impact on mergers and acquisitions (M&A), particularly those involving foreign investment, is complex. The flurry of new competition regulators (national, regional and continental) may bring more convenience and consistency to the merger filing process, but there are also concerns about political tensions, overlapping jurisdictions and high merger filing fees.
There have been a few regulatory developments in 2024, including the AfCFTA Competition Protocol being published. The protocol aims to establish a continental regulator who will assess merger transactions with a “continental dimension”. The AfCFTA will apply to the whole continent, not just certain member states. Regulations setting out merger thresholds are expected to be finalised soon.
The Economic Community of West African States (ECOWAS) Regional Competition Authority (ERCA) became fully operational in October 2024, and must now be notified of mergers involving parties that meet certain financial thresholds. The ECOWAS region comprises 15 Western African member states, but military coups in member states such as Burkina Faso, Mali and Niger have led to their withdrawal from ECOWAS and undermine the political stability of the bloc.
Earlier in 2024 the Common Market for Eastern and Southern Africa (COMESA) published draft COMESA Competition Commission (CCC) regulations which propose that the CCC enforce a suspensory merger control regime. This shift from the current suspensory regime, which allows parties to implement their transaction before CCC merger approval, means that merger parties must now first obtain approval from the CCC before implementation. The COMESA region covers 21 African member states.
The East African Community Competition Authority (EACCA) is expected to begin accepting merger filings soon. The East African Community (EAC) region covers eight member states, including the Democratic Republic of Congo, Kenya, Rwanda, Tanzania and Uganda.
From a national perspective, Uganda, Malawi and Egypt all saw changes in regulations governing mergers. The Uganda Competition Act 2024 became effective this year, and merger thresholds are expected to be published soon. The Malawi merger control regime changed its voluntary merger notification requirement to a mandatory requirement. Egypt also introduced a new merger control regime requiring that mergers be submitted to the national competition regulator for approval before implementation.
Many complications may well arise due to the proliferation of regional regulators in Africa. In contrast, in the European Union (EU) the European Commission (EC) is the only body that regulates competition law across the continent, with national competition regulators across the EU recognising the EC’s jurisdiction.
In Africa, several countries belong to more than one regional bloc and thus fall under more than one regional regulator. Most AfCFTA member states also belong to a regional competition regulator. For example, Kenya, Uganda and Rwanda are common member states across both COMESA and the EAC, with all their member states also falling under the AfCFTA competition law regime.
These overlaps may introduce conflicts when regulators exercise jurisdiction. This has already been the case with the Egyptian Competition Authority and the Ethiopian Trade, Competition and Consumer Protection Authority, who have taken the approach that merger parties should submit merger filings to them separately, even if a merger is submitted to the CCC. This approach could result in increased transactional costs through duplication, including the possibility of paying merger filing fees to multiple competition regulators.
Different merger thresholds can also cause problems.. For example, while the CCC combined turnover thresholds of the merger parties is US$50 million, the ECOWAS thresholds are almost half at approximately US$25 million. Reduced thresholds will lead to an increase in merger filings where there may not be an impact on competition that requires regulatory scrutiny.
Increased regional competition law enforcement in Africa does, however, have some potential positive developments for M&A transactions. In some instances, submitting merger filings to a regional regulator negates the issue of navigating uncertain competition law processes in individual jurisdictions. From a deal planning perspective, this also means that merger parties will ideally pay one merger filing fee to the regional (or continental) regulator and have more certainty on review timelines when planning towards closing transactions.
Another cause for concern is that some regional competition regulators, such as the CCC, allow member states to call for a national review of transactions. The ability of national regulators to exercise concurrent jurisdiction can create deal uncertainty. This was recently seen in the Canal+ proposed acquisition of Multichoice, when the Competition Commission of Mauritius asked that the merger be referred to it, and in the CCC’s approval of a merger involving Access Bank Plc and National Bank of Kenya Limited, which was referred to the Competition Authority of Kenya for approval, separately to the CCC's determination.
It will be necessary for the various African competition regulators to align their approaches, and it’s encouraging to see that, both nationally and regionally, these regulators are increasingly demonstrating continental integration and an ability to learn from each other.
There’s still a way to go, though, and newer competition regulators should learn from the best practices of more established regulators. For example, the ECOWAS competition regulator is encouraged to adopt a similar approach to that of the CCC with regard to merger filing fees. While the merger filing fees in COMESA and ECOWAS are both 0.1% of the merging parties' combined annual turnover or assets in the common market, COMESA has capped the fee at US$200 000 whereas, the ECOWAS filing fee is uncapped. This may raise serious concerns for merger parties with substantial turnover across the ECOWAS member states.
Addressing these complexities requires a coordinated effort to strengthen legal frameworks, enhance regional integration, and build the capacity of competition regulators across Africa without losing sight of the need for increased investment and economic growth.