Threat to free market system – Government interference in Burger King transaction

FF Plus

Threat to free market system – Government interference in Burger King transaction
Threat to free market system - Government interference in Burger King transaction. Photo: Pixabay

The terms and conditions for the Competition Tribunal’s approval of the acquisition of Burger King South Africa by the private equity fund ECP Africa Fund, pose a serious threat to free market principles and economic progress in the country.

This acquisition is, thus far, the first that the Competition Commission wanted to deny based on the fact that it would have a negative impact on Black Economic Empowerment (BEE).

The initial offer for the acquisition of the Burger King restaurant franchise by ECP Africa Fund from Grand Parade investments (GPI), a Cape-based empowerment firm, would in the Competition Tribunal’s view have reduced BEE and according to the Tribunal, that would not have been in the “public interest”.

The transaction was eventually approved by the Tribunal, but it is subject to a number of Black Economic Empowerment requirements that Burger King will have to meet within the next five years. These include drastically increasing its number of outlets in the country; permanently employing at least 1250 new employees from historically disadvantaged groups; increasing payroll and employee benefits; improving the rating on its B-BBEE scorecard; and establishing an employee share ownership program for an effective 5% interest in Burger King SA.

The Competition Commission and Tribunal are regulatory creations of the South African state and have the final say over mergers and acquisitions.

This method of regulation, however, certainly does not promote the free market approach to the economy. If there were to be interventions in a free market, it would simply be to ensure a level playing field in terms of regulation and legal aspects, especially in the case of state-supported institutions.

However, that is clearly not the intention with the domestic enforcement of competition legislation.

At present, competition legislation is being exploited to further the government’s BEE agenda and public interest is being manipulated to achieve political objectives.

Continuing this type of regulation may cause certain businesses to remain small as they opt not to expand as a result of the over-regulation, which hampers the economy.

The FF Plus will continue to campaign for the protection of a free and market-directed economy in South Africa.

Read the original article in Afrikaans by Jaco Mulder on FF Plus

SOURCEFF Plus