Govt: Walmart merger will devastate jobs

2011-10-05 07:05

Johannesburg - Walmart's acquisition of Massmart Holdings [JSE:MSM] can have a "potentially devastating" effect on local jobs, three government departments said on Tuesday.

The transaction should be sent back to the Competition Tribunal for proper consideration and more effective conditions to be imposed, the departments of agriculture, forestry and fisheries; economic development; and trade and industry said in a statement.

The three departments filed their heads of argument on Wednesday in the Walmart Massmart merger case.

"Government has argued that the merging parties will increase imports, relying on Walmart's vast and extensive international procurement capability," said Economic Development Minister Ebrahim Patel.

"We are concerned that tens of thousands of jobs could be lost in the local factories that currently supply Massmart and other local retailers.

"We have intervened in the proceedings as government to support local jobs and industrial capacity in South Africa," said Patel.

The minister of economic development was bound by the law and the constitution to intervene in the proceedings to ensure realisation of the objectives of the Competition Act.

Trade and Industry Minister Rob Davies said there was no evidence that Massmart would create 15 000 jobs because of the merger, as it had advertised.

"The tribunal failed to take into account the enormity of the likely impact of the proposed merger on the South African economy.

"It will result in the closure of many SMMEs (small, micro and medium enterprises) and firms owned by historically disadvantaged individuals. The country's manufacturing base could be further eroded and that capability, once lost, would take many years to win back," said Davies.

Agriculture Minister Tina Joemat-Pettersson said the implications of a displacement of local suppliers by Massmart would result in lost income and most likely the loss of jobs.

It appeared that in some industries this had already taken place since the merger, she said.

"Olive farmers in some parts of the country have been advised that they should no longer expect orders from Makro (a subsidiary of Massmart) for locally produced olive oil, as they intend to import cheaper products.

"If unchecked the shift to imports is likely to have a catastrophic effect on local farmers and agro-processing manufacturers," said Joemat-Pettersson.

The three departments said government had asked the court to send the matter back to the Competition Tribunal for a more considered evaluation based on adequate information from the merger parties with a view to much stronger conditions being imposed.

The review and appeal was expected to be heard in the Competition Appeal Court on October 20 and 21.


  • Pietpetoors - 2011-10-05 07:25

    What is the real problem here? Did Wallmart forget to pay top ANC officials their much needed bribes or what? Don't you think all the Chinese that is streaming into the country to work on projects will have a devastating effect on jobs? But nothing says anything about that because the Chinese are clever enough to put their money where it is needed, in the pockets of the top ANC guys. So please Wallmart, pay our government the bribes which they so much need to enrich themselves and their families so they can stop crying about good competition coming into the country

  • TheRealist - 2011-10-05 07:59

    And wiegh this off against teh million of customers that will no longer be ripped off by overpriced local good made at enormous expense.

  • ian b - 2011-10-05 08:04

    The three government departments should look at why SA manufacturing and agriculture is uncompetitive and not just try and close the door on investors who can save the general population thousands on their monthly shopping. The ANC Government with their kitchen economics together with the protectionist allies have been the cause of massive cost increases in all sectors of our economy. Electricity costs have risen to such an extent that production of certain commodities is no longer viable while costs have been driven upwards by this essential input directly due to the inept ANC government. Have a look across the whole supply chain and you will find the uncompetitive production in South Africa is a direct result of the ANC government and its allies inability to govern within an acceptable economic structure. “Working together we can steal more”

  • AgPseDaddy - 2011-10-05 08:13

    Rubbish~!~!!~ The ANC Government is the cause of the devastating effect on jobs in South Africa since 1994. The ANC have been in power for too long it is time for them to move on!

  • drBob - 2011-10-05 08:17

    A prime example of the goverment being two faced. Massmart is a probelm, but the relationship with China is not a problem???? Come on, who are they trying to fool here?

      nixcroft - 2011-10-05 11:50

      the same sheep they have been fooling the 17 years...

  • s r - 2011-10-05 08:37

    I suspect some disgruntled govt officials did not back-handed on this deal, hence the challenge.

  • Acacia39 - 2011-10-05 08:51

    Little late aren't we GOVERNMENT???!!!

  • Turbo - 2011-10-05 09:10

    Perhaps you should have thought of this before the deal went through !! Backward bumbling from the govt should not be tolerated. It makes SA look like a bunch of idiots !!

  • Margaret2 - 2011-10-05 09:27

    What is Ebrahim Patel griping about. Wasn't it under his watch as head honcho at SACTWU that the Western Cape clothing industry was decimated?

  • Clinton - 2011-10-05 09:42

    Loss of Jobs? Go shopping at a Makro / Game stores...see how many staff just stand around and talk. I would dismiss plenty if I bought them, the staff are employed to keep the quota up...If you query anything, they vanish for minutes on end .."to go find out" by someone who actually knows anything about the products they sell. The service is pathetic!!!

