Concerns about Patel's Walmart meddling

2011-05-15 10:23

Pretoria - The intervention by the government, and especially by Economic Development Minister Ebrahim Patel, in the Walmart hearing before the Competition tribunal has been sharply criticised.

Observers at the past week's hearings said it increasingly appeared that Patel was sending a message to foreign companies that he would decide on the conditions for foreign companies to operate in South Africa.

David Unterhalter SC, acting on behalf of Massmart Holdings [JSE:MSM] and Walmart, said this intervention was extraordinary because the government was targeting a specific company.

Such action involved specific interventions based on specific actions to determine how a single private institution should conduct its business, he said.

Unterhalter said the government intervention was a shocking example of how public policy was formed.

“Here you have a minister who says: ‘I like company X and therefore I will make life easier for it. I don't like company Y and therefore I will make life more difficult for it’.”

On Friday Unterhalter berated the government's approach during his cross-examination of state economist James Hodge from Genesis Analytics.

Hodge had compiled a report for Patel’s Department of Economic Development, the  Department of Trade & Industry and the Department of Agriculture, Forestry & Fishing.

These departments and various trade unions, including the clothing and textile workers’ union Sactwu, of which Patel had been general secretary, demand radical conditions to protect jobs and local manufacturers.

Observers say Walmart has never before encountered such aggression and hostility in countries to which it has extended its operations.

Meanwhile, Cosatu has indicated that it will strike if the deal is approved without conditions.

The tribunal hearing has been characterised by an exceptionally aggressive and hostile approach by Rafik Bhana SC, representing the three state departments.

Competition experts have expressed concern over what increasingly looks like direct intervention, in particular deals to determine economic policy.

“The situation is extremely worrying,” a legal practitioner in competition circles told Sake24.

“Competition authorities are now being manipulated to extract extraordinary commitments from foreign companies.”

Government's reaction to the controversial Kansai deal, in which Japanese paint giant took over South African paint company Freeworld Coatings [JSE:FWD], was a danger signal.

Patel has publicly acknowledged that he is the driving force behind the radical conditions for the transactions.

A well-known source in competition circles who wishes to remain anonymous said that initially there were several questions raised about the reason for Patel’s interest in the competition authorities.

Patel is the authorities’ political head.He wants to use competition law as leverage to get concessions from the companies.
“He is the gatekeeper. He has the key and companies have to persuade him to open the gate.”

 “Foreign companies need to jump over a government hoop to get their transactions approved. This is a very dangerous signal being sent out.”

Competition experts say various countries are approaching particular transactions with great circumspection.

The ideal would be to have an institution free of political agendas examine these types of transactions.

 “We have reason to be worried,” said the source.

According to Unterhalter, Hodge’s report maintains that such interventions form part of the minister's public mandate.

“Your client says specific interventions with regard to a specific company form part of his public mandate.”

Hodge said he disagreed and could not speak on behalf of government.

His report referred to concerns about the impact of the deal on the public interest.

Public interest is one of the criteria the tribunal needs to examine when considering approval of the merger. 

  • Slapper - 2011-05-15 10:48

    No Kickback to the usual crew, no deal. They will put a whole toolbox of spanners in the works, until they are taken care of. An absolute disgrace

  • zaatheist - 2011-05-15 10:53

    The government is interfering to protect the current Pick n Pay, Shoprite, Spar cartel and Cosatu at the expense of consumers.

      lizards - 2011-05-28 15:16

      He is not protecting other capitalist companies - it is just Communist against capitalist. Who was in control of a Union fund that is now very very short of money in the bank where there should be millions -was it not our present Patel?? Govt + Unions = Communist control!!!

  • Angus - 2011-05-15 11:02

    What about the consumer, you have 97% of people retiring who cannot afford it, why, because life is too expensive in South Africa. Here Walmart want to make it easier and guess what hopefully with a little education you could get people to save for retirement. Economic Development must attract more companies like Walmart, not show the away...

  • Marcell - 2011-05-15 11:10

    I take it Walmart don't want to pay the bribes?

  • Carl Muller - 2011-05-15 11:51

    I wonder how much kickback he wants...

  • epherb - 2011-05-15 11:52

    Its all about kick-backs....Nothing for nothing!

  • epherb - 2011-05-15 12:13

    No kicbacks! nothing for nothing!

  • Creeky - 2011-05-15 12:22

    Pretty sure Patel will pull a Jimmy Manye and request a PERSONAL SHARE in the Wal-Mart / Mass-Mart deal!

  • Shahied - 2011-05-15 12:25

    Way to go Patel...this is our conditions,take it or leave it !!

  • Wikkie - 2011-05-15 12:40

    That is the sad reality is SA. The ANC government interferes, makes it difficult for some and super-easy for cronies. Do not be surprised if some bribes are expected to pass hands in this WalMart saga. I am embarrassed and will prefer if WalMart calls it a day and take their business adnopportunities elewhere. It is sad.

  • Tc - 2011-05-15 12:43

    WalMart, take your business and opportunities eleswhere. SA is a terrible place to try and do business. Have you been asked for briibes?

