INNSCOR Africa’s growing market influence is facing stiff resistance from several quarters, amid revelations that the company could be slapped with severe sanctions from the Competition and Tariff Commission (CTC) for breaching competition rules.
By Clive Mphambela
At a public hearing held in Harare last Friday, it emerged that Innscor had failed to give notice of its intention to acquire a majority stake in ZSE-listed National Foods, resulting in the CTC opening an enquiry into the conduct of the conglomerate.
During the stakeholders meeting, the commisssion noted that Innscor had gradually increased its shareholding in National Foods over a sustained period since 2003, but failed to notify the relevant authorities, in particular CTC, of the process when its shareholding grew to an effective controlling interest .
According to the CTC, Innscor acquired a 36% stake in Natfoods in 2003, which had increased to 49,9% by the end of 2011.
The company later sold 12% to Tiger Brands in 2012 leaving it with 37,82%. It is CTC’s contention that Innscor advised the regulator of the transactions in 2012, well after its investigations had commenced.
CTC chairman Dumisani Sibanda told businessdigest that because Innscor had neglected its obligation to give prior notification of the acquisition, the commission was looking to penalise the firm. Innscor, which has stakes in a dozen renowned companies, is accused of suffocating many businesses out of the food industry.
The CTC probe was triggered by a plethora of complaints lodged by affected companies and observations by the CTC itself.
The probe was instituted in accordance with Section 28 (2) Chapter 14:28 of the Competition Act, under which the conglomerate is being probed for possible restrictive practices and creating unfair trade barrier against potential competition.
Several submissions made at the hearing by competing companies generally suggested that the merger between Innscor and National Foods had lessened competition as the growing size of the Innscor group across closely related industries was resulting in substantial market power.
The Innscor group also owns a major stake in Colcom, the country’s largest pork processors, Bakers Inn, fast Food outfits —Chicken Inn and Pizza Inn — and Distribution Group Africa.
National Foods is the country’s largest milling and food packaging company. Innscor also recently acquired a controlling stake in Irvines and Texas Meats.
Victoria Foods marketing director Joel Katsande said Innscor should have declared upfront its intentions to acquire National Foods and given peers the opportunity to give representation as is the norm everywhere.
The representatives from Victoria Foods said the acquisition of Natfoods had created dominance and had given the group power to determine the pricing structure as there could be unfair internal price transfer between National Foods and Innscor bakeries.
This, Victoria Foods argues, could lead to an unfair advantage for Innscor’s bakeries and shut them out of supplying flour to Bakers Inn.
Using prices that are not reflective of the correct production costs could result in Innscor dictating the prices for the whole market. Katsande pointed out that because of the structure created by Innscor, the company was unable to supply such companies like OK Bakeries as these are run by Bakers Inn.
The company said that even at CFI group level, Suncrest cannot supply to its traditional customers as Innscor also owned Irvine’s.