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Walmart dismisses merger concerns

Aug 02 2011 19:07 Sapa

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Cape Town - United States retail giant Walmart and Massmart Holdings [JSE:MSM] have rigorously defended their R16.5bn merger, rejecting claims by the government that the deal poses a risk to the South African economy.

In a statement on Tuesday, the retailers said the government had earlier in the day presented as fact propositions which had already been rejected by the Competition Tribunal during its hearings on the merger.

"In addition, the [government] statement appears to express the opinion that the Tribunal's decisions and proceedings were flawed, even though the application before the Appeal Court has yet to run its course," they said.

The government appeared to delve into territory that the Competition Appeal Court had been called upon to adjudicate in the ministers' review application now before the Competition Appeal Court.

"Out of deference to the legal proceedings currently underway, Massmart and Walmart cannot comment publicly in relation to issues that have yet to be determined by the Appeal Court," the retailers said.

"In the interim, we are using the time available under the Appeal Court rules to prepare our answer to the ministers' review application. This will be filed and made available in due course."

Trade and Industry Minister Rob Davies, Agriculture and Forestry Minister Tina Joemat-Pettersson and Economic Development Minister Ebrahim Patel said on Tuesday that the merger, as it stood, threatened to cause a decline in local manufacturing and production.

They filed papers with the Competition Appeal Court last month seeking to have the Competition Tribunal's decision to approve the merger set aside.

At a media briefing in Pretoria on Tuesday, Patel said the government would be derelict in its duty if it did nothing "when there is clear and compelling evidence of probable job losses or deterioration in the working conditions of South African workers due to increased imports as a result of the proposed transaction".

For this reason, it was trying to get more appropriate conditions attached to the conditions of the merger.

Massmart and Walmart said the transaction would accelerate Massmart's investment in growth, resulting in the creation of approximately 15 000 jobs in retail over the next five years.

"Furthermore, a review of Walmart's international operations will reveal a demonstrable track record of developing local suppliers in the markets within which it operates, not least because this makes commercial sense," the retailers said.

"During the tribunal hearings the merging parties were especially sensitive to the concerns raised about local suppliers and the need to grow suppliers in South Africa."

The retailers said a healthy base of local suppliers was good for their supply chain, consumers and the local economy.

To facilitate local supplier development, Massmart and Walmart volunteered to establish a R100m programme to develop local South African suppliers.

"Instead of insulating local industry from international competition for a period, it seeks to make local industry more competitive to meet international competition," they said.

The Walmart-Massmart merger was approved by the Competition Tribunal on May 31, subject to certain conditions.

The SA Commercial, Catering and Allied Workers' Union has appealed against this clearance.

The tribunal's decision has been welcomed by both Walmart and Massmart.

At public hearing on the merger at Parliament last month, the government indicated it was not seeking to veto the deal, but believed public interest concerns made a review essential.


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