Consolidation of safety-shoe manufacture

Genesis was approached by all the major safety-shoe manufacturers in South Africa in order to assist them in assessing what the competitive effects would be of a consolidation of the industry and whether this would pass muster under the Competition Act. This required not only a detailed assessment of what role imports played in safety-shoe sales of different standards and price, but also to model the potential efficiency effects of such a consolidation and reorganisation of the production plants.

Genesis was able to demonstrate through a quantitative analysis that while the majority of safety-shoe imports were primarily of a lower standard and cheaper price, these were effectively constraining safety shoes of a higher standard and price. This indicated that a single market was likely across differing qualities and that imports placed a significant constraint on domestic producers.

In addition, with the assistance of the manufacturers, Genesis built a model of the efficiencies that would likely arise through the reorganisation of production facilities and the net effect this was likely to have on costs of production. On this basis Genesis was also able to determine the potential public interest benefits from stemming the loss of employment and reductions in output for the domestic industry.

The Competition Commission’s own investigation of the merger also reached the conclusion that the merger would not lessen competition and, in contrast, was likely to help preserve jobs and output in South Africa. As a result, the merger was unconditionally approved by the competition authorities.