Asset Financing
7.
The Commission evaluated the market for the financing of office and IT equipment throughout
South Africa. Standard Bank finances a wide range of new and used moveable assets, but predominantly is involved with vehicle financing.
Safika’s asset financing relates to IT and office equipment. It does this via Safika Asset Finance. At a horizontal level, Safika has a market share of approximately 3%. Standard Bank only provided market share figures for the broad
asset financing market which is 22%. Since the proportion of office equipment financing conducted by Standard Bank is minimal relative
to the other type of asset financing it conducts, the combined market share is unlikely to exceed 10% post-merger.
Vertical Analysis
8.
The commission noted some vertical issues within this market, since both parties operate at
different functional levels of the market. Safika acts as a “broker” between the bank and the client and ultimately retains
ownership of the equipment. Standard Bank will either finance the purchase of the equipment directly, or contract with a broker like
Safika. However unlike Safika, Standard Bank does not retain ownership of the asset. What seems clear is that Safika and other brokers
are frequently customers of all the banks in obtaining financing, hence the vertical relationship.
9.
The Commission found that in both the markets for provision of asset financing (upstream) and
for the brokering of IT and office equipment, the parties’ market shares are low and neither can be construed to be dominant.
Therefore, no foreclosure concerns are likely to arise. Furthermore, the merging parties assured that the fact that Safika conducts
the majority of its client business with Standard Bank, will not mean that post-merger Safika will favour Standard Bank over other
banks as Safika Asset Finance does go to various other banks to get terms and in future, this will be conducted on an arm’s
length basis. In their competitiveness report, the parties confirm that in future, it is likely that Safika Asset Finance will discount
its leases with a more diverse number of banks.
Private Equity
10.
The second area of overlap between the parties is in private equity investing. This activity comprises providing private enterprises
with equity capital. They are classified as captive or as independent funds. Captive funds make investments exclusively on behalf
of a parent company and funds are drawn from a pool available within the group. Independent funds comprise funds made from third
party investors, but managed by the private equity firm. The parties advised that a separate sub-market exists for BEE funds, wherein
these funds assist businesses to fulfill their empowerment objectives. Standard Bank is not involved in this type of funding and
we do not find it necessary to delve further into this sub-market.
11.
Since both captive and independent funds make capital available for recipients and have the same objectives, it might be possible
to view both types of funds as forming part of one market. We however agree with the Commission’s approach to avoid any detailed
description of the market as no concerns arise on even a narrower market definition.
12.
Post-merger the combined market share, based on total funds under management, is under 3% (independent
funds) and 4.3% (captive funds). The combined market share for total private equity investments is 3.58%.
Conclusion
We conclude that the merger will not lead to a substantial lessening or prevention of competition.
The Tribunal therefore approves the transaction unconditionally. There are no public interest concerns which would alter this conclusion.
__________
20 May 2005
Y. Carrim
Date
Concurring: M. Mokoena, U. Bhoola
For the merging parties:
P.Cleland, Routledge Modise Moss Morris Attorneys
For the Commission:
S. Nunkoo, Competition Commission
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