South Africa: Walmart Fight Has Cost Govt

Photo: Jared C. Benedict
Walmart store in Laredo, Texas.

Cape Town — Government has so far spent about R4.1 million in challenging the Walmart-Massmart merger, Economic Development Minister Ebrahim Patel said on Tuesday.

In a written reply to a parliamentary question, Patel said his department was a party to proceedings involving the Walmart-Massmart merger at the Competition Appeal Court (CAC), involving both a review of a decision of the Competition Tribunal, as well as an appeal against the decision.

The merger parties applied to the Competition Commission for approval of the proposed transaction during late 2010.

In early 2011, the Competition Commission recommended that the Competition Tribunal approve the transaction without any conditions.

Based on this outcome, the economic development department, together with the trade and industry and the agriculture, forestry, and fisheries departments, approached the tribunal to participate in the proceedings.

Following government's participation in the tribunal proceedings, the tribunal approved the merger in May 2011, subject to certain conditions.

Government then launched review proceedings against the tribunal's decision and asked to be party to the appeal launched by the trade union involved, on the basis of both procedural and substantive defects in the tribunal outcome.

"Government's objective in doing so was to ensure that all pertinent matters in relation to the effect of the merger on employment, local manufacturers, and small business could be ventilated before the competition authorities," Patel said.

In deciding the matter on appeal and review, the CAC recognised the importance of public interest considerations in assessing any merger, in particular those relating to small business and employment in supply-chains. This had been at the heart of government's case during all the legal proceedings in this matter.

The court also found that the conditions imposed by the tribunal had not been sufficiently interrogated in the process.

"The appeal process is not completed, since the court directed that three experts be nominated -- one by government, one by Walmart, and one by the trade unions," he said.

The costs of the experts' work would be for Walmart's account.

Once the experts had concluded their work, parties might make submissions to the CAC, which would then conclude on the appropriate conditions.

The legal costs, including the costs of an economic expert, incurred to date by government as a result of its participation in the appeal and review proceedings before the CAC, amounted to about R4.1 million.

The economic development department's share to date of the costs for the review and appeal to the CAC was about R1.4 million.

"The costs related to government's participation in the review and appeal proceedings before the CAC, should therefore be viewed in the context of the significant outcomes which have been achieved for the public in this matter," Patel said.

Commenting later, Democratic Alliance spokesman Kenneth Mubu said the appeal was unwarranted. Walmart's entry into the South African market was a positive development.

"It amounts to R16.5 billion in foreign direct investment and Walmart projects that 15,000 jobs will be created in the Walmart-Massmart operation in South Africa," he said.

Walmart had furthermore indicated that it planned to significantly increase the number of Massmart retail outlets in South Africa and to use its activities in South Africa as a base to expand into the rest of the African continent.

"This creates further growth potential as South African producers would be well-placed to stock Walmart's stores in Africa.

"The government's appeal against the investment was therefore unfathomable.

"The initial decision by the Competition Commission also attached conditions to the Walmart-Massmart merger. These conditions, which included a requirement for Walmart to follow all South African labour regulations and to set up a fund to support local South African producers, were appropriate and sufficient."

Wasting millions on appealing against foreign investment was counterproductive, Mubu said.

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South Africa Counts Cost of Walmart Merger Appeal

Walmart store in Laredo, Texas.

An appeal lodged by South African authorities against the approved merger between local firm Massmart and American retail giant Walmart has cost the government R4.1 Million. Read more »