Tribunal furnished with info on SABMiller takeover

October 2016

JOHAN SMIT, managing editor: SA Graan/Grain

Although Anheuser-Busch (AB) InBev has obtained the Competition Tribunal's approval of its R1,5 trillion takeover of SABMiller on 30 Junie 2016, the approval is subject to far reaching conditions designed to address both public interest and competition concerns arising from the merger.

According to a public statement by the Tribunal there had to be supply conditions of input suppliers, particularly in respect of barley producers. Barley producers are concerned about whether an existing industry pricing mechanism will change post-merger given the international sourcing power ABI brings to SAB.

During the time of the hearing in June, Grain SA submitted supporting information with regards to the proposed merger between Anheuser-Busch InBev SA/NV and SABMiller Plc on request of the Competition Tribunal.

As representative organisation of barley and maize producers who are suppliers to SABMiller, the organisation declared interest in the merger case since SAB is the sole buyer of malt barley in South Africa. The malt barley industry is currently in a monopoly market state, which means that a small adjustment by the single buyer can change the whole industry. With the merger, the risk of importing barley is increasing since there is better access to already structured foreign markets established by Anheuser-Busch InBev. Anheuser-Busch InBev is also well known for establishing its own production of malt barley. This means that the local production can be under additional pressure and risk. South Africa produced 332 000 tons of barley in 2015.

Grain SA proposed the following remedies to the Tribunal:

Commercial contracting

Grain SA proposed that the Competition Tribunal consider to add to the conditions that the current contracting practises to ensure the procurement of local barley be maintained for at least another three years.

Farmer development

Grain SA proposed that the Competition Tribunal consider to add to the conditions regarding farmer development to allow Grain SA to represent those farmers they intend to develop or alternatively that it be done in a more structured and inclusive way such as a Trust.

Publication: October 2016

Section: Grain SA