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Cosatu unhappy at Massmart verdict

May 31 2011 14:57

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Massmart gains as deal gets nod

Walmart deal approved with terms

Johannesburg - The Competition Tribunal approved Walmart’s R16.5bn bid for Massmart Holdings [JSE:MSM] on Tuesday, saying the retailer must not fire workers for two years.

It did not impose conditions on local procurement.

Comments were mixed, with some saying the conditions are too strict.

Patrick Craven, Cosatu spokesperson:
We are not happy. We would have hoped that the deal would be rejected or at least much more stringent conditions be imposed. Of course, we welcome the fact that the 500 workers would have to reinstated. The questions still arises how long will those jobs remain if the condition is merely that there be no more retrenchments for two years, which is a relatively short time.

Our biggest concern remains completely unanswered, and that is the knock-on effect on jobs in other retailers and the manufacturing industry.

We would have liked to see some conditions on local procurement although of course that ought to apply to all retailers, not just Walmart, and much more concrete and permanent guarantees that workers' rights would be respected and not just for a period of two years, which is nothing really.

How will they enforce the training of local suppliers?

Gary van Staden, political analyst, NKC Independent Economists:

It indicates that we still have too much labour and leftwing influence on government policy and South Africa needs to be in a position where we offer attractive incentives for investors, not conditions.

I think other foreign investors will look at it and ask: what conditions are they going to impose on us? What labour wish list are we going to have to deal with?

Devin Shutte, Newstrading:
It has come with what looks like very stringent conditions attached to it. They have to honour existing labour agreements, rehiring workers fired in 2010 and establishing a fund for the development of local suppliers.
The issue now is will Walmart and Massmart take any exceptions to these conditions or will the deal go ahead.

As a broad principle I think it is good what the competition commission has done. It’s fired short-term in the barrel of any other potential suitors to say that they won’t have free rein in South Africa, but we are still open for business. As long as they get that balance right, I think it will be good for potential investment in the future.
Syd Vianello, retail analyst, Nedgroup Securities:

This a meek and mild ruling. Quite frankly, I think Walmart and Massmart will accept every one of these conditions because it’s the conditions they offered in the first place.

I think all the fears of onerous conditions have been removed. This is a very manageable ruling and will be accepted by the parties and embraced by them.

Peter Attard Montalto, emerging market economist, Nomura:

This was a very important test case as it was so high profile - though arguably the less high profile Kansai paint/Freeworld Coatings deal already gave us a flavour of what was to come.

Whilst there was no chance in our minds that the deal would be rejected, the level of conditionality was always going to be key and it looks to be at upper end of what was expected: investment and jobs quotas plus local sourcing, all with numeric targets and worker firing ban.

The condition around rehiring already fired workers is especially strict. All this will go to show whilst South Africa is open for business, the costs and difficulties of investing are great with Econonomic Development Minister Patel pushing the developmental state agenda.

Strong opposition

Walmart, the world’s largest retailer, has bid R16.5bn for a 51% stake in Massmart, a discount retailer that sells everything from liquor to televisions in South Africa and a dozen other African countries.

The Competition Tribunal, which decides on antitrust matters, heard evidence on the deal for more than a week earlier this month from unions, the government and executives from both companies.

The unions and some government departments have lined up against the deal, saying it is likely to put the squeeze on local suppliers, leading to job losses.

Walmart has said it would agree not to cut jobs for two years, but added that targets on local procurement could force it to walk away from the deal.
cosatu  |  walmart  |  massmart holdings


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