Pretoria - The Department of Trade and Industry (dti) has asked the Competition Commission to prohibit the takeover of a South African paint company by a Japanese company.
"The dti has argued that the takeover be prohibited. Alternatively and failing which, the dti has submitted that the Commission should impose conditions which ensure that public interest and competition concerns set out in the dti submission are met," said the department on Wednesday.
Japanese multi-national Kansai Paint Company wants to take over Freeworld Coatings.
Weakening of competition in the market which is already highly concentrated and prone to collusive behaviour in other jurisdictions are some of the concerns raised by the dti. Additionally, the takeover constitutes a direct threat to the government supported localisation drive seeing that Freeworld is the only local manufacturer of automotive coatings supplied to Original Equipment Manufacturers (OEM's) in the sector.
"Other suppliers import products procured by the OEM's. Job losses would be an inevitable consequence of a curtailment or cessation of local manufacture," said the dti.
The department added that the company had made a significant contribution to uniquely South African product development and commercialization in partnership with Stellenbosch University. Freeworld, which has done well with the implementation of black economic empowerment, has also received a dti award for innovation.
"The dti has taken this step because it is of the view that increased competition, local manufacture and local product development, particularly in the strategic automotives sector, which is characterised by high economic and employment multipliers, is critically important," said acting Director-General Lionel October.
"It is important to stress that the dti is motivated by these considerations and this intervention should not be construed as opposition by the dti to foreign direct investment," said October.
October said should the Commission decide against prohibition the department was of the view that the Commission should place a set of conditions on the acquisition in line with competition and public interest concerns.
