Johannesburg - Walmart Stores and Massmart Holdings [MSM] said on Tuesday they planned to answer the government’s appeal of their R16.5bn tie-up, but declined to make any immediate comment.
South Africa said it would push Walmart to rejig the conditions of its 51% acquisition of Massmart, as Pretoria looks to wring bigger conditions from the world’s top retailer.
The retailers declined to comment, citing legal proceedings currently under way.
Earlier on Tuesday, the government criticised Walmart's plan to set up a R100m fund for the development of South African manufacturers as inadequate, and said it was looking for a "package" of changes.
The Competition Tribunal in May approved Walmart's bid for 51% of discount retailer Massmart with token conditions, including the creation of the R100m fund to develop local suppliers.
The government has since appealed that ruling.
Legal experts say South Africa has little room to overturn the completed transaction, but could use political pressure to renegotiate the conditions.
"We are looking for a package of measures, one of which is a supplier development fund," Economic Development Minister Ebrahim Patel told reporters at a briefing.
Patel's department, together with the departments of trade and industry and forestry and fisheries, are behind the appeal, citing concern that Walmart's reliance on imports could lead to job losses at local firms.
"A R100m supplier development fund could pale into insignificance given the likely impact of substantial shift to imports by the merged entity," the departments said in a joint statement on Tuesday.
Patel declined to comment further on what concessions the government was seeking.
Business Report newspaper said last week Pretoria wanted the fund increased to R500m, citing a government source.Reputational damage
But the effect on South Africa's reputation among international investors could be significant.
"This is not the kind of signal that South Africa needs to send to our investors," said Gary van Staden, a political analyst with NKC Independent Economists.
"The government may be thinking they want to get more out of Walmart, but that is not the way you do business."
Patel, a former trade unionist, and his colleagues are likely under pressure from unions that have opposed the deal from the start, said Paul Theron, chief executive at asset management firm Vestact.
"If you want an industrial policy that is interventionist like that, you must design one, get it approved in parliament and then ram it down everyone's throat," he said.
"It's inappropriate to use a competition hurdle as an opportunity to try to effect industrial policy."
Patel told South Africa's eNews Channel the government was not opposed to foreign investment, but concerned Walmart's entry into the market would choke local manufacturers when unemployment is already around 25%.
"We welcome foreign investment if it supports jobs and South African industrialisation," he said.
"Our doors are open for business."
Walmart and Massmart have said the appeal will have no impact on their implementation of the transaction.