Manufacturing

The manufacturing sector is characterised by a diverse set of activities ranging from industrial inputs and manufacturing to fast-moving consumer goods. Genesis has extensive experience in providing services across the broad spectrum of this sector, from the manufacture of steel, cement, chemicals, resins and fertilisers to credit cards, supermarkets, cereals and tyres.

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Expertise Areas

Competition economics

We offer clients a comprehensive range of expert economic services in the area of competition law, and remain the provider of choice for most top law firms when they need to retain expert economists to advise on critical matters. Our application of rigorous economic analysis, using quantitative and conceptual approaches, has resulted in blue-chip companies across Africa routinely relying on us for expert advice and support when they interact with competition authorities.

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Economic impact assessment

In economics there are always trade-offs. Changes in policies, laws, and regulations, and every government intervention creates both positive and negative impacts, winners and losers.

Good government requires that these impacts are mapped and understood, so that responsive policy can be crafted to maximise the positive while minimising the negative.

This requires analysis that is independent, rigorous, balanced and fair, analysis that understands the power of markets and pain of social challenges equally, and is not swayed by vested interests of lobby groups.

Genesis works across the continent with governments, law-makers, and the private sector to provide this analysis. We help our clients to understand potential economic, social, environmental and health impacts of policy and legislation on markets and people.

Our reputation as leading economic impact experts is built on rigorous, fact-based analysis that is independent, robust, persuasive and which retains credibility with all parties.

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Regulatory economics

Genesis is also a leading provider of regulatory economics advice, offering the full spectrum of expert economic and regulatory accounting services to governments, regulators and private firms. We have played a central role in critical policy and regulatory debates across numerous sectors.  

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Shared value and corporate impact

Today a company’s relationship with society is a key determinant of its corporate value. At risk are credibility with consumers, regulatory permissions, media and investor reputation and social licence to operate. On the positive side, understanding societal need and building better relations with stakeholders can spark new models, products and revenues.

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Trade disputes and damages quantification

In addition to our competition and regulatory experience, we have a diverse range of experience in litigated and contested processes, including international trade disputes and damages quantification. Our evidence-based and rigorous analysis brings clarity to arbitration hearings and court proceedings across a number of fields. 

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Projects

Enhancing investment for domestic foundry and mill markets

Project name:
Economic assessment of an export tax on scrap metal

Service:
Damages, trade and other litigation
Regulatory economics and accounting

Sector:
Manufacturing

Client:
Department of Economic Development

Date:
2019

Country:
South Africa


Scrap metal is an important input to beneficiation and the foundry and mini-mill industry in South Africa. These industries are of significant importance for industrialisation and the potential creation of jobs in the country. The inability to access affordable scrap because of rising exports is a major factor in the ailing sector’s performance.

The South African government is seeking to implement an export tax on scrap metal as an alternative to the current Price Preference System (PPS) implemented by the International Trade Administration Commission (ITAC). The PPS required scrap dealers to first offer scrap to domestic customers at preferential prices before being granted a permit to export scrap at higher prices. This was not effective because of implementation inefficiencies and the ability of exporters to circumvent the policy.

Genesis was previously contracted by ITAC to conduct research into the effect of the PPS. Based on the report’s findings, Genesis proposed applying an export tax to replace the PPS. This led to the Economic Development Department (EDD) contracting Genesis to undertake an economic assessment of whether an export tax on scrap metal will achieve the objectives of improving availability of quality scrap metal at affordable prices for foundries and mills in the domestic market. Our work also included examining what may be an optimal tax to achieve the necessary input price to support industrialisation and achieve diversion to domestic supply.

Genesis proposed tax levels between 5% and 25% for various metals and quantified its benefits to output, employment and investments within the foundry sector. Genesis’s expert input resulted in an announcement by the Minister of Finance in the 2020 budget speech, which stated that the Government will commence consultations with industry regarding the introduction of an export tax on scrap metal.

