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Pretoria - Walmart’s success resides in the management of its supply chain. South Africa’s problem is that its manufacturing sector cannot grow quickly enough to react to changing market conditions.
Judge Dennis Davis described Walmart as a global hurricane hitting South Africa. He questioned whether it was the task of competition law to protect the economy.
On Friday Davis and his two fellow judges in the Competition Appeal Court heard arguments in the appeal application brought by trade union SA Commercial, Catering and Allied Workers' Union (Saccawu), as well as arguments from the ministers of economic development, agriculture, and trade and industry.
The parties are appealing the Competition Tribunal’s conditional approval of the R16bn deal in which Walmart acquires a 51% stake in South African retailer Massmart Holdings [JSE:MSM].
Davies put it to Rafik Bhana SC, appearing for Economic Development Minister Ebrahim Patel, that all the minister is aiming for is better conditions than those imposed by the tribunal.
But the consideration should be how to make South African suppliers more efficient so they can produce faster and cheaper.
“It’s clear that protectionism does not work.… Walmart would not have posed a threat if South Africa’s manufacturing sector was competitive and efficient.”
The most important consideration should be to have a working supply chain network. One cannot impose a condition that allows inefficiency to persist, Davis stressed.
Patel’s intentions include subjecting the approval of Walmart’s controlling stake in Massmart to import control. His legal team maintains that this would not imply South Africa contravening any World Trade Organisation regulations.
Davis said Patel’s attempt to have his own conditions enforced is snarling up the courts.
He said if he were to send the case back to the tribunal, this would have to be with very specific instructions as to what information should be provided and which conditions could be legal remedies for the transaction to be in the best public interest.
Davis said there was a danger that the case would be tossed back and forth between the tribunal and his court, until the minister was ultimately satisfied.
If he were to send the case back, it would have to be with clear instructions. He said he did not want to hear from the group again.
Davis asked Bhana whether the benefits of lower prices for consumers brought about by the arrival of Walmart could not be taken into account when considering public interest concerns (job losses and the possible destruction of small businesses).
Bhana’s response was that these should not be contemplated in the way the tribunal had done. He then added that the law made no reference to issues to take into account when considering the interests of the public.
These issues played no role, Bhana eventually said when Davis wanted to know what he would then do with this information.
According to Davis, South Africa will probably have the only competition authority in the world that does not give consideration to the benefit of lower prices to consumers.
