Cape Town - The government will cooperate with US retail giant
Walmart and local group Massmart Holdings [JSE:MSM] after the Competition Appeal Court
provided an "innovative" way forward on the merger, ministers involved
in the case said on Friday.
Economic Development Minister Ebrahim Patel said
Friday's judgment by Judge Dennis Davis endorsed some of the central
concerns government had expressed during the legal proceedings.
"The order goes a long way to addressing how we can deal with consequences of the merger," Patel told reporters in Cape Town.
Davis dismissed the application by the ministers of
economic development, trade and industry and agriculture, forestry and
fisheries who sought to review and set aside the Competition Tribunal's
approval of the merger.
He ordered that a study be commissioned by three
experts, representing the SA Commercial, Catering and Allied Workers'
Union (Saccawu), the three ministers and the merging parties.
They must produce a report for the consideration of the
court on the best means by which South African small and medium
suppliers could participate in Walmart's global value chain.
Patel welcomed the court order and said it was helpful.
"We think it is an excellent innovation by the court to
propose a group of experts and to set a deadline in which they must
"What we are looking for is the Walmart matter is a
test that is applied to transactions of this nature, a forum in which
the appropriate conditions can be developed and an opportunity for
fact-based resolution of this matter."
Asked whether the government would make further legal
challenges to the merger, both Patel and Trade and Industry Minister Rob
Davies said they would take advice from their lawyers but were content
with the "creatively structured forum" given by the court.
"It does seem to us that this is an excellent route that the court has proposed," said Patel.
He said the judgment had taken South Africa's competition law "significantly forward".
The ruling recognised public interest considerations
were fundamental to the operation of competition law, that conditions
should be set to mergers and acquisitions, and that those should go
beyond what a merger party offers.
The judgment ensured there had to be an interrogation of conditions and a test of employment and small business development.
Davies said one of the "red herrings" around the case
was whether the government's stance on the Walmart merger was "a
generalised process around foreign direct investment".
"What we are dealing with here is a merger dealing with
entry of the world's largest retailer, in a context where global value
chains have been developed, which have significant impacts on
participating countries," Davies said.
"This particular merger should result in an outcome which is positive in terms of employment and small business development."
He said government would be participating "fully" with the study.
"We look forward to an outcome in which a merger of
this nature is regulated in such a way that it does yield positive
benefits to employment and small business development," he said.
Brian Leroni, a spokesperson for Massmart and Walmart,
said the merged firm welcomed the decision and wanted to work with
labour and government.
"The process has been rigorous and long in duration. We think that we know and understand each other's expectations."
Saccawu, however, was not happy with the judgment.
Union spokesperson Mike Abrahams said the judiciary had
failed to take various factors such as the conditions of employment into
"In my view the judiciary had a very conservative approach to the issues we raised," Abrahams said outside court.
"The way workers will win is not through litigation but
by increasing our number of members and taking on business in the shop
Abrahams welcomed the study, saying it would give the
union another chance to show the implications of the merger on the local
Davis did uphold, in part, an appeal by Saccawu for 503 workers who had been retrenched from Massmart before the merger.
They were entitled to reinstatement.
Davis said due to the nature of the case and the outcome, there would be no order as to costs in respect of the appeal.
He said the merged entity had to ensure there were no
retrenchments based on the operational requirements in South Africa for
two years from the effective date of the transaction.
The merged entity must honour existing labour
agreements, continue to honour the current practice of the Massmart
group, and not challenge Saccawu's current position as the largest
representative union for at least three years.
The judgment comes days after the conditional approval of the merger between Walmart and Massmart by the Namibian authorities.
Massmart was advised by Namibia's trade and industry
ministry that the deal had been approved with three conditions -- that
the merged entity ensure there were no retrenchments resulting from the
transaction for two years, that it honour existing labour agreements and
that it continue to recognise representative trade unions for two
The merged entity must consult with the ministry of
trade and industry on the establishment of a programme of activities for
domestic supplier development.
Massmart has operations in 14 African countries outside South Africa.