Commission approves sale of Modderfontein property to Shanghai Zendai

The sale of the Heartland property by chemicals and explosives company AECI (AFE) to Chinese property developer Shanghai Zendai has been approved by the Competition Commission‚ but with a condition.

The agreement between AECI and the Chinese investor sets out a restraint of trade on AECI not to engage in property development in the Modderfontein area‚ and the commission was concerned that this restraint of trade amounted to market allocation‚ which is a contravention of the Competition Act.

The commission set a condition that the period of restraint of trade be reduced from 10 years to five years. The commission said in a statement on Tuesday that the 10-year restraint period was “too long‚ unjustified and likely to frustrate potential re-entry by AECI into the Modderfontein area”.

The sale of the 1‚600ha of vacant land and buildings worth R1bn was concluded at the end of 2013 and will result in Shanghai Zendai Property developing the land for mixed use‚ which may include residential‚ commercial and retail developments.

Stakeholders who may be affected by the transaction expressed concern about pollution‚ the sale of land to a foreign company and the fact there was no agreement on the building of low-cost housing.

However‚ the commission’s mandate is to ensure the transaction does not adversely affect competition‚ and advised the parties to raise these issues with other government agencies better suited to deal with them.

In terms of public interest‚ the commission found that the acquisition will not result in retrenchments as the land is being bought as a going concern. Shanghai Zendai has also undertaken not to retrench any employees and not to change the terms of conditions of employment.

Shanghai Zendai is an investment company with a market capitalisation of the equivalent of $294m at the end of last year on the Hong Kong Stock Exchange.