  • SmartSA - 2011-05-15 13:01

    Mmmmm it will be awsum to have Wallmart in SA as long as you realize that P n P etc all will suffer huge loss to how cheap and mammoth sized wallmart is and yes if there are no policies in place to protect jobs more unemployment will ensue which means more crime etc

  • LuxOcculta - 2011-05-15 13:11

    In the past you paid a bribe to the right government officials in order to do business in Africa. Now you need to give away a part of your company to do business in Africa. Same financial transaction - but a bribe no matter what you call it. So Walmart, simply get a couple of BEE partners on board, the closer to the ANC elite the better, and before you know it you can be in business ala Aurora style. No union worries, no need to pay staff, simply rape and pillage.

  • speculator - 2011-05-15 13:12

    why does government protect other foreign nationals e.g. somaliers when local shop owners in townships etc. complain about being undermined by the excessive cheaper prices being charged by said foreigners which invariably has so far led to physical violence against them and which has conveniently been classified by government as "xenophobia!"

  • M - 2011-05-15 14:25

    So let me get this straight - the government (Patel) and Cosatu are worried about Wal-mart coming into the country because they will bring with them CHEAPER imported goods instead of sourcing goods locally. All this tells me that they are actually admitting that stuff that is made in this country, in our own backyard, is more expensive for ordinary South African's to buy than imported goods. That just doesn't sound right. Surely, Patel and Cosatu should go back to the drawing board and ask themselves why this is the case and fix that problem i.e bring down the cost of locally produced goods so that we too can buy them, before they set about giving the likes of Wal-mart a string of ridiculous terms and conditions. If I was the chief-in-charge of Wal-mart, I would give Patel and Cosatu the finger and look to Botswana or one of our other neighbours to be the springboard of their venture into the continent of Africa. I am sure that any one of those countries would be only too willing to accommodate Wal-mart.

  • papaown - 2011-05-15 14:31

    most of you lack the socio-economic understanding of the impact of Wallmart coming into SA the same way they did in other countries. This CANNOT be allowed as the workers suffered the most. Wallmart employees get paid far less that what workers in SA do and cant even go on maternity leave... now imagine the impact of putting people who dont even comtemplate crime because of the pay and security they receive currently through Massmart,by lowering their pay and security we DONT want more crime so get your minds off kickbacks and look at whats REALLY going on companies like Wallmart are very good at spinning PR in coutries they want to enter so they reach their targets...maximise THEIR profits at the expense of the coutries they enter rant over

      clark - 2011-05-16 01:33

      - Narrow minded 3rd World logic - Have you maybe noticed that in dire need of foreign investment ? Truth is, this country needs Walmart far more than they need SA. and the govt's restrictive laws ,obstacles and general interference. Whereas you claim that Walmarts workers are underpaid, it is also true that the company saves every household in the US on average, $2400 per year on their purchases.

      papaown - 2011-05-17 07:36

      @fred not all businesses are created equally in South Africa are you aware of the fact that BHP Billiton and Anglo American, which use up 7% of the countries electricity, pay 1 tenth of the price that ordinary businesses and South Africans pay for it?

  • Met - 2011-05-15 16:59

    Putting obstacles in the path of Wallmart, while the Corrupt from India, China and elsewhere are streaming into the country.Wallmart should go and do a comprehensive study.SA is in decline, but they are obviously hoping with the aquisition of Massmart, they can get a foothold in Africa.Do yourself a favour. Show this corrupt scum bag the middle finger.

  • Motho - 2011-05-15 18:50

    There is no inteference at all, everyone including government want to satisfy themselves that this merger is in the best of the country. Sometimes, analysts are misleading.

  • T de J - 2011-05-15 19:14

    gentlemen give this Mr Patel his African Handshake and all will be accepted .

  • Julius - 2011-05-16 05:58

    Clearly Walmart has not learnt how to do business with the SA Gov. The ANC's back hand is empty.

  • Tsitsikamma Firehawk - 2011-05-16 09:53

    Not sure how many employees Massmart has, but even if Walmart pay them the pit-tins, within the constraints of the BCE, does it really balance off the fact that the rest of the country stands to lose in more cost effective goods. In my opinion the trade unions are extremely valuable, but as with other bodies, their priority is with there members. Government should prioritize the electorate.

  • core - 2011-05-16 12:02

    why when a large company has stated that it will abide by the laws of the country as far as labour law is concerned, and has also stated that it will honour current employment conditions. Although it would appear from an outsiders perspective that government and Unions do not think they are smart enough to deal with such a large company

  • Investor - 2011-05-16 12:24

    What would Patels reaction be if the USA meddled with SA companies trying to export to USA and expand business in USA - he doesnt understand basic economics, move over for a competant person ! Does Patel also want to destroy trade with China by implementing protectionism because industries refuse to become internationally competitive ?

  • Candice - 2011-05-16 14:43

    To all those thinking this is about kick-backs, listen up. Walmart's entry into SA will affect suppliers badly, this will increase unemployement to even higher levels than it is now. You must know that South Africa is not the only country instilling conditions to FDI, most BRIC countries do, China is even worse. otherwise these companies come and extract wealth and do not contribute to long term economic development. So I salute Patel for his active role in ensuring that this deal does not destroy our farmers.

  • DeonWtb - 2011-05-16 16:11

    Wallmart, can't you see what is happening? It is clear the minister, as with most other government officials, want's a bribe. They are so used to this way of negotiating. Money talks harder than objectivity.

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