Walmart verdict to test SA image

2012-03-08 22:00

Johannesburg - South Africa's reputation among global investors will be at stake on Friday, when a court rules on a government appeal aimed at overturning or attaching weightier conditions to Walmart's R18bn acquisition of Massmart Holdings [JSE:MSM].

Although few investors believe the Competition Appeal Court will overturn the transaction, which was cleared with token conditions in June last year, a ruling against Walmart Stores could tarnish South Africa's image of being open to foreign investment.

South Africa's anti-trust regulator in May approved Walmart's bid for 51% of discounter Massmart Holdings with token conditions. That prompted the government and the main service workers' union Saccawu to launch separate appeals.

"Any ruling that could lead to a radical change in the transaction will not only affect Massmart's shares, I would expect the entire market to show some sort of a reaction," said Abri du Plessis, chief investment officer at Gryphon Asset Management.

"The deal implementation is already under way, it is going to be very difficult and costly to reverse certain parts of it if the government gets its way."

The ruling is expected at 10:00 on Friday.

The government is, at the minimum, seeking to increase the conditions on the deal. Currently, Walmart is required to not cut jobs for its first two years, honour existing labour contracts and set up a R100m fund to develop local suppliers.

The state's appeal centres on procedural issues during the anti-trust hearing in May. The government said it was not allowed access to critical Walmart documents.

The government also says the timetable of the hearing impeded the thorough cross-examination of witnesses.

Saccawu argues the current conditions do not adequately address concerns about job losses and competition.

  • John - 2012-03-08 23:12

    Now who in government didn't get there kickback??

      Jason - 2012-03-09 04:37

      That will be finalised at around 9:55am.

  • Paul - 2012-03-08 23:54

    These multinational companies are no good. Why don't they start from scratch and build their own retail network. That would create jobs and illustrate Walmarts commitment to SA. Now, they are throwing worthless dollars (backed by questionable bonds) at the Massmart asset that has real value. Get Walmart to pay in Swiss Dollars.

      Dirk - 2012-03-09 05:19

      Swiss Dollars?? Where can I find one? I collect bank notes- rare ones.

      Mattewis - 2012-03-09 07:20

      You've addressed this at the core of what's wrong with so-called investment today! Western culture has convinced itself of the truth of the illusion that money fixes everything. "If issues aren't resolved, it's because you didn't throw enough money that them"! I can see from the thumbs responses to your comment, that people in general do not understand this. Engineers & especially artisans in SA are in steady decline, and this should be a major concern in a country where job-creation is a so-called priority. In contrast with that the bean-counting chiefs say that we have a major shortage of accountants. There definitely won't be any "job creation", as there has to be a shortage of accountants as a result of an increase in artisans and engineers. Modern currency mostly has perceived value. Real currency is what you can do by applying your mind & hands (that isn't directly related to currency) toward the improvement of the quality of life! Currency should only be the measurement standard for this. A stock exchange is nothing more than a legally & socially sanitized pyramid scheme! In the light of this, how will Walmart improve the situation in SA? I'm sure their investors aren't banking here! If Cosatu wanted a reason for mass action, this should be it! Did we see a massive drop in banking costs when ABSA was acquired by Barclays? How will this be different without building of factories & establishment of commercial farms?

  • Boer - 2012-03-09 00:21

    It is going to be interesting. For Walmart, customer is king. Their model is to drive production cost down and customer satisfaction up. We will buy product A from you. This is the min quality that it needs to be and this is the price that we will pay. We want 10000 it on this day. If you don’t produce 10000 of product A, you will provide the shortfall (might be a higher quality product B) at the same price. Walmart is not interested in your labour problems. If you don’t deliver you are out. Next supplier please! This is the concerns that the union has. Supply companies will close if/when the labour force play games with their employers. At last now both parties will be affected, not only business.

      Mike - 2012-03-09 07:16

      If you think Walmart is cheap and good, visit China. Walmart is in China under its own name. Walmart is more expensive than some smaller shops. Not many people support Walmart in China.

      Boer - 2012-03-09 07:25

      Difficult to import from China while in China.

  • Kevin - 2012-03-09 06:21

    Why do we want a one off investment and then Walmart takes all the profit fo evermore back to America. Already Edgars,Jet and CNA are 100% American owned.Between these two a substantial part of SA retail profits go to America. In the case of Edcon which is contemplating a relisting that is because the bloody Americans are hoping for a fat relisting gain against there 26 billion purchase price. More SA money heading off shore.Walmart with its dismal history of staff benefits and salary offers no gain for a already well run business. Perhaps bringing cheap chinese rubbish products is the benefit. There prices are no improvement .

      don.odendaal - 2012-03-09 07:30

      All I can say Kevin is welcome to living in a world economy.If you cant play with the other kids don't cry when the don't pick you for the team

      lindz.kok - 2012-03-09 07:58

      don.odendaal- why support Americans

      Paul Chappell - 2012-03-09 08:34

      @Kevin welcome to the new world order!

