South Africa: Wal-Mart provokes debate
South African government challenges retailing giant’s plans.
South African union workers protest against the plans of the United States retailing giant Wal-Mart to move into South Africa. The workers stand on May 9, 2011 outside South Africa’s Competition Tribunal in Pretoria, where the anti-trust tribunal began hearings into Wal-Mart’s proposed takeover of local wholesaler and retailer Massmart, with government and unions set to present their objections to the deal. The government will argue the merger could cause thousands of job losses, after a report done in April found the takeover could lead Massmart to switch from locally supplied merchandise to imports, hurting domestic suppliers. The companies need approval from the tribunal to go ahead with the deal.
Wal-Mart's big move into South Africa is meeting some resistance and provoking heated debate.
The Wal-Mart debate is pitting President Jacob Zuma's African National Congress government and black-dominated trade unions against the white-dominated business community.
The government is charging that Wal-Mart's purchase of controlling shares of the Massmart chain might result in a "surge" of imported goods that would have a "destabilizing" impact on the economy.
South Africa's Trade Minister Rob Davies the increase in imported good might undermine South Africa's efforts to create more jobs. Davies was speaking on the Johanneburg-based 702 Talk Radio.
The South African government and labor unions oppose Wal-Mart's proposed $2.3 billion acquisition of a 51 percent stake in Massmart, South Africa's largest wholesaler. As many as 4,000 jobs could be lost should Massmart shift just 1 percent of its procurement to imports, a government witness said during Competition Tribunal hearings on the purchase.
Wal-Mart has counter-argued that the fears are "unfounded." South African lawyer Jeremy Gauntlett, senior counsel for the two companies, said at the hearings.
Wal-Mart said that when it purchased Chile's Distribucion y Servicio D&S SA in 2009 it actually resulted in a doubling of the company's exports from the Latin American country, according to the Chilean company's director, who came to South Africa to testify in the hearings. The Chilean company's exports are expected to double again this year while the company is also able to provide lower prices locally for consumers, he said.
The move by Wal-Mart is an important development as it is an indicator if South Africa can be the entry for multinational firms that want to expand their business across Africa.
The charges that Wal-Mart would flood South Africa with imports is surprising to many because South African stores already have lots of Chinese-made products on the shelves.
Many in South Africa's business community argue that the country's labor laws would give adequate protection to Wal-Mart employees.