Working on a solution to turn around South Africa’s rust belt

Project name:
Vaal Region Rejuvenation Project

Service:
Shared value and corporate impact

Sector:
Manufacturing
Infrastructure

Area of Expertise:
Shared value, transformation and inclusive business
Public policy

Client:
Standard Bank

Date:
2018

Country:
South Africa


Like many steel and manufacturing hubs around the world, the Vaal region south of Johannesburg had faced years of company closures, ageing infrastructure and rising unemployment. The Vaal was rapidly turning into a rust belt.

The CEOs’ Initiative, a grouping of 60 top CEOs, asked Genesis Analytics to diagnose the challenges in the region and come up with a solution. Our team worked with the government and big businesses in the region to design a rejuvenation plan.

Funded by Standard Bank and chaired by Nampak, the work was unique in several ways. First, it used a technique to diagnose challenges that included demographic profiling, economic case studies of firms that had closed down, an audit of infrastructure stock, and a survey of the largest companies in the area. Second, the problems were approached by businesses and the government working together in a developmental partnership. Third, the action plan walked the line between the two extremes of doing nothing and unhealthy protection for uncompetitive industries, neither of which were sustainable in the long term.

The CEOs’ Initiative delivered the regeneration action plan to the President and Minister of Finance.

Vaal Region Rejuvenation Action Plan

Vaal Region Rejuvenation Action Plan (Information pack)

Impact of multi-billion move from sugar to corn syrup

Project name:
Socio-economic impact assessment of a new production plant, and impact on BEE transformation

Service:
Shared value and corporate impact
Transaction advisory
Market analysis and positioning

Sector:
Manufacturing
Agriculture and Agribusiness

Area of Expertise:
Economic impact assessment
Corporate impact
Public policy

Client:
Confidential

Date:
2018

Country:
South Africa


Genesis was appointed to evaluate the economic pros and cons of a multi-billion-rand mega-transaction in the FMCG sector.

Two of the world’s biggest consumer goods brands wanted to build a new multi-billion-rand production plant and switch from using sugar to corn syrup produced from maize.

The transaction was one of the biggest BEE deals in history and would also source one third of maize from emerging farmers.

Genesis was appointed to undertake an independent assessment of the economic costs and benefits of the new project, measured in a net contribution to GDP and employment.

Genesis was also asked to evaluate whether the deal would be good for transformation of the economy and what impact it would have on food security.

Our work found that the project would create a net positive growth of the economy, and would be a net positive for transformation. This had to be balanced, however, by harm done to the sugar industry. It was net neutral for food security.

The independent report was used to present the pros and cons of the project to the policy-makers to secure government and regulator support for the transaction.

Expert economic testimony paves the way to tile merger

Project name:
Expert economic testimony in Italtile’s acquisition of CIL and Ezee Tile

Service:
Competition economics

Sector:
Manufacturing
Retail

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
Italtile

Date:
2016 - 2017

Country:
South Africa


Genesis was appointed by Italtile to provide expert economic opinion and testimony in Italtile’s acquisition of Ceramic Industries Limited (CIL) and Ezee Tile. 

Italtile consists of major retail stores such as Italtile, CTM and Top T; upstream supplier CIL is a producer of tiles, baths and sanitaryware products; and Ezee Tile produces grouts and adhesives. 

The merger was initially prohibited by the Competition Commission, and Genesis was appointed to provide testimony before the Competition Tribunal on behalf of the merging parties. 

The key issue raised by the commission was that the acquisition would result in CIL’s tiles being channelled solely through Italtile’s retail stores, to the detriment of its rivals. This transaction was unique in that the merging parties were already owned by a common majority shareholder.

We provided an expert economic report focusing on the commission’s concerns. In particular, we considered the competitive dynamics in the production and retailing of tiles. 

Genesis indicated to the tribunal that the merging parties were unlikely to either have the ability or incentive to stop supplying other retailers, given that alternative sources of supply existed for these retailers. Furthermore, the nature of the markets meant that a foreclosure strategy would be immensely costly to the merged entity, to the extent that there would be limited prospects to recoup at the retail level the upstream cost that would have to be incurred.

