Weekly Shots: Mergers, Jackson Hole Symposium, SA GDP, G20 CwA Summit, OMZim Solar Investment
This week, the South African retail giant Shoprite Group revealed that the plans to acquire parts of one of its competitors, Massmart, may be finalized by the SA Competition Commission or Tribunal by the first quarter of 2022. If approved the sale will see the Shoprite Group take over the food retail components of rival Massmart.
Massmart itself is no stranger to merger matters, the South African retail group was acquired by the global giant Wholemart in 2011. This acquisition has become one of classical importance in the history of competition economics in SA given the implications for social welfare given the global personality of the giant Walmart. In considering merger and acquisition proposals, financial implications take less precedence over the technological, efficiency, pro-competition, employment creation and other public interest gains.
Although Competition Laws differ across jurisdictions the protection of public interest gains are becoming increasingly vital in the approval of mergers and acquisitions, especially in developing economies. Are there any negative public interest implications that could result from the Shoprite-Massmart merger?
A Bigger Pie?
This week Statssa released revised data that indicates that the South African economy was 11% bigger in 2020 than was initially estimated. This translates to a GDP figure of R5.5 trillion and indicates a higher than the estimated increase in economic activity between 2015 and 2020.
This estimate, however, does not have any direct implications for the real economy and current economic activity. However, there are implications for economic indicators that are calculated as ratios of GDP such as GDP per Capita. This increase in the GDP figure will increase in indices such as the latter but indices, where GDP is used as a denominator, will fall.
The Annual Jackson Hole symposium
This week, on 27 August 2021, economists and monetary authorities across the globe will convene virtually to discuss the future for Monetary Policy under the theme- Macroeconomic Policy in an Uneven Economy.
One of the topics on the agenda is how the Fed can play a role in reducing racial inequality in the US in terms of income and wealth. Ex-ante, the consensus appears to be that even if the Fed were to expand its mandate to target these inequalities it does not currently possess the necessary tools to carry out this mandate effectively. The Fed is not the only Central Bank to come under scrutiny for not pursuing a comprehensive mandate targeting economic growth and equity. Over recent years, and more so during the Covid-19 pandemic, central banks in several countries have received calls to expand their mandates to include employment creation among other proposed mandates.
The compliment of academics, central bank governors promises to shed light and possibly bring forth solutions to this and other important challenges faced by central banks around the world in the face of the Covid-19 Pandemic.
G20 Compact with Africa Summit
This week Heads of State from various African countries travelled to Germany to take part in the G20 Compact with Africa Summit hosted by German Chancellor Angela Merkel. Germany launched the Compact with Africa (CwA) initiative under the G20’s finance track in 2017 with an objective to encourage private investment in Africa, particularly in the infrastructure sector, for high growth and job creation within Africa. The 12 countries which have joined the initiative include Benin, Burkina Faso, Côte d'Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia. South Africa is the only African country which is a G20 member and co-chairs the initiative alongside Germany.
The COVID-19 pandemic has had devastating effects on the global economy, negatively affecting investment in African countries which is necessary for economic growth, financial stability and job creation, due to uncertainty which has changed investor behaviour. The Summit this year will feature a G20 Investment Summit on "Framework Conditions for Business and Investment", and a session on "the G20 Compact with Africa amid the Covid-19 Pandemic". These discussions are pivotal as they will provide strategies to improve the business environment and investor confidence on the continent in order to attract investment.
Old Mutual Lights Up Zimbabwe
For years Zimbabwe has had an unstable power supply with acute power cuts lasting up to 18 hours a day at various junctures. The country imports at least 300 MW from Eskom South Africa, while other imports are from Cahora Bassa Mozambique. The insufficient power supply has had detrimental effects on the economy as loadshedding affects production and labour productivity as well as investor confidence given electricity is crucial for business operations.
In a bid to help the Zimbabwean economy to recover and grow as well as preserve the value of their clients’ investments, Old Mutual Zimbabwe, a subsidiary of Old Mutual, has invested US$12.4 million into solar projects which are expected to generate 25 MW upon completion and feed electricity into the national grid. This is a diversification of the company’s portfolio into private infrastructure and equity investments in the energy sector which has come at a time when more Zimbabwean companies are turning to solar energy for power supplies. Old Mutual Zimbabwe has also committed to continue supporting the sustainable energy and agriculture sector as well as other green climate projects.