Namibian leaders reject Ohorongo-Chinese sale
Otavi leaders and stakeholders want the Ohorongo Cement sale to Cheetah Cement stopped, citing unfulfilled local promises and fears of a cement monopoly by Chinese companies.
Schwenk (Ohorongo cement) Namibia has been asked to allow Namibians to buy the company instead of selling it to Whale Rock (Cheetah) Cement.
This is after a deal that involves Cheetah Cement acquiring 100% share capital of Ohorongo cement from Schwenk Zement International GmbH & Co KG was labelled a breech of the promise the company initially made to prioritise locals.
It is not the first time Ohorongo Cement has been up for grabs. In 2020, Chinese company West China Limited wanted to acquire the company for N$1.5 billion, but the sale was blocked by the competition commission, citing a monopoly.
However, an analysis by The Namibian of the ownership of Ohorongo Cement’s prospective buyer – West China Cement Limited – also showed that this company, and Whale Rock, which owns Cheetah Cement, are under one fold, which, if approved, could deal a fatal blow for competition in the sector. However, West China pulled the plug on the deal the same year. Whale Rock took over the bid later on.
Otavi constituency councillor George Garab says the proposed merger disregards foundational commitments to Namibian stakeholders that were made when the company was set up.
Among those commitments was that in the event of a sale of shares, preference would be given to local buyers.
Garab says Ohorongo Cement significantly benefited from the assistance of the Otavi Town Council and other local authorities in securing operational licences.
It also received policy and fiscal incentives from the government, including infant industry protection. In return, the company made clear commitments to prioritise local buyers in any future sale of shares.
‘BREAKING PROMISES’
“Despite these benefits, Schwenk Group appears to have entered into negotiations to offload its stake in a clandestine manner, without affording Namibian investors or the government an opportunity to acquire a stake, thus breaching the spirit of its foundational obligations and expectations,” Garab says.
He says the transaction appears to have been negotiated and advanced without formal disclosure to shareholders or local authorities.
“The decision to sell 100% of the shares contradicts earlier commitments to offer Namibians the first right of refusal,” Garab says.
He has therefore asked the Namibian Competition Commission (NaCC) to reject the merger proposal.
“We respectfully submit that the NaCC and other competent authorities must reject the proposed acquisition of Ohorongo Cement by any entity with an existing ownership interest in Cheetah Cement or similar operations in Namibia,” Garab says. Activist Johannes Johannes says the merger would drive many of Otavi’s people onto the streets, as the mine was absorbing many residents – even those who are unqualified.
“At Otavi, most of these people were hugely unqualified residents that were just absorbed by the mine. Now they could end up back on the streets as a result of that merger,” he says.
‘AFFORDABILITY CRISIS’
He says potential price hikes could lead to an affordability crisis.
Additionally he raises concerns over national sovereignty and infrastructure development.
“If we do not gain full control over our cement and it is owned by foreigners, are we going to develop our country? Because cement is key in infrastructure development,” Johannes says. If left with no other choice but to allow the merger, he says the government should negotiate that all employees are retained.
“They must not lose their jobs,” he says.
OPTIMAL MARKET
Grace Moham, representing Global Business Development, says the merging parties cannot argue a failing firm due to Namibia’s market size.
“Prior to entering the Namibian market, Ohorongo Cement knew the growth potential, market size and possible profits, considering the size of the Namibian market,” she says.
Moham says the market operates optimally with two competitors.
Since 2010 when Ohorongo cement entered the market, there has been no evidence that those market dynamics have changed, therefore leaving no reason for the merger to be approved, she says.
Moham says the merger could make the offer public, allowing Namibians to buy Ohorongo Cement.
Additionally, it would spark an uptick in the construction sector as the economy has been showing growth, she says.
‘MAKE OFFER PUBLIC’
“The conduct of the seller has left much to be desired. They have the right to sell their business, but cannot decide who must buy their business.
“If there is an indication that there is no viable person in Namibia to buy the business, they have the option of making the offer public.”
A letter from biomass producers at Tsumeb, who have been supplying Ohorongo Cement with wood chips since 2016, says they have not seen any interest from Cheetah Cement on taking part in the initiative.
The initiative helps farmers improve their grazing ground by removing encroachment bush, which is then sold to Ohorongo.
According to the letter, the biomass producers have been able to clear about 11 000ha of land, providing employment for locals and also ensuring that farmers get the greatest benefits from their farmlands.
“We are uncertain if Cheetah Cement will continue with the initiative as a proposal was made to them in 2019, however, they have not engaged or responded to that proposal,” the letter reads.
Ohorongo Cement currently uses 14 000kg to 15 000kg of biomass per month.
UNCOMPETITIVE PRICES’
Construction Industries Federation of Namibia (CIF) chief executive Bärbel Kirchner says the NaCC should reject the merger. She says the proposed merger will subject the construction sector to uncompetitive prices.
The construction sector has been seeing some improvement and with the capital projects that the government is planning, the sector will continue to improve, Kirchner says.
“This merger could lead to price manipulation, and local procurement would be under threat as the new owners may not be as supportive of local businesses,” she says.
Additionally Kirchner says global best practices would never allow such a merger as it would create a monopoly.
‘ONLY ONE NEEDED’
Ohorongo Cement managing director Hans-Wilhelm Schütte says Namibia only needs one cement manufacturer. He says the cement market in Namibia has always been fragile due to overcapacity and market fluctuations.
“Even with the highest consumption of cement in Namibia, one factory could easily produce it. The construction industry has declined since the 2015 radical with double production,” Schütte says.
NaCC spokesperson Dina //Gowases says the final decision on the merger will be announced after all recommendations and interrogations have been completed.
“The recommendations will be shared with the NaCC board of commissioners who will either agree or disagree with the recommendations before the final decision is shared with the merging parties and the public,” she says.
Schwenk Namibia holds a 69.83% stake in Ohorongo Cement, with the remaining shares held by Industrial Corp South Africa (14.27%), the Development Bank of Namibia (11.73%), and the Development Bank of Southern Africa (4.17%).
The post Namibian leaders reject Ohorongo-Chinese sale appeared first on The Namibian.
