Competition agency to rule on State’s row with Lafarge
What you need to know:
Lafarge owns 41.7 per cent of East African Portland Cement Company (EAPCC) and a further 58.9 per cent of Bamburi Cement.
Bamburi is the largest cement manufacturer while EAPCC’s long-held position two is under severe test from new rivals.
CAK has undertaken a research of cement industries in five African markets to help determine whether there is competitive regime in Kenya.
The Competition Authority of Kenya (CAK) is in June set to make a ruling on whether or not French transnational Lafarge enjoys a dominant position owing to shareholding in two major cement makers.
Lafarge, headed for absorption by Swiss giant Holcim, owns 41.7 per cent of East African Portland Cement Company (EAPCC) and a further 58.9 per cent of Bamburi Cement.
The Treasury has an indirect controlling stake of 52.3 per cent in EAPCC — when its 25.3 per cent share is combined with that of the National Social Security Fund.
This shareholding structure has seen the government perennially wrangle with Lafarge accusing it of using its toehold in the two to undermine it as a co-shareholders and also other cement makers.
Bamburi is the largest cement manufacturer while EAPCC’s long-held position two is under severe test from new rivals.
Competition Authority of Kenya director-general Kariuki Wang’ombe now says the agency will in three months decide on whether government’s claims are valid or not.
CAK has undertaken a research of cement industries in five African markets to help determine whether there is competitive regime in Kenya.
“The report will help us determine whether there are unfair practices including unreasonably high prices and production costs in the local cement industry,” Wang’ombe told the Business Daily.
“We did the survey in Kenya, Tanzania, South Africa, Zambia and Botswana for comparative purposes and the results will be released on April 22.”
In December, Industrialisation PS Wilson Songa wrote to CAK accusing Lafarge of seeking to destabilise EAPCC to protect its interests in Bamburi, the largest cement maker in the region by market share.
The Competition Act allows relief including ordering firms found to be in contravention to desist but orders are subject to appeal.
The PS had accused Kenya Airways CEO Titus Naikuni and lawyer Hamish Keith of advancing anti-competitive behaviour, asking the regulator to punish them. But Lafarge maintains its minority stake in EAPCC is insufficient to exert control over the firm where it is represented on the board.
Lafarge also argues that Portland is a genuine Bamburi Cement competitor.
“We believe that they (Lafarge) created the current dispute in the management of the company to negatively affect the operations of the company for the benefit of Bamburi,” claimed Dr Songa in the letter dated December 19 to CAK. “Lafarge has a financial interest in maintaining control at board and management levels of the company.”
In last year’s annual report, CAK noted that Lafarge’s two board seats and control of strategic committees at Portland amount to anti-competitive behaviour.
The regulator said Mr Naikuni should stop chairing the technical committee of Portland’s board since he represents Lafarge, posing a potential risk to its strategic leadership.
This was the first time CAK openly declared that Lafarge’s shareholding in the two amounts to monopolistic tendency saying it held more than half the country’s cement market.
Given this earlier CAK proclamation, it remains to be seen what decision it reaches in June and how it affects the shareholding structure in the Portland and Bamburi.
“By law we are required to base all our decisions on best practices in other countries and that is why we had to do the survey in markets bearing similarity to Kenya,” added Mr Wang’ombe.
