E-Malt.com News article: Tanzania: Experts dismiss as not true claims that Tanzania’s economy will suffer if Serengeti Breweries is acquired by EABL

Tanzania Breweries’ claims that that increased competition in the local beer market will hurt the economy were dismissed as not true by some local experts, All Africa posted on September, 2.

Earlier this week the media quoted TBL managing director Robin Goetzsche as saying that the move by the Kenya-based East African Breweries Limited (EABL) to acquire Serengeti Breweries Limited (SBL) would adversely erode TBL's market share leading to reduced beer production and negative consequences to the economy.

Mr Goetzsche said increased competition would force TBL to lay off about 200 workers, jeopardize a $25 million (about Sh30 billion) in new investment and would also reduce by about Sh25 billion of taxes paid by TBL to the Government annually.

However, some economists and competition experts disputed this line of argument, saying ensuing competition due to the entrance of powerful players in the Tanzania market, will be a boon to the economy and not the opposite.

Dr Haji Semboja of the Economic Research Bureau at the University of Dar es Salaam, said Tanzania embarked on economic reforms, more than a decade ago, to create conducive environment for investors and therefore powerful foreign players can come in and compete.

"Competition would increase efficiency, reduce prices of products, encourage consumption, which will in turn result into more taxes to the Government.”

He added that since economic reforms were to do away with state monopoly and to allow more private players in the market, any attempts to go back to monopoly will have devastating effects to the economy and not the opposite.

Dr Semboja noted that a private player would be wary of competition only if it is inefficient, meaning that its production capacities cannot withstand competition.

"If TBL feel unable to compete why they don't opt out and leave the market in the hands of those who can compete for the betterment of the Tanzanian economy?" he queried.

The director general of the Tanzania Fair Competition Commission, Mr Godfrey Mkocha, on his part said it is too early to start discussing how a possible EABL and SBL venture will hurt the economy.

And definitely it was not up to TBL to start making market assessment for repercussions in the market that the company helped distort some years ago.

"When and if EABL wants to acquire SBL they will notify us and we will be the ones making market analysis to determine how the move would affect competition in the market, it is not up to TBL to determine that," he said.

Mr Mkocha expressed dismay at the tendency now emerging between the two beer giants of taking their fight to the media, whose purpose was to play with people's sympathy.

"Why wasn't people's sympathy sought when a market distorting contract was entered between EABL and TBL in 2002, which led to price increase of beer in Tanzania for more than three times," he said.

Mr Mkocha pointed out that though the legal battle between the two giants was taking place in Europe, it is the FCC which has legal mandate to make final approval or disapproval on the deal.

He said whatever the outcome of the legal tussle between the two companies, each side will have to seek FCC's approval before any deal that affects the local market is sealed or not sealed.

Speaking of the contentious contract between EABL and TBL, Mr Mkocha said the agreement was anti-market from the beginning because it killed competition and led to the rise in beer prices in Tanzania by 300 per cent. At that time, Serengeti Breweries Limited was not strong enough to compete with TBL especially after it had joined forces with EABL.

"We opposed the deal from the beginning but we were nascent and we did not yet had the legal powers to block it, so the Government used that opportunity to override us," he said.


04 September, 2009