Bayer opposes black economic empowerment in purchase of Monsanto

Pic: Courtesy Friens of the Earth, Europe

Author: Stephen Greenberg, ACB Research Coordinator

The Competition Tribunal announced the finalisation of the merger between Bayer and Monsanto in South Africa in May. Bayer had taken the original conditions imposed by the Competition Commission in 2017 to the Tribunal for reassessment. These included selling businesses to black economic empowerment (BEE) compliant companies. Bayer has claimed confidentiality on the conditions, making it difficult for the public to see what was agreed.

The merger is one of three concurrent global mergers in agricultural biotechnology, seed and pesticides. The others are Dow-DuPont and ChemChina-Syngenta, both of which were previously approved by the competition authorities in South Africa. The result is concentration from six to four globally dominant multinationals in this field; with BASF being the fourth and a beneficiary of asset sales from the mergers.

Globally the Bayer-Monsanto merger has raised concerns from many quarters, including from commercial and small-scale farmers, civil society organisations and competition authorities, who say it will increase the price of agricultural inputs, reduce choice for farmers and consumers, reduce innovation, and entrench corporate power in food systems.

In South Africa, Bayer trades mainly in pesticides, with a smaller seed business, including cotton. Monsanto is one of the two dominant seed companies, the other being Pioneer-Pannar owned by DuPont (now merged with Dow to form Corteva Agribusiness). These companies control seeds of our staple foods – maize, wheat, oilseeds – as well as other crop types.

More than 90% of South African commercial markets in maize, soya and cotton are genetically modified (GM). Maize is the major commercial seed market, with more than half of total market value. Monsanto currently has 17 of 22 GM traits licenced in South Africa, including some of those used by its largest competitor, Pioneer-Pannar. Monsanto is the originator and long-time beneficiary of glyphosate, the main herbicide used in commercial agriculture. Glyphosate is used together with herbicide tolerant GM seed in Monsanto’s RoundUp package.

In 2017 the Commission had found that the merger would produce unacceptable levels of concentration in GM cotton seed. It therefore imposed the condition that Bayer divest of its South African cotton seed business. This business currently licences Monsanto GM traits from an Australian company, which holds an exclusive global licence. The Commission further stipulated either the business, or the licence should be sold to a BEE-compliant company. It did not specify the size of the company. The details are not transparent because Bayer’s lawyers used confidentiality claims based on sensitive business information to censor documents available to the public.

The Commission also found that the merger would result in lack of competition in particular markets, including GM traits and herbicides. The Commission argued that Monsanto’s Roundup GM seeds and herbicide do not have many competitors on the market. For its part, Bayer has a similar GM seed-herbicide package called Liberty, but it is not yet commercially available. The Commission was concerned that the merger of these two parties would remove this possible competitor to Monsanto’s dominance.

As a result, the Commission imposed a condition of the merger that Bayer has to sell its Liberty trait and herbicide package to a third party, and that this package had to be made commercially available in order to compete with the newly merged Bayer-Monsanto. Bayer has already agreed to sell these assets to BASF globally.

A year later, and Bayer’s request for the Competition Tribunal to reassess the conditions of the merger was scheduled for hearing. From what we can tell, Bayer opposed the condition of the sale of the seed business to a BEE-compliant company, wanting to widen the definition of who could purchase the business. Again, we do not have the full argument, because Bayer has used confidentiality claims to censor the material. Bayer also opposed the condition that the Liberty package be commercialised in South Africa either by the buyer of the assets, or through licencing to a third party with BEE credentials.

Bayer argued that commercialisation of GM varieties and pesticides is a highly complex process that not just anyone can do: complex technical skills and facilities are needed, regulations must be adhered to, the process requires complex organisation, and so on. In his statement to the Tribunal, Klaus Eckstein, CEO of Bayer in SA, said “…the process for the registration and commercialisation of herbicides and traits is onerous. It requires a significant capital investment and substantial technical knowledge”. He also said a GM development programme “can only be undertaken by a large multinational company”.

Lack of capital investment and technical knowledge amongst black-owned enterprises is a direct product of apartheid in South Africa. The seed and chemical multinationals themselves are at least partly responsible for this situation. They operated in South Africa under apartheid. They facilitated and benefited from the growth of large-scale commercial monoculture farming, which itself is based on a long history of violent land dispossession, super-exploitation of farm workers, and apartheid repression.

Another reason for lack of technical knowledge is the imposition of intellectual property rights, in the form of patents and plant breeders’ rights, that prevent access to knowledge. Control and ownership over knowledge is a source of wealth for these companies. Licencing the use of privatised knowledge and information to others is a profit centre for them.

But the transfer of GM technologies is not appropriate for our conditions. The competition authorities could rather have insisted that the merger is allowed on condition that the multinationals restrict their activities to GM and hybrid seed for commercial markets, and release all other crops and varieties for public use, royalty free. The authorities could also have called for a fund to support diversification in seed and agricultural input production and supply.

There is no offer from Bayer even to assist with transferring assets or technical skills, or of developing domestic production capabilities. Bayer is seeking a free pass to extend its ownership and control, without any consideration for national demands for economic transformation. If South Africa is serious about redress of apartheid inequities, it is precisely the sharing of capital and diverse technical knowledge that is required. The lack of these resources outside the corporations cannot be used as an excuse for not diversifying and opening the economy to others.

These are public interest issues. Yet Bayer has claimed confidentiality on the final conditions. A private company is preventing the public from seeing what deals were made behind closed doors. The merger has implications for the future of farming in South Africa: will it be possible to diversify our economy or are we going to be taken further down the path of exclusion and even greater wealth concentration in the hands of a few? The decisions reached also have implications for national sovereignty: does the democratically-elected state have the ability to act to realise redress and progressive transformation, or is it now subordinated to multinational corporations who can override national decisions, such as BEE?

Diversifying production systems and allowing for more broad-based economic participation also requires diversification of agricultural inputs. As with other parts of the economy, agricultural input supply should also be opened to wider participation. This means deliberate efforts to build and support black- and women-owned small and medium input production and supply enterprises that can respond to diverse needs. In the South African context it makes no sense to allow further concentration amongst multinational corporations.