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Merging firms need skill plan - regulator
November 24, 2009
 By Ann Crotty
The Competition Commission is asking merging parties to establish funds to re-skill employees in cases where a merger is expected to result in job losses.
Maarten van Hooven, the manager of the commission's mergers and acquisition division, said that in terms of the Competition Act the competition authorities were required to "promote employment and advance the social and economic welfare of South Africans".
Van Hooven said that this had always meant that the commission and tribunal were aware of the employment implications of transactions but in the current climate they were even more sensitive about the issue.
"These days we are seeing more firms wanting to merge because they are in distress or failing, which invariably means that the implications for employment are more severe than previously."
It also appears that trade unions are becoming more actively involved in the process. In terms of the act, trade unions have a right to participate in merger hearings. Until recently they have not enforced this right in an effective or strategic manner.
Van Hooven said that the unions had become more pro-active and more involved in the negotiating process.
"In cases where a merger is motivated by financial distress, the unions generally accept the need for job cuts because often if the merger does not go through there is a worse scenario for employment."
He added: "In cases where there are going to be job losses we are increasingly asking parties to create a fund that is used to re-skill the employees who will lose their jobs."
Van Hooven noted that the funding commitment was over and above what the employer was required to do in terms of the Labour Relations Act.
But he noted that it was generally not significant in terms of the value of the transaction being proposed.
Head of competition law at Werksmans Paul Coetser said that the best course of action for any company planning a merger that could affect employment was to be proactive.
"Right from the start, you should carefully consider the potential impact of the takeover on employment at the target company," he said.
"If there are going to be job losses, you need to determine upfront how many employees will be affected and then start engaging the unions immediately."
Coetser said that companies should ensure that where a merger was going to result in job losses, the competition authorities would need to be assured that these were justified in terms of gains in competition.
He recommended that a company's strategy "should include alternatives to retrenchments, such as reskilling employees and deployment to other grades or occupations in the wider corporate group".
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