South Africa’s Walmart ruling welcomed

9 March 2012

The Competition Appeal Court’s ruling on US retail giant Walmart’s $2.4-billion (R16.5-billion) acquisition of local retailer Massmart has been welcomed as balancing the need to project South Africa as investor-friendly while addressing concerns around small business and job creation.

South Africa’s Competition Appeal Court on Friday dismissed an application by the state to overturn the Competition Tribunal’s approval, with conditions, of Walmart’s 51% takeover of Massmart.

The government had asked the court to decide whether public-interest concerns – over the merger’s impact on employment and small businesses – justified more stringent conditions on the deal than those laid down by the Competition Tribunal when it approved the deal in June 2011.

Experts to assess small supplier development programme

Judge Dennis Davis said on Friday that “there was insufficient evidence to conclude that the detrimental effects of the merger would outweigh the clear benefits to consumers”.

At the same time, the court ordered that an expert study be carried out on the R100-million development programme for small and medium suppliers that the Competition Tribunal laid down as a condition for the merger.

According to the ruling, three experts – one appointed by the government, one by organised labour, and one by the two merging retailers – will be given two months to report to the court on ways in which small and medium suppliers can participate in and benefit from Wal-Mart’s global value chain.

Government welcomes court’s solution

Trade and Industry Minister Rob Davies told a press briefing in Cape Town following the court’s verdict that the government welcomed the judgement in that it endorsed issues around employment.

He said the government thought this “a well thought-out process, to come up with a solution in which we participate and find an evidence-based way in dealing with this particular merger in such a way that it ends up with positive inputs.”

Economic Development Minister Ebrahim Patel said the government would still be taking legal advice on the issue, “but on a preliminary reading it does seem to us that we have a forum that is very creatively structured, an innovative forum”.

Regarding the state’s objection to the merger and whether this would send out an anti-investor message, Davies said the government’s concerns were specific to the transaction, and would have been exactly the same had both companies been South African-owned.

“This is not a general statement on our position on foreign investment. We continue to work with foreign investors,” Davies said, adding that it was both incorrect and misleading to say that government departments were negative towards foreign direct investment in the country.

Business Unity South Africa, meanwhile, welcomed the decision as successfully balancing the need to project South Africa as an investor-friendly economy while addressing concerns around job losses and the role of small and medium suppliers.

SAinfo reporter and BuaNews