South Africa approves Walmart deal
Wal-Mart gains its first foothold in Africa as competition authorities approve the retail giant's bid for local firm.
Last Modified: 31 May 2011 19:57
Walmart took control of Massmart, which runs wholesale and retail chains in 14 African countries [Reuters]

South Africa has cleared the way for Walmart to gain its first foothold in Africa, approving the company's $2.4bn bid for control of retailer Massmart with minimal conditions.

South Africa's competition tribunal on Tuesday gave Walmart the go-ahead to buy a 51 per cent stake in Massmart provided the US retailer does not lay off any workers for two years.

The condition is designed to placate organised labour, which has accused the world's largest retailer of union-bashing.

"We have decided to approve the merger subject to the undertakings made by the parties becoming conditions for the approval," the tribunal said in a statement.

"The merged entity must ensure that there are no retrenchments, based on the merged entity's operational requirements in South Africa, resulting from the merger, for a period of two years."

Wal-Mart in January signed a $2.5 bn offer for a controlling stake in Massmart, which runs nine wholesale and retail chains with 288 stores in 14 African countries.

'Mother of all boycotts'

But the deal has been slammed by South Africa's politically powerful unions.

The country's largest labour federation, Cosatu, initially threatened "the mother of all boycotts" if the merger went through.

The tribunal has ordered Walmart to honour all existing labour agreements and not challenge the position of the country's largest retail-sector labour union, the South Africa Commercial, Catering and Allied Workers Union.

But Mike Abrahams, a spokesman for SACCAWU, told the Reuters news agency that the union might consider appealing to the Competition Appeals Court.

"We are meeting with our legal representatives to explore legal possibilities," he said.

The deal will for the first time give Arkansas-based Walmart a foothold in Africa and increase its market share in emerging countries, which have been driving its profits as US retail sales have slowed.

The company believes South Africa is a key market for growth, accounting for some 20 per cent of consumer spending on the African continent.

The tribunal acknowledged the merger was likely to have losers, as Walmart's entry might displace small businesses and reduce the market share of some of the country's major retailers.

"That is an inevitable consequence of the competitive process," it said.

Cheap imports

Unions had raised concerns that Walmart would flood the local market with cheap imports, resulting in job losses at local manufacturers.

Cosatu also accused the retail giant of being "one of the worst union-bashing employers in the world".

The labour federation pledged on Tuesday to continue its anti-Walmart campaign.

"Overall we think that (the tribunal's approval) is a victory for Walmart and we shall be continuing our campaign against the takeover of the Massmart stores," Cosatu spokesman Patrick Craven told eNews television.

"We believe all the reasons for that campaign are still absolutely valid."

The government, which has prioritised job creation in its policies, had also voiced concern about the deal, saying South Africa stood to lose jobs to China if the cost-cutting giant boosted imports.

South Africa is struggling with a 25 per cent unemployment rate.

Ayo Akanbi, an economist at Pan African Investments told the AFP news agency that the investment was a positive development for the country's economy but its impact would only be felt if it contributed to job creation.

"The net effect of the deal will only be favourable for South Africa if it can create jobs and stimulate local industries," Akanbi said.

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