Government to study Walmart-Massmart decision MyZA

Pretoria – Government has noted and will study the Competition Tribunal’s decision allowing US retail giant Walmart to merge with Massmart.

“Government has taken careful note of the decision of the Competition Tribunal as well as the conditions that have been imposed,” the Departments of Economic Development, Trade and Industry and the Department of Agriculture, Forestry and Fisheries said in a joint statement on Tuesday.

This, after the Tribunal ruled that the merger between the two would go ahead with conditions after hearings were held earlier in May at the recommendation of the Competition Commission in February.

The Commission had previously recommended the approval of the transaction without conditions, but then changed its position in favour of conditions. This comes after shareholders voted to accept the US Company’s bid to acquire 51 percent of the South African retailer in a deal worth about R16.5 billion.

The departments had opposed the merger, arguing it would lead to the loss of jobs as well as put suppliers out of work. Trade unions, namely the South African Commercial, Catering and Allied Workers’ Union (Saccawu), the South African Clothing & Textile Workers’ Union (Sactwu), Congress of South African Trade Unions (Cosatu) and other unions in industries which sell products to the retail sector are also opposing the merger.

Cosatu on Wednesday expressed disappointment at the decision.

It said that while it welcomed the reinstatement of workers and that all agreements negotiated by unions must be honoured, the approval did not do anything to address its concerns as well as those raised by government as well as concerned South Africans.

“Cosatu has never opposed foreign investment into South Africa, particularly if it leads to the creation of new, decent jobs. Walmart however is more likely to destroy jobs, by using its competitive advantage to force its competitors out of business, and destroying South African manufacturing businesses, which will not be able to compete with a flood of cheap imports,” spokesperson Patrick Craven said.

It said it is willing to engage Walmart on the issue. “But if no satisfactory agreement is reached, the Cosatu Central Committee, from 27-30 June 2011, will be debating on how to proceed with its campaign of mass action,” said Craven.

The conditions imposed on the deal are that the merged entity may not retrench workers for a period of two years; it must reinstate the 503 Massmart employees that were retrenched in June 2010; it must also honour existing labour agreements and not challenge Saccawu’s role as the collective bargaining agent for at least three years. The entity must also set up a R100 million fund to support local suppliers and small business.

“We welcome the recognition by the Tribunal that a merger should be subject to conditions. We welcome the decision that these conditions should cover areas such as commitments to avoid job losses, protection of worker rights and measures to promote procurement of locally-manufactured goods. These matters are vital to ensure that we achieve the goal of increasing employment and decent work opportunities in South Africa,” said the departments.

Government will study the measures set out in the conditions and whether these adequately “meet the public interest tests set out in the Competition Act and whether they will secure the desired outcome, in particular ensuring that South Africa is not faced with large-scale job losses in supplier industries to Massmart-Walmart.”

Ministers of Economic Development Ebrahim Patel, Trade and Industry Rob Davies and Agriculture, Forestry and Fisheries Tina Joemat-Pettersson said they will meet with Walmart-Massmart to discuss their commitments in the light of the conditions.

“Based on the outcome of the study of the conditions and the responses of Walmart-Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage,” said the ministers.

Meanwhile, the South African Chamber of Commerce and Industry (SACCI) welcomed the decision.

“Any disapproval of the deal would have reverberated around the globe and would have discouraged investment in South Africa,” said SACCI President Chose Choeu of Walmart, which operates in many countries including Brazil and China.

SACCI said it would be up to local suppliers to make the best of the merger and deliver goods and services of standards sufficiently high that will enable them to penetrate the export market.

“The increase of 1.7 percent in the Massmart share price on the announcement bears testimony to the positive reaction of investors,” said Choeu.

Business Unity South Africa (Busa) said: “This appears to be a realistic solution to what has been a very complex scenario. At the same time, the limits of the competition authorities’ mandate as set out in the announcement should be respected by all parties.

“The acquisition will increase competition in the retail sector and is thus in line with the provisions of the new Growth Path seeking to raise levels of competition in the SA economy.”

Busa emphasised that laws governing foreign investment should as far as possible be clear, predictable and transparent, while also adding that the timelines involved should be as short and predictable as possible.

“In this regard, the latest process was less than ideal. South Africa must still want to become the most favoured destination for foreign investment to facilitate economic growth,” said Busa spokesperson Masego Lehihi.

The Tribunal said it would give reasons for the decision on or before 29 June 2011. – BuaNews

South Africa – guard against becoming like the People of Walmart!