Walmart Deal ‘A Race To The Bottom’

walmart
Walmart entered the African market in 2011

AFRICANGLOBE – Multinational Walmart is trying to acquire South African retailer Massmart. Khadija Sharife explains why the deal would be bad for the country and bad for workers.

There is nothing like a R16.5-billion merger to put South Africa on the map as a safe geopolitical investment jurisdiction, not least when the world’s largest company and private sector employer, Walmart, is the company giving you the nod. Provided the South African government steps up and ensures that conditions are conducive to a win-win situation, this may not be a bad idea.

But Walmart’s retail model of category management – allowing for one mega-multinational like Procter & Gamble (P&G) or Coca-Cola – to determine shelf space, pricing and promotion almost certainly threatens to undermine the framework of ‘free market competition’ that Walmart claims to uphold. In the process, it will also violate South Africa’s own Competition Act (such as Section 4.1).

Yet Jeremy Gauntlet, acting for the merging companies, was probably spot on when he claimed that SA’s Competition Tribunal did not have the power to exempt South Africa from international ‘obligations’ – not so much because it cannot be rightly contested that the economy is unlocked to foreign investors in various disadvantageous ways, but because there is little chance of being triumphant.

The expert planning of companies like Campbell’s (occupying 70 per cent of the space allocated to canned soup) and P&G (who, along with Colgate-Palmolive controls over 80 per cent of the toothpaste market) consolidates cartels – transforming the relationship from adversarial to collusive – between both suppliers and retailers; and squeezes out ‘independent’ producers who do not source cheapened goods and labour in countries like China and Bangladesh (the former supplying at least one component to over 70 per cent of Walmart goods) through a process known as ‘global procurement’, which has the effect of ‘exporting jobs’ through destabilising domestic manufacturing industries. Currently, Massmart sources 60 per cent of goods from domestic suppliers. As has been well publicised, losing just 1 per cent would generate 4,000 job losses.

‘All American’ goods like Nabisco’s famed Oreos contain multiple ingredients such as Chinese gluten, but many products, like Ritz Crackers, are now manufactured in Chinese factories such as Danyahng Day Bright Co. Over 80 per cent of Walmart’s supplier factories are Chinese, where workers earn between $100 – $250 dollars a month, depending on the legal minimum wage of the province. Some Walmart facilities in China provide as much as 40 per cent of the ‘base legal wage’ in subsidies, ensuring that the company does not need to annually increase the whole salary, just 60 per cent of it.

Walmart has been compared to a private government. If it were, it would be China’s eighth largest trading partner – one every bit as repressive as the regime under China’s Communist Party leader Deng Xiaopeng that facilitated Walmart’s operations in the corporate paradises of ‘special economic zones’ as early as the 1980s.

But how does Walmart treat its own citizens, called associates? As former vice-president of Walmart, Andrew Bond revealed that none of the American stores have unions. It gets slightly worse: in 2008, the Wall Street Journal reported that Walmart feared a Democratic win may ‘change federal law to make it easier for workers to unionise companies’. One of Walmart’s leaked ‘confidential’ toolkits advised managers on early ‘warning’ signs of union activity:

‘Most union organising will begin as “covert” (undercover) activity. By keeping all union activity covert, the organiser is hoping management will not be alerted to his/her organising efforts. The Labour Team has identified two categories of early warning signs. If you suspect any of these early warning signs of union activity are occurring at your facility, call the Union Hotline immediately.’

The document titled ‘A manager toolbox to remaining Union free’ states:

‘Early warning signs – Category 1

– An increase in associate phone calls in and out of the facility.

– Increased curiosity in benefits and policies.

– Associates receiving unusual attention from other associates.

– Abnormal amount of absenteeism.

– Excessive turnover.

– Slowdown in work productivity.

– An increase in errors in associates’ work.

– Exit interviews indicating associates are in conflict.

– Surge of complaints by associates against management.

– Associates confront management.

– Associates ‘bait’ management into discipline or termination.

– Abuse of restroom visits.

– Argumentative questions are asked in departmental/facility meetings.

Category 2:

– Confidential information being misplaced or removed from files.

– ‘Strangers’ spending an unusual amount of time in the associates’ parking areas at the

beginning or end of shifts.

– Associates spending an abnormal amount of time in the parking lot before and after work.

– Frequent meetings at associates’ homes.

– Associates coming back to the facility to talk to associates on other shifts.

– Open talk about unions among associates.

– Reports from associates of the union visiting their homes, calling them, or sending them literature in the mail.

– Union literature found around the facility.

– Associates using union terms such as arbitration, grievance, and seniority.

– Interest in obtaining names and addresses from schedules or associate listings.

– Associates leaving work areas on a frequent basis to talk to other associates.

– Associates who are never seen together start talking or associating with each other and begin forming strange alliances.

Without a union, workers have little collective muscle with which to challenge the ‘structural systemic underpayment’ that Walmart has become renowned for, according to the US National Employment Law Office. Other union-busting tactics include surveillance, intimidation, threats and illegal firings.

Much evidence has been documented about the way Walmart approaches ‘associates’: a study (2005) by the UC Berkeley Centere for Labour Research and Education found that Walmart’s entry into metropolitan areas eliminates similar jobs that pay 18 per cent more than Walmart. Studies from the UFCW – union workers in the US food industry, reveal that ‘the average Walmart sales associate earns 32 per cent less than the average wage of a comparable UFCW worker at one of the three major supermarkets under the current contract for Southern California in 2011.’

While corporate governance is fast becoming a big-money industry, in countries like China, evidence strongly suggests that the company games CSR by encouraging factories to keep their workers in line through brutality and intimidation.

South Africa’s strong union culture presents an entirely different situation. But aside from the direct and lethal threat to the local manufacturing industry, impacting employment beyond direct Walmart employees as well as the life of our national productivity, South Africa will be further integrated into a system of exploitation, facilitating a race to the bottom for the 12 other African countries in which Massmart operates. In just over a week, the Tribunal will deliver a judgment. It is a decision that reaches far and wide – all the way to China.