The amendment of the Competition Act in 2019 fundamentally altered the workings of merger control in South Africa. By elevating the promotion of a greater spread of ownership to a mandatory public interest consideration under section 12(A)(3)(e), the legislature’s aim was to transform employee share ownership plans (Esops) into essential pillars of deal structuring. In a previous article I noted the rising role of Esops in securing merger approvals (“The rising role of Esops in SA merger approvals”, August 21 2025). The recent Esops impact study published by the commission not only cements the importance of Esops but also reveals a shift from merely requiring an Esop to scrutinising exactly how it is designed. What merging parties now need to understand is that the commission is increasingly likely to reject any Esop design that is not demonstrably worker-empowering and value-creating. To the commission, it would appear that the underlying logic of an Esop is that workers are integral to firm growth and should share in its success. Therefore, by allowing employees to acquire shares without upfront costs, firms create an inclusive ownership structure. However, what the commission’s study — which analysed mergers from financial years 2019/20 to 2022/23 — reveals is a troubling gap between the theory of inclusion and the reality of perpetual debt. To satisfy the public interest mandate, an Esop must provide tangible economic benefits, and the commission has identified several red flag design features that it now views as obstacles to true empowerment. The most significant finding concerns what the commission terms the “debt trap”. While some Esops are outright grants, most rely on notional vendor finance (NVF). The commission found that many of these are being crippled by interest charges. In many cases the dividend doesn’t even cover the annual interest charge, meaning the capital loan is never reduced and workers see little to no cash flow. Consequently, the commission now recommends that interest should not be charged on NVF debt, as it renders the structures financially unsustainable and fails to create real value. To remedy this, the commission is moving toward a more prescriptive value-first mandate. Beyond removing interest, the commission expects firms to apply the same discounts, minority, marketability and lock-in criteria that are applied to commercial investors or executives.These discounts reduce the initial debt and accelerate the path to real ownership. Furthermore, a non-negotiable principle remains that workers must not be required to pay an initial cost to participate; their sweat equity is their contribution. However, it is emphasised that value isn’t just found in dividend cheques but also in governance. The commission is moving towards making specific design principles mandatory to ensure the Esop isn’t just a passive vehicle controlled by the firm. This includes empowerment beyond the balance sheet, where employee representatives nominate a director to the company board, and Esop trusts that consist of either a majority of beneficiary-nominated trustees or an equal split with the firm. To ensure this oversight is professional, firms must provide mandatory training for both beneficiaries and trustees at no cost to the workers. Perhaps the most progressive aspect of these findings is the call for worker agency as a deal-breaker. The commission now advocates for workers, unions and worker forums to be active architects of the Esop rather than passive recipients. The study argues that beneficiaries must be included in determining key levers such as the duration of the plan, the class of shares and the placement of the Esop at the operating level, where workers have a direct impact. What merging parties now need to understand is that if an Esop design prioritises debt repayment over worker payouts or excludes employees from meaningful governance, it fails the public interest test. The imperative is for merging parties to now prove that their Esops are sustainable wealth-creation tools or risk a flat rejection of their merger filing. • Tlhong is corporate commercial director at TGR Attorneys.