Genesis’s analysis ultimately assisted the tribunal in reaching its decision to overturn the commission’s prohibition. The tribunal approved the merger with the sole condition that Italtile not be granted access to information about CIL’s other customers. 

Economic contribution of beer brewing industry

Project name:
The economic contribution of the beer industry

Service:
Economic impact assessment

Sector:
Manufacturing

Area of Expertise:
Corporate impact
Economic modelling

Client:
Beer Association of South Africa

Date:
2019

Country:
South Africa


The Beer Association of South Africa (BASA) is a non-profit organisation whose founding members include Craft Brewers Association of South Africa, Heineken South Africa, the South African Breweries and the United National Breweries.

The objective of BASA is to lead the responsible advancement of the interests of beer manufacturers and to raise and improve the reputation and status of the industry.

To prepare for strategic engagements with the government and other stakeholders, BASA needed independent facts on the nature, size, dynamics and economic contribution of the beer industry, as well as a better understanding of the public policy issues facing the industry.

Genesis documented the entire industry and modelled the economic impact. This included malt beer, sorghum beer and craft beer markets.

It was the first time the craft beer market had been fully documented.

Trade-related analysis on poultry imports from USA

Project name:
Trade-related analysis on poultry imports from USA

Service:
Damages, trade and other litigation

Sector:
Agriculture and Agribusiness
Manufacturing

Area of Expertise:
International trade disputes

Client:
South African Poultry Association (SAPA)

Date:
2015

Country:
South Africa


Genesis has become an important source of independent analysis and advice to the South African Poultry Association (SAPA) and, through these engagements, also to decision-makers in South Africa’s International Trade Administration Commission (ITAC), the Department of Trade and Industry (the dti) and the Department of Agriculture, Forestry and Fisheries (DAFF).

Over the past three years, we have helped ITAC to understand the potential impacts on domestic prices and consumers, and also on domestic poultry producers arising from SAPA’s tariff and anti-dumping applications against imported poultry products. Our work has also shaped and developed all stakeholders’ understanding of the conceptual underpinnings of the trade remedies available in South Africa’s Trade, Development and Co-operation Agreement (TDCA) with the European Union (EU).

In these various work streams, Genesis has modelled the transmission mechanism between higher tariffs, domestic prices and consumer welfare, as well as the average return on capital employed by domestic producers to be able to continue investing in their businesses. These analyses have generated a clearer understanding of the trade-offs between different types and levels of import protection. They have also assisted ITAC in its consideration of various objections raised by the importers and retailers who contested SAPA’s tariff and anti-dumping applications, many of which were speculative rather than evidence based.

Genesis also provided the dti with evidence-based analysis of the potential impacts of the USA’s decision to make South Africa’s continued inclusion in the African Growth and Opportunity Act (AGOA) contingent upon USA poultry producers gaining greater access to South Africa’s poultry market. This informed the dti’s negotiating strategy with representatives of the USA government, including the magnitude of the import quota eventually granted to USA producers. The objectives of this work required a thorough investigation of existing general equilibrium models to show the impacts on South African poultry producers and consumers of allowing USA poultry imports into the domestic market, as well as a rigorous analysis of the nature and extent of the potential harm to South African exports to the USA should AGOA preferences be revoked.

Genesis continues to provide economic advisory to SAPA on an ongoing basis. More recently, our team has been involved in assisting SAPA and the DAFF understand the impact of proposed brining regulations on domestic poultry producers and consumers.

Tribunal gives conditional green light to alcohol merger

Project name:
Competitive effects assessment of merger involving licensing of certain Diageo products to AB InBev

Service:
Competition economics

Sector:
Manufacturing
Retail

Area of Expertise:
Merger analysis and public interest

Client:
AB InBev and Diageo

Date:
2018 - 2019

Country:
South Africa


AB InBev and Diageo have entered a licensing agreement whereby AB InBev will produce, market and sell Diageo’s Smirnoff ready-to-drink (RTD) alcoholic beverage and Guinness brands in South Africa.

