Fin24

Govt will cooperate with Walmart

2012-03-09 16:17

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 come back.

"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 account.

"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 floor."

Abrahams welcomed the study, saying it would give the union another chance to show the implications of the merger on the local economy.

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 years.

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.

Comments
  • Nicholas - 2012-03-09 16:33

    Why has the government always got to be forced by a court of law to do the right thing?

      Mzwandile - 2012-03-09 17:40

      @Nicholsa - if you are don't have know of a subject just keep quite. This decision is the victory to the people of South Africa, workers and the emerging and small business. If this merger was left with the condistions imposed by the competition tribunal, no workers would have been reinstate, the conditions of employmet would have been changed and Walmart would not have had obligation to ensure that they procure thei good in Sout African companies and smaller compettors like PnP, Checkers shoprite would have been forced to lower their prices resulting in retrenchments. We can now contribute intelligently.

      Mike - 2012-03-09 18:18

      @ Mzwandile: If you think Checkers is a "small competitor" you obviously are not reading the financial pages. Why am I not surprised?

      Mike - 2012-03-09 18:36

      @ Mzwandile: You know , if your original post had been more erudite and specific, I may have agreed with you!

      Kevin - 2012-03-11 07:09

      Walmart is not the right thing. To give the biggest bully retailer a such a big stranglehold on SA retailing is going to alot of South Africans

  • david.lebethe - 2012-03-09 17:07

    @Nicholas. I was in the beginning wary about the government's involvement in the whole matter. But, after reading the judgment, I now now realise there wouldn't have been an alternative suggestion made by the court and which will go a long way to guide stakeholders on how to approach such a merger in the future. Despite Saccawu's misgivings, am generally happy with the judgement. It was in a football match, I would say it's a draw.

      Nicholas - 2012-03-09 22:04

      I agree David, I think the court's ruling was fair.

  • Sam - 2012-03-09 17:22

    Dennis Davis is a credit to his profession and to his country.

  • Leon - 2012-03-09 17:32

    He talked a lot and did not say a single thing. He breathed out a lot of hot air and we still don't know what is going to happen. Typical politician speak.

      Mike - 2012-03-09 18:11

      "Politician"? Which one?

  • Peter - 2012-03-09 22:18

    What does mergers/buyouts have to do with Government ? Who cares if Massmart becomes even bigger ? Does the ANC not try all tricks in the book to be the biggest political party / Should they not be hauled in front of the Competition Board for having the monopoly of voters ?

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