      Martin - 2012-03-09 08:51

      Yes Kevin, what we should do is close our borders and make sure that only South Africans own South African business. When SAB goes out and buys smaller breweries, we all cheer. When MTN and Vodacom invades Africa, we're all proud of what we've achieve. If the Americans do it, the THEY are somehow blamed. We are to blame if we can't/won't keep our hands on our own assets.

      Ashuvha - 2012-03-09 09:09

      martin I can see you are a beneficiary of the puppet master system.FYI vodacom and sab are british companies pretending to be South African,the money goes to england more than it comes to South Africa when you buy castle larger

      Glyn - 2012-03-09 10:41

      The secret for survival in an international economy is to be competitive. Nothing else! In South Africa the anc has destroyed the national competitiveness with their racist BEE and AA programs.

  • Tc - 2012-03-09 06:50

    This plundering ANC government has no interest in South africa's image or reputation. They care only for their own back pockets! Pathetic.

  • Sidney Gilroy - 2012-03-09 06:58

    Unless you have been inside a Walmart, you cannot comprehend the savings and competition they will bring to the Retail Market in SA. Their support to the local agricultural and manufacturing market will far outweigh the losses that will be inevitable to Pick n Pay, Woolworths and Spar. Checkers will suffer, but is far better positioned to rebound. Bottom line is : Woolworths asks R116 /kg for meat and Walmart asks R 58 /kg for the same meat. Who is the threat to the consumer now?

      Mike - 2012-03-09 07:22

      @Sidney - you cannot compare Woolworths meat to any other meat. Woolworths food is far superior to any other chain including Walmart. Walmart are not good in China. Smaller shops in china have better prices than Walmart.

      Gerald - 2012-03-09 07:32

      Mike you will be very surprised to find out who supplies Woolworths with meat, Milk bread etc. My family gets better meat at a cheaper price from smaller butchers

      don.odendaal - 2012-03-09 07:32

      Mike this is not China (not yet anyway) and I beg to differ on woolies meat try Alberton meat market cheaper and much higher quality.

      Nibiru - 2012-03-09 07:36

      @Mike How do they survive in China ?

      DuToitCoetzee - 2012-03-09 08:01

      @Mike. Smaller shop are usually cheaper than oversea big chain shops in a very (over) productive country. They export mostly out of their country and it gets done in batches thus left over or substandard must be sold somewhere and will be cheaper. Please just don't tell me it is oversea stuff. The stuff gets made in China to appear as if from another country.

      Ashuvha - 2012-03-09 09:11

      Sidney if they want to bring competition they must create new stores not take existing ones that kills competition.

  • Nigel - 2012-03-09 07:33

    Walmart is competative, something that Cosatu & the ANC don't subscribe to, they prefer protectionism to compensate for our inflexible & intolerant labor laws at the cost of jobs, its ironical that they complain that Walmart threatens jobs, while their own policies have directly cost 1000's of jobs.

      Ashuvha - 2012-03-09 09:15

      I realized that less intelligent people who cannot debate the issues always blame it on government.

      Glyn - 2012-03-09 10:51

      @ Ashuvha - So are you very intelligent? Do you vote for the anc? Do you see the anc creating jobs? No! Do you see the state of the SA economy going down under the anc regime? Yes! Do you see technocrats and academics flooding into or out of SA? They are going out! The average age of an academic right now is 59 year!! The anc has destroyed the universities and the country's education. The only way to beat China/India/USA/Europe is to be competitive, something your anc does not understand. They are afraid of efficiency, afraid of quality, afraid of excellence! They are afraid of the DA!

  • Ashuvha - 2012-03-09 08:37

    Never believe anything reported by reuters.reuters is a big propaganda machine of the puppet masters,they are now trying to influence the courts decision.

      Martin - 2012-03-09 08:55

      I'm loving all the paranoia.

      Glyn - 2012-03-09 10:54

      @ Ashuvha - But Reuters was a South African company! Where do you think it started? They are a darn sight better at reporting than say... the sabc! You sound like an anc puppet!

  • Paulo - 2012-03-09 10:44

    South Africa--Inspiring New Ways

  • Glyn - 2012-03-09 10:57

    People (read anc) are afraid of the USA because they are efficient, they get things done. The anc government will never be in the same league as the USA or Europe or China or Mauritius or Vanuatu or even Lesotho!

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