This agreement required the approval of the competition authorities, given that it was filed as a merger. Genesis was appointed to assist with the merger assessment of the agreement.

Our work focused on assessing the competitive effects alleged by the Competition Commission, in particular concerns related to (i) market share accretion, (ii) impact the loss of alleged close competitors would have on consumer outcomes, and (iii) other potential anti-competitive effects, such as customer foreclosure and conglomerate effects.

Our work assisted the legal team in its responses to the Commission by showing that the concerns raised had no basis. We have also presented our findings to the Commission to assist in its deliberations and submitted a memorandum outlining our views on key competition issues.

Following the commission’s recommendation of a conditional approval of the transaction, Distell’s participation in the process at the Competition Tribunal led to claims regarding potential tying and bundling strategies AB InBev might undertake post-merger. We filed a report with the tribunal showing that the merger provided little reason for concern and rather suggested that AB InBev would be able to offer, on the merits, a stronger and more effective competition to Distell.

In August 2019, the tribunal provided its order that the merger be conditionally approved.

Consolidation of safety-shoe manufacture

Project name:
Consolidation of safety-shoe manufacture

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Merger analysis and public interest

Client:

Date:
2012

Country:
South Africa


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.

Competition Commission vs Netstar and others

Project name:
Competition Commission vs Netstar and others

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Netstar, Tracker

Date:
2009

Country:
South Africa


In what has become a landmark case, Genesis was retained by a number of vehicle-tracking companies to provide an independent economic analysis of the allegation that a standard set for the vehicle-tracking industry and its adoption by insurers had the effect of raising barriers to new entrants. This was the first product standard case in South Africa and raised a host of complex legal and economic issues. 

On the back of extensive research into USA and EU case law, Genesis tackled the issue from three major angles. The first was an analysis of whether the standard was developed in conjunction with, and on the instruction of, the insurance firms themselves. This is because, in economic theory, customers are unlikely to agree to a standard which would harm themselves. Second, Genesis sought to understand how widely the standard was adopted by insurance companies at the time, and therefore whether new entrants could gain traction with some insurers, even if not all. Finally, Genesis spent considerable effort in building evidence as to whether any potential entrant was ready for entry during the period the standard was in place and therefore whether it had the actual effect of preventing entry. 

This analysis contributed to the eventual finding by the Competition Appeal Court that the case against the vehicle-tracking companies lacked merit. Genesis’s work also helped the court establish an important legal principle in assessing these types of cases, namely that the effect cannot be hypothetical where a specific allegation is made by a litigant. Rather, in those cases the court found there was a need to demonstrate an actual effect.

Expert testimony in alleged case of excessive pricing

Project name:
Expert advice and testimony in an alleged case of excessive pricing in the polymer production industry

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Expert testimony
Abuse of dominance and prohibited practices

Client:
Sasol Chemicals

Date:
2015

Country:
South Africa


The concept of excessive pricing and how competition authorities should treat this prohibition has been the subject of much debate worldwide. The seminal Sasol Polymers excessive-pricing case has since set precedent as to how future claims of excessive pricing will be assessed in South Africa, and is likely to also shape the approach of other competition authorities across Africa. In this matter, Genesis was commissioned to provide an in-depth economic assessment of whether Sasol’s polypropylene export prices were likely to represent a valid comparator to the domestic prices that were alleged to be excessive. 

Central to this analysis was the question as to whether an investment in an export facility could be taken as a reliable indication that export prices were a reflection of economic value (and therefore a reasonable benchmark against which excessive prices could be evaluated).  Combining our deep understanding of Sasol’s business, with a meticulous evaluation of Sasol’s investment decisions and financial position, Genesis was able to offer an assessment which showed that export prices in this matter did not necessarily represent a reasonable benchmark to evaluate excessive prices.

