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Johannesburg – The government welcomes investment by foreign companies as long as the deals do not undermine "productive capacity", Trade and Industry Minister Rob Davies said on Wednesday.
Davies said this in answer to a question on Walmart's 51% acquisition of local retailer Massmart Holdings [JSE:J203].
The R16.5bn deal, which is being assessed by the Competition Tribunal, is opposed by public interest groups led by the SA Commercial, Catering and Allied Workers Union (Saccawu), a Cosatu affiliate.
Cosatu general secretary Zwelinzima Vavi said this week that the campaign against Walmart must be heightened. He accused Walmart of having no regard for local procurement and workers' rights.
Local analysts have suggested the deal is at risk after the Competition Tribunal “reluctantly” granted a postponement of the merger hearing, after requests by the government and Saccawu for more time to submit information.
Analysts fear that an orchestrated – albeit late – attempt to have the acquisition approved with conditions may break the deal.
The delay has put the government under pressure and raised concerns that SA, which is not finding it easy to attract foreign investment, is not welcoming to international investors.
However, Walmart is unlikely to walk away from the deal even if it is rejected by the Competition Tribunal, according to Bryan Roberts, director of retail insights at London-based research company Kantar Retail.
Walmart is likely to appeal an unfavourable ruling by the tribunal because an alternative route into Africa would be arduous, said Roberts.
“Walmart might consider organic market entry, or perhaps setting up in another country, but I feel that this would be unlikely. It needs an existing business to hit the ground running,” said Roberts.
“Walmart is finding great success in so-called emerging markets, and South Africa is obviously a massive opportunity. If the deal with Massmart is rejected, then I think Walmart would appeal.”
Massmart shareholders have approved the R16.5bn deal and the competition authorities are the final hurdle.
Walmart is struggling with sluggish like-for-like sales in the US – its traditional market – and has identified emerging markets as a growth opportunity.
Saccawu has rallied public interest groups to oppose the deal, citing Walmart's less than spotless reputation on labour relations.
It has warned that the world's biggest retailer will instruct Massmart to ditch local suppliers in favour of its international network of suppliers, most notably its cheap Chinese suppliers – which will harm SA's fragile manufacturing industry.
Roberts said Walmart could have been a more proactive in communicating its plans to the vendor community.
“Walmart, like Massmart and countless other retailers, sources a lot of its non-food merchandise from China and other Far Eastern economies. That's a fact of life,” he said.
Local sourcing is done for other products such as health and beauty or food and drinks.
“It makes zero economic sense for Walmart to start shipping groceries from the US or UK. Furthermore, it would make no sense to replace local brands that are loved by local shoppers with foreign brands that have no brand awareness or equity,” he said.
According to Roberts, Walmart buys 90% locally for groceries in all of its international markets and the same would be true in South Africa.
There are likely to be some exceptions with private labels where Walmart might ship some products from the UK, but these would account for a miniscule proportion of sales, he said.
The merging parties have also been frustrated by Namibia's competition watchdog, which wants to attach conditions to approval of the merger.
Massmart operates three stores in Namibia. The deal has received the nod in Tanzania, Malawi, Swaziland and Zambia.
- Fin24
Davies said this in answer to a question on Walmart's 51% acquisition of local retailer Massmart Holdings [JSE:J203].
The R16.5bn deal, which is being assessed by the Competition Tribunal, is opposed by public interest groups led by the SA Commercial, Catering and Allied Workers Union (Saccawu), a Cosatu affiliate.
Cosatu general secretary Zwelinzima Vavi said this week that the campaign against Walmart must be heightened. He accused Walmart of having no regard for local procurement and workers' rights.
Local analysts have suggested the deal is at risk after the Competition Tribunal “reluctantly” granted a postponement of the merger hearing, after requests by the government and Saccawu for more time to submit information.
Analysts fear that an orchestrated – albeit late – attempt to have the acquisition approved with conditions may break the deal.
The delay has put the government under pressure and raised concerns that SA, which is not finding it easy to attract foreign investment, is not welcoming to international investors.
However, Walmart is unlikely to walk away from the deal even if it is rejected by the Competition Tribunal, according to Bryan Roberts, director of retail insights at London-based research company Kantar Retail.
Walmart is likely to appeal an unfavourable ruling by the tribunal because an alternative route into Africa would be arduous, said Roberts.
“Walmart might consider organic market entry, or perhaps setting up in another country, but I feel that this would be unlikely. It needs an existing business to hit the ground running,” said Roberts.
“Walmart is finding great success in so-called emerging markets, and South Africa is obviously a massive opportunity. If the deal with Massmart is rejected, then I think Walmart would appeal.”
Massmart shareholders have approved the R16.5bn deal and the competition authorities are the final hurdle.
Walmart is struggling with sluggish like-for-like sales in the US – its traditional market – and has identified emerging markets as a growth opportunity.
Saccawu has rallied public interest groups to oppose the deal, citing Walmart's less than spotless reputation on labour relations.
It has warned that the world's biggest retailer will instruct Massmart to ditch local suppliers in favour of its international network of suppliers, most notably its cheap Chinese suppliers – which will harm SA's fragile manufacturing industry.
Roberts said Walmart could have been a more proactive in communicating its plans to the vendor community.
“Walmart, like Massmart and countless other retailers, sources a lot of its non-food merchandise from China and other Far Eastern economies. That's a fact of life,” he said.
Local sourcing is done for other products such as health and beauty or food and drinks.
“It makes zero economic sense for Walmart to start shipping groceries from the US or UK. Furthermore, it would make no sense to replace local brands that are loved by local shoppers with foreign brands that have no brand awareness or equity,” he said.
According to Roberts, Walmart buys 90% locally for groceries in all of its international markets and the same would be true in South Africa.
There are likely to be some exceptions with private labels where Walmart might ship some products from the UK, but these would account for a miniscule proportion of sales, he said.
The merging parties have also been frustrated by Namibia's competition watchdog, which wants to attach conditions to approval of the merger.
Massmart operates three stores in Namibia. The deal has received the nod in Tanzania, Malawi, Swaziland and Zambia.
- Fin24
