Expert advises FCC to reform merger threshold for companies

13Aug 2020
Francis Kajubi
Dar es Salaam
The Guardian
Expert advises FCC to reform merger threshold for companies

THE threshold requiring merging companies to seek Fair Competition Commission approval should be reviewed to enable rapid development of the sector, an expert has advised.

SSC Capital’s CEO, Salum Awadh.

Founder and Chief Executive Officer of SSC Capital, Salum Awadh said FCC should also reform its regulations to allow pension funds take part in venture capital. Awadh said last week that the threshold for businesses to merge without requiring FCC approval should be increased to U$6 million to align with Kenyan counterparts.

"We have some policy challenges including the lower threshold for merger notification required by FCC, pension funds not being allowed to invest in venture capital as an asset class, and lack of specific tax incentives for promoting the industry,” said Awadh.

SSC Capital founder has suggested that policy and legal reforms to develop a competitive venture capital industry in the country, among others, should include the increase in merger notification threshold.

According to him, the current threshold does not give a conducive environment to attract venture capital through mergers both at home and abroad so that the country can compete with other markets in East Africa notably Kenya.

“Venture capital and private equity is a fairly new industry in Tanzania, we still have massive work to do to increase investment flow, and unlock the industry, which currently stands at around 17 percent of U$2.4bn, which is the regional industry size," he argued.

He asserted that Nairobi is Dar’s main competitor for venture capital but with its merger threshold increased to around U$10 million, it leaves Tanzania's estimated U$1.2 million, far behind.

He hinted that increment in the threshold amount will widen the scope of venture capital transactions that need no FCC approval hence attract businesses that currently end up in Kenya and other EAC markets. The FCC raised the threshold from 800m/- to 3.5bn/- in 2017.

Responding to Awadh’s concerns, FCC’s Head of Communication, Frank Mndimi said that there is a big difference on how the commission operates compared to the Competition Authority of Kenya hence the varying of the approval processes with some taking months.

“FCC does everything on its own from investigation of the merger applications to approval while in the case of Kenya, such process is at large done by COMESA Competition Authority with the Competition Authority of Kenya take over the process at a point where everything is clear. That’s why ACK can take few months to approve mergers,” argued Mndimi.

On the case of increasing the threshold, he said that the current margin depicts the country’s economy in line with financial status of entrepreneurs and start-ups. The FCC spokesman added that the local market has a big merger threshold that does not obligate merging businesses to seek the commission’s approval compared to other countries in the EAC and SADC regions.