Neither the Tribunal nor the Competition Appeal Court disputed the independent economic analysis offered by Genesis Analytics.  The Competition Appeal Court ultimately overturned an initial finding of excessive pricing against Sasol made by the Competition Tribunal.

Improving effectiveness of CSI programmes in telecoms

Project name:
Improving effectiveness of CSI programmes

Service:
Shared value and corporate impact

Sector:
Manufacturing
Communications and Media

Area of Expertise:
Shared value, transformation and inclusive business
Corporate impact
Public policy

Client:
Samsung

Date:
2014

Country:
South Africa


The Shared Value team facilitated training and workshops for Samsung on improving the company's corporate citizenship in Africa by improving monitoring and evaluation of projects.

Expert analysis on impact of Walmart-Massmart merger

Project name:
Expert advice and testimony on public interest issues in the landmark Walmart merger before the competition authorities

Service:
Competition economics

Sector:
Retail
Manufacturing
Public and Social

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
South African Commercial, Catering and Allied Workers Union

Date:
2011-2012

Country:
South Africa


Genesis was appointed to provide expert analysis on Walmart’s proposed acquisition of Massmart by affected trade unions, which were later joined by the Department of Economic Development. This was considered a seminal case regarding public interest issues related to mergers and acquisitions in South Africa.

The central issues at stake were whether the acquisition would result in a loss of employment, or reduction in the conditions of employment, and an increase in global sourcing at the expense of domestic industry. Genesis was brought in to provide expert analysis of these issues by the trade unions, later joined by the Department of Economic Development. 

The particular challenge in this case was not only to determine if such effects were likely on the economic and documentary evidence, but also if likely, what the quantum of effect would be. Genesis was able to meet this challenge through the careful extraction of key information from the vast discovery and the application of a variety of economic tools drawn from international trade theory, labour economics and input-output analysis. 

This evidence was central to the Competition Tribunal adopting a condition that Walmart put in place a supplier development fund, and the Competition Appeal Court singling out Genesis as fulfilling the expert role in these kinds of proceedings in an exemplary fashion.       

When the Competition Appeal Court later decided to refer the matter of the size and structure of the supplier development fund to a group of experts, Genesis was once more involved in developing submissions, which were co-authored by Nobel laureate, Joseph Stiglitz. This process ultimately resulted in the total funds dedicated to a supplier development fund being raised from R100 million to R200 million. At the conclusion of the proceedings, the Appeal Court singled out the Genesis team for fulfilling its expert role in the proceedings in an exemplary fashion

The Walmart case not only shaped the legal view of public interest in merger control, but the contribution made by Genesis  demonstrated that economists are able to bring useful tools to bear in matters such as these. Using these tools, they are able to accurately quantify and measure the effects on public interest variables and, in doing so, to greatly improve legal decision-making on otherwise vague concepts.   

Impact of Walmart merger on Namibia

Meet the Team

Areas of Service Expertise

  • Competition economics
  • Economic impact assessment
  • Regulatory economics
  • Shared value and corporate impact
  • Trade disputes and damages quantification

Projects

Project

Enhancing investment for domestic foundry and mill markets

The Economic Development Department (EDD) contracting Genesis to undertake an economic assessment of whether an export tax on scrap metal will improve the availability of quality scrap metal at affordable prices for foundries and mills in the domestic market.

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Project

Working on a solution to turn around South Africa’s rust belt

The CEOs’ Initiative, a grouping of 60 top CEOs, asked Genesis Analytics to diagnose the challenges in the Vaal region and come up with a solution. Our team worked with the government and big businesses in the region to design a rejuvenation plan.

View Project

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Leading the team

Stephan Malherbe

Chair and Managing Partner (Competition and Regulatory Economics)

Stephan Malherbe
Chair and Managing Partner (Competition and Regulatory Economics)
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Ryan Short

Partner (Shared Value and Impact)

Ryan Short
Partner (Shared Value and Impact)
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