South Africa regulator stops Sasol's bid to sell sodium cyanide unit to Czech rival Draslovka

By Thulani Mpofu October 12, 2023

South Africa’s Competition Tribunal has prohibited a proposed intermediate merger involving the sale by a local company of its sodium cyanide business to another from the Czech Republic.

Local chemicals producer Sasol South Africa Limited (Sasol) planned to sell the unit to the Czech-based rival producer Draslovka Holding A.S., through its local subsidiary, Draslovka (South Africa) (Pty) Ltd (Draslovka).

“Sasol has a monopoly position in the production of liquid cyanide in South Africa, and the gold mining sector is dependent on Sasol for the supply of liquid cyanide, according to the Competition Commission. In terms of the proposed transaction, Sasol would have supplied certain key inputs required in the production of sodium cyanide to Draslovka,” the tribunal said in a release on October 11, noting further that it would give reasons for its decision later.

Sodium cyanide is a chemical compound commonly used in the extraction of precious metals such as gold and silver and is an important input for the gold mining firms operating in South Africa, one of the world’s biggest producing nations of the metals.

The commission had prohibited the transaction in November 2021, leading to the parties approaching the tribunal for adjudication.

Local large gold mining firms Sibanye Stillwater Limited and its subsidiary, DRD Gold Limited, Pan African Resources PLC and Harmony Gold Mining Company Limited had been granted leave to participate in the tribunal proceedings, following their applications for intervention.

Furthermore, the tribunal heard oral evidence from the merger parties, the commission and other stakeholders, including factual and economic expert evidence during the merger hearing held in April and May 2023. Thereafter, the parties made further written submissions to the tribunal, the last of which was received on October 2, 2023.

In prohibiting the merger bid, the commission cited, among other grounds that, it would “likely result in a substantial prevention or lessening of competition due to post-merger price increases which would be detrimental to customers, i.e., gold mining firms. The commission also found that the proposed merger would have a substantial negative effect on the public interest given its effects on the South African gold mining sector.”

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