Court victory oils WalMart entry into South Africa

By Crystal Van Wyk

Posted on Friday, 9 March 2012 17:18

It is now all systems go for the entry of the world’s largest retailer, the American retailer Wal-Mart to begin business in South Africa.

This follows a judgment by a South African court that dismissed an application by the country’s Ministers of Economic Development, Trade and Industry and Agriculture, Forestry and Fisheries to review and set aside the Competition Tribunal’s approval of the merger.

The government departments had argued that they did not enjoy a fair hearing before the tribunal when it was decided to approve the merger between WalMart and Massmart.

Wal-Mart acquired 51 percent of South African retailer Massmart.

The Competition Appeals court largely dismissed the appeal by government and unions against the Competition Tribunal’s approval of the deal. The court also ruled that 503 previously fired workers should be re-instated and that a panel should study how to ensure that smaller companies can participate in Wal-Mart’s supply chain.

Massmart has operations in 14 African countries outside of South Africa.

The judgment comes days after the conditional approval of the merger by Namibian authorities.

While South Africa’s main trade union, Cosatu said it was disappointed that the court decided to allow the merger to proceed and continues to oppose Wal-Mart’s entry into the country, it welcomes the order that the merged entity should 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”.

The South African Commercial and Catering Association, SACCAWU, a Cosatu affiliate said, they welcomed the CAC’s ruling in that, the 503 Massmart employees who were retrenched in 2009 and 2010 must be reinstated and all existing labour agreements by the merged entity must be honoured for a minimum period of three years.”

“The court had, however, accepted that although the merger should be approved, there were legitimate concerns about the effect of the merger on small producers and its effects on employment” said SACCAWU spokesperson, Mike Louw.

In its appeal the South African government accused the competition tribunal of not affording it a fair hearing before it approved R16.5 billion merger in 2011. They were also concerned that Wal-Mart would use its massive buying power to bring in cheap imports. This they argued would undercut local manufacturers.

But the court ruled that it found the tribunal’s decision had not been inflexible. It says government should have launched an immediate review with the court at that time.

The Minister of Economic Development, Ebrahim Patel welcomed the court’s order that a panel of experts be set up to examine ways of ensuring that local businesses benefit from Wal-Mart’s global value chain. Patel said the ruling had endorsed some of government’s main concerns

A spokesperson for Wal-Mart-Massmart in South Africa, Brian Leroni said, “Massmart welcomes the decision by the court and we would like to emphasise that we want to work with labour unions and the government in this matter”.

“This merger is now endorsed by all parties and the process has been rigorous, we must all work together now or the mutual beneficial way”, he added.

Local economists has also welcomed the court’s rejection of government’ attempt to reverse approval of Wal-Mart’s multi-billion rand acquisition of Massmart. They said the ruling was likely to be seen as a victory for Wal-Mart in its plans to expand in Africa.

Also read:

Walmart’s corporate expansions and unions
South Africa’s hysteria over mass marketing techniques
Is Walmart good news for Africa?
Country profile: SOUTH AFRICA
Top African business deals of the year

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