South African Govt Want Massmart-Walmart Merger Revisited

The Massmart-Walmart merger could have a “devastating” effect on South African jobs, said the Departments of Agriculture, Forestry and Fisheries; Economic Development and Trade and Industry.

“The Walmart acquisition of Massmart can have a potentially devastating effect on local jobs and the transaction should be sent back to the Competition Tribunal for a proper consideration and more effective conditions to be imposed,” the three departments said on Tuesday.

The departments filed their heads of argument in the matter on Tuesday. They set out their grounds for a legal review and their submission in respect of the South African Commercial, Catering and Allied Workers Union’s appeal of the decision by the Competition Tribunal to approve the merger with minimal conditions.

At the end of May, the Tribunal decided to allow the US retail giant to merge with Massmart with conditions, resulting in Walmart acquiring 51% of the South African retailer. The departments had opposed the merger, arguing it would lead to the loss of jobs as well as put suppliers out of work.

Measured by its impact on employment and industry, the merger is the most significant ever to come before the Competition authorities.

“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 Economic Development Minister Ebrahim Patel said.

Trade and Industry Minister Rob Davies said the US retail giant has claimed in the media that it would create 15 000 retail jobs in the next three years. According to Davies, no evidence was led in the Competition process for this claim.

“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 and firms owned by black South Africans. The country’s manufacturing base could be further eroded and that capability, once lost, would take many years to win back,” said Davies.

Davies said given a shift to imports, Walmart’s growth was likely to come at the expense of large numbers of jobs in manufacturing.

Agriculture, Forestry and Fisheries Minister Tina Joemat-Pettersson said: “For example, 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.

“Government is requesting 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 is based on the fact that the Tribunal unreasonably denied the government departments’ access to information in the possession of the merging parties.

According to the three departments, government’s view is that the Tribunal had not correctly interpreted the Competition Act, which among others, aims to promote employment and advance the social and economic welfare of South Africans.

“The government departments have intervened to safeguard the public interest and in the accordance with the rule of law. The Competition Tribunal should be asked to reconsider the merger application, determine the extent of possible interest harm and to impose conditions that will fully and adequately address the harm,” said Patel.

The review and appeal is expected to be heard in the Competition Appeal Court on 20 and 21 October 2011. If not completed, proceedings may also continue on 24 October.