      Reg - 2011-10-05 20:11

      Since moving to the US I have noticed how relatively few shop assistants are employed by a Vons / Target v a Pick n Pay etc. A few other comparisons - they all greet you as you enter or walk past and at the till you can even have a "how are ya" chat; most will know exactly where a product is located (although they dont always know what you are asking for aka SA type product); assistants will even remember you from previous days in the store and they don't shout at each other from down the row or gather in groups chatting. That having been said they are paid (at least in California) at least $8.45 / hour and often up to $20 or more. Now $8.45 / hour is roughly $1 400 / month. While not great even over here you CAN live on it and own a car and afford cheap accomodation. They are also unionised (believe it or not) and they have extensive pension plans and medical. I suppose the rub is that if you ARE going to pay peanuts then you should not expect your workforce to be particulary productive, afterall you did choose to hire the most uneducated people willing to accept the bottom rate wages.

      quidditas - 2011-10-06 16:43

      It is precisely those staff members who will lose their jobs. As far as olive imports are concerned, very few South Africans buy the local stuff; the imports from Greece are cheaper than they have ever been.

  • M - 2011-10-05 09:44

    Quite frankly I do not understand why a huge company like Walmart went ahead with their investment in this country. Clearly, our government does not like the colour of a dollar. If I was Walmart, I would pack my stuff and leave because the South African have done such brilliant work at creating jobs and wealth in this country.

  • Badballie - 2011-10-05 09:49

    Doesn't really matter does it, what Walmart doesn't destroy our relationship with China will. But as long as the ANC elite get to carry on stealing from the honey pot they don't really care anyway.

  • Mike - 2011-10-05 09:53

    The classic 'let's treat the symptom and not the cause' approach. Local industry is a threat to local industry and nobody else. You can't shove double digit electricity and wage increases down the Country's throat and expect to be competitive in the global market, especially when your labour laws encourage inefficiency and strike action. With the price of logistics being what it is, if you can import something and put it on the shelf for cheaper than you can get it over the road from a local supplier then your problem is not the Retailer. When you consider this comment from government in light of the unofficial support for China and what that support means then the irony is quite absurd.

  • patsa - 2011-10-05 09:56

    Admittedly, these are valid concerns from government because they intend to shield employment from potential adverse effects of the merge. The question though for me is more about what is government together with businesses doing about uncompetitive of our suppliers? This is important question because it means we have/are buying goods at inflated prices mainly because local firms are protected by government. For how long? Obviously, if retail firms were sourcing cheap goods from overseas suppliers that would have benefited consumers and in turn force productivity and competitiveness in local industries. For any country to grow, it requires investments, and since South Africa has lower saving rates, we therefore rely on foreign investments. Importantly, this is more stable investment, unlike speculative portfolio inflows, which move in and out of the country anytime. Further, Wallmart is a reputable brand with footprint in many countries and i think they recognise opportunities in this country. Lastly, I think we must refrain from over-restricting new investments. They must be subjected to the same regulatory regime binding to local firms if we want to promote SA as investment destination.

  • Zambezi - 2011-10-05 10:03

    Free market systems is what consumers want. The regime should always remeber that.

  • Zambezi - 2011-10-05 10:09

    Yeah yeah yeah, There'll be a curb in Corruption and kick backs maybe that's the problem, Competition is healthy, but not for the thieves. Stop stunting growth with the excuse of protecting S.A.'s poor that get ripped off constantly by the fat cats in Government

  • haroldrvjansen - 2011-10-05 10:24

    Please stop leading "in hind-sight" and rather let your vision and goal direct your thoughts and plans. Make a decision, stick with it and take responsibility for both the good and the bad.

  • Honest - 2011-10-05 12:17

    How did the ANC take the decison to buy it`s T-shirts from China during the General Election? If I can understand that maybe I will understand these arguments about Walmart as well.

  • scud - 2011-10-05 13:05

    This nonsense comes fron three of our most inept ministers

  • Joey - 2011-10-05 13:46

    Its true, Americans doing business abroad will send the money back to the states. I worked for a American Multi national that didnt give 2 hoots about the South African staff. No increase or bonus in 3 years. I stand with Govt on this one, dont let them fool u...

  • Jabulaniboy - 2011-10-06 02:17

    Walmart is not Chinese. That is the ONLY problem to the government.

  • Nasdaq7 - 2011-10-06 11:36

    No minister can say how it will affect the market precisely. Rob Davies is an incompetent minister that says the Rand must be weak to encourage growth. That's the only way he can create exports is when the Rand is weak. He wants to sell South African goods at a discount overseas. That's the only why he can grow a business: lowering the prices of the products. Totally unskilled minister.

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