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Pretoria - Walmart may abandon efforts to buy a South African chain if the government demands that it stock a specific amount of South African products, the giant retailer said on Monday.
Walmart raised the possibility of pulling out on the last day of hearings on the R16.5 deal before the Competition Tribunal. It is expected to rule in the next week on whether Walmart can go ahead with the purchase of Massmart Holdings [JSE:MSM].
During hearings on Monday that have resembled a trial, South African unions and some government officials have joined foreign activists in arguing the deal should be rejected unless Walmart is required to take steps to protect jobs.
Walmart says requiring it to buy an undetermined percentage of South African goods - to protect local manufacturing jobs - would give an unfair advantage to competitors not subject to such conditions.
In a joint statement to the tribunal, Walmart and Massmart said such conditions would violate world trade regulations and were not guaranteed to be an efficient or effective way to safeguard jobs. They said if such conditions were imposed, they would be forced to appeal "or reluctantly to walk away from the transaction".
Walmart is the world's largest retailer, and its interest in a South African business had been seen as a vote of confidence not just in South Africa's economy, but in the continent's potential. If the deal were to collapse, it could raise concern among other investors about whether South African bureaucrats and unions put up too many hurdles to doing business.
After months of speculation that Walmart was considering entering Africa, it announced its offer to buy 51% of Massmart last year. The deal was approved in January by Massmart shareholders. Those include the Public Investment Corporation which invests on behalf of civil service pension funds, and Scotland's Aberdeen Asset Management.
Massmart workers, most of whom are black, also have a stake through a trust set up as part of a South African campaign to help those denied economic opportunities under apartheid.
Walmart, based in Bentonville, Arkansas, has 8 692 stores in 15 countries, among them Brazil, China and India. But until now it has not ventured into Africa.
Massmart would give it a jump-start on the continent. The company operates in more than a dozen African countries and is Africa's third-largest distributor of consumer goods, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.
Unions have been opposed to the deal from the start, and threaten boycotts and strikes if it goes through. They say Walmart is anti-union, and that its buying strategy will destroy local manufacturers and competition. International groups who say Walmart's enormous reach even has environmental consequences - driving factories and farms to pollute in pursuit of producing cheap goods for the retailer - have joined South African unions in opposing the Massmart deal.
Walmart and Massmart told the Competition Tribunal on Monday that its opponents' fears were not supported by evidence. But the companies made some concessions on Monday, pledging not to fire any Massmart employees for the next two years and to respect Massmart's existing labour agreements for as long as the tribunal says is necessary; the tribunal's staff has suggested three years.
Walmart and Massmart also say they will spend R100m over the next three years to help farmers and other South African producers if the deal goes through. Officials said they were still working out how to spend the money, which is intended to help South Africans gear up to supply Walmart.
Unions said Monday the pledges were not enough to address their concerns.
Walmart raised the possibility of pulling out on the last day of hearings on the R16.5 deal before the Competition Tribunal. It is expected to rule in the next week on whether Walmart can go ahead with the purchase of Massmart Holdings [JSE:MSM].
During hearings on Monday that have resembled a trial, South African unions and some government officials have joined foreign activists in arguing the deal should be rejected unless Walmart is required to take steps to protect jobs.
Walmart says requiring it to buy an undetermined percentage of South African goods - to protect local manufacturing jobs - would give an unfair advantage to competitors not subject to such conditions.
In a joint statement to the tribunal, Walmart and Massmart said such conditions would violate world trade regulations and were not guaranteed to be an efficient or effective way to safeguard jobs. They said if such conditions were imposed, they would be forced to appeal "or reluctantly to walk away from the transaction".
Walmart is the world's largest retailer, and its interest in a South African business had been seen as a vote of confidence not just in South Africa's economy, but in the continent's potential. If the deal were to collapse, it could raise concern among other investors about whether South African bureaucrats and unions put up too many hurdles to doing business.
After months of speculation that Walmart was considering entering Africa, it announced its offer to buy 51% of Massmart last year. The deal was approved in January by Massmart shareholders. Those include the Public Investment Corporation which invests on behalf of civil service pension funds, and Scotland's Aberdeen Asset Management.
Massmart workers, most of whom are black, also have a stake through a trust set up as part of a South African campaign to help those denied economic opportunities under apartheid.
Walmart, based in Bentonville, Arkansas, has 8 692 stores in 15 countries, among them Brazil, China and India. But until now it has not ventured into Africa.
Massmart would give it a jump-start on the continent. The company operates in more than a dozen African countries and is Africa's third-largest distributor of consumer goods, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.
Unions have been opposed to the deal from the start, and threaten boycotts and strikes if it goes through. They say Walmart is anti-union, and that its buying strategy will destroy local manufacturers and competition. International groups who say Walmart's enormous reach even has environmental consequences - driving factories and farms to pollute in pursuit of producing cheap goods for the retailer - have joined South African unions in opposing the Massmart deal.
Walmart and Massmart told the Competition Tribunal on Monday that its opponents' fears were not supported by evidence. But the companies made some concessions on Monday, pledging not to fire any Massmart employees for the next two years and to respect Massmart's existing labour agreements for as long as the tribunal says is necessary; the tribunal's staff has suggested three years.
Walmart and Massmart also say they will spend R100m over the next three years to help farmers and other South African producers if the deal goes through. Officials said they were still working out how to spend the money, which is intended to help South Africans gear up to supply Walmart.
Unions said Monday the pledges were not enough to address their concerns.
