The telecommunications and energy sectors are undoubtedly amongst the key drivers of the South African economy at present. However, with an increasing number of mergers and acquisitions (“M&A”) occurring in these sectors, the Competition Commission are imposing stricter approval conditions to promote public interest and balance competition and economic transformation. 

Under the Competition Act 89 of 1998, the Competition Commission and the Takeover Regulation Panel are mandated to evaluate mergers based on competition concerns and public interest factors.  However, even with the 2019 amendments to the Competition Act, there is still an emphasis on public interest considerations, requiring an assessment of the impact on employment, ownership transformation, and market competition. 

A leading example of regulatory intervention in the telecommunications sector is the blocked merger between Vodacom (Pty) Ltd (“Vodacom”) and Maziv (Pty) Ltd (“Maziv”), previously called Business Venture Investments No. 2213 (Pty) Ltd, in October 2024. The Competition Tribunal (“Tribunal”) prohibited the transaction on the basis that it would substantially lessen competition in key markets, despite Vodacom’s proposed commitments to infrastructure investment and job creation. From a business perspective, this decision highlights the necessity for firms to proactively consider public interest obligations when structuring M&A deals.

Companies engaging in such transactions must ensure compliance with merger control provisions, assess the likelihood of regulatory approvals, and formulate effective remedies to address competition concerns. Further, the Tribunal’s ruling signals a shift towards prioritising market access for smaller players, reinforcing the regulatory emphasis on preventing dominant market positions. As such, telecommunication firms planning to engage in M&A transactions must integrate competition risk assessments into their governance frameworks. 

Furthermore, the energy sector has seen more approvals of mergers being subjected to stricter conditions. One such case is the April 2024 approval of Vitol Emerald Bidco (Pty) Ltd (“Vitol”) acquisition of Engen Ltd (“Engen”). The Tribunal sanctioned the deal on the condition that it should promote ownership transformation and protect employment. It was decided that the Employee Stock Ownership Plan (“ESOP”) of this merger shall be structured following the Broad-Based Black Economic Empowerment Act 53 of 2003 (“B-BBEE”), which promotes economic transformation for historically disadvantaged people. For instance, within 5 years of this M&A, it was stated that Vitol shall ensure the increase in direct B-BBEE ownership in Engen by increasing the ESOP's 5% shareholding to 7%, suggesting that companies within the energy sector must now factor in regulatory expectations regarding B-BEEE compliance and employment security when structuring transactions. It was also expressed that Engen will remain a tax resident of South Africa. The Competition Commission’s approach aligns with broader corporate responsibility principles, compelling firms to incorporate environmental, social, and governance considerations into their M&A strategies.

Given the increase in regulatory scrutiny surrounding M&A transactions, businesses and M&A practitioners must adopt a multi-faceted approach when navigating merger transactions. Regulatory due diligence is a priority for pursuing a merger and companies in the telecommunications and energy sectors must conduct thorough legal and regulatory assessments to anticipate potential competition and public interest objections, and proactively engage with regulators, such as the B-BBEE Commission, and the National Energy Regulator of South Africa that facilitate negotiations on potential conditions to prevent regulatory hurdles. Moreover, these companies need to be prepared to comply with B-BBEE policies and stakeholder interests to increase the likelihood of approval.

It will be crucial for companies in the telecommunications and energy sectors to approach M&A transactions considering these approval conditions. The Competition Commission highlighted the importance of maintaining market competition while promoting socio-economic objectives. Therefore, firms must adopt proactive compliance strategies, ensuring that mergers not only align with corporate growth objectives but also satisfy the regulatory framework necessary for approval in South Africa’s evolving M&A environment.


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