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Unformatted text preview: r Pattison states that he was called by government ministers to discuss the
transaction. He was asked to participate in a social dialogue with interested parties, to
which he agreed. He, however, made it clear that he was not prepared to make legallybinding commitments. After the meeting he had with the Ministers of Economic
Development and Trade and Industry, no other meetings were held with government at
that level. Massmart was prepared to assist government in some industry-wide initiative
to regulate local content for retail goods, but not to bind itself to buy local when its
competitors were not.
The government stated that both Wal-Mart and Massmart agreed with its concerns as
pointed out in a meeting with them. However, government complained that the
companies were not forthcoming with information that would enable them (government)
58 to fully evaluate the implications of the entry of Wal-Mart into South Africa. The
government was also disappointed that the social dialogue stalled as soon as Wal-Mart /
Massmart received the green light for the merger from the Competition Commission.
The government stated that, although it welcomes FDI, it was opposed to this merger
because of the negative impact it would have on the country’s economic growth path
and employment situation. The government made it clear that its opposition to the entry
of Wal-Mart into South Africa did not reflect a general government posture towards FDI
but was specific to the public interest issues arising from this case.
The media did not devote much attention to the relationship between government and
the firms involved, but noted that government supported the unions. In general, the
media took the side of the firms, accusing government of overreaching their mandate
and confusing investors. “Essentially, the Americans have been told to go away, but in
the most sordid, underhand and creepy way”, said the editor of a leading business daily
in South Africa.
5.2.3 Local Suppliers and Jobs
The key issue in government documents regarding the merger is its impact on local
procurement. Government was concerned that Wal-Mart’s buying power would lead it to
shift to imports, hurting local manufacturing and jobs in the process. Government was
very unhappy with Wal-Mart / Massmart’s refusal to make commitments regarding local
procurement. The Minister of Agriculture, Forestry and Fisheries, writing in South
Africa’s second largest Sunday newspaper, argued that Wal-Mart’s entry posed a threat
to food security in the country as supplier food chains are disrupted and production
59 capacity lost. She welcomed the last minute commitment by Wal-Mart to create a
supplier development fund but complained that the R100 million offered was not enough
to “provide assurances that arise from our very real public-interest concerns…”. The
Minister of Trade and Industry echoed the same sentiment, warning of the “surge” in
imports that could have a destabilising effect on the economy and threaten jobs, and his
Director-General cautioned that the risks posed by Wal-Mart “outweigh the benefits” of
All trade unions were concerned with the impact of the merger on local jobs through the
(likely) shift from local suppliers to imports, emanating from Wal-Mart’s global sourcing
capabilities as well as the squeezing of local suppliers.
“The reason why we are concerned is because if you procure from abroad, and I think
my colleague tried to explain this, if you procure from abroad you essentially retain jobs
abroad, if you procure manufacturing products at least you retain jobs from where you
procure if it’s outside of the Republic, even if you bring those products much cheaper for
local consumers. So a rising number of unemployed people and a rising number of
unemployment in the country as a consequence of job losses here or job creation
abroad I believe does not augur well for the country if products are cheap. You may still
buy products at a cheaper rate but those people may not be able to afford those
products because they are unemployed”.
“Our position to the proposed Wal-Mart / Massmart measure must be understood and
located in the broader economic political and legal context. South Africa’s biggest
challenges by far are its massive levels of unemployment, poverty and inequality”. 60 Media
Some sections of the media were sympathetic to concerns about local industries and
employment, and therefore supported government interventions. “FDI [should] result in
proper investment into the South African society and economy: an increase to the
existing level of production, more jobs and higher wealth creation. A simple transfer of
ownership…does not, on its own, do anything for South Africa”. However, most were
highly critical of the government’s intervention, taking the view that “customers will win
from the merger” and declaring a “new era for consumers” in anticipation of lower prices.
The government’s intervention was criticised for sending confusing signals to
international investors. “For Goodness sake, here’s a cou ntry in need of foreign
investment, and which preaches the mantra of job creation. Yet [the government has
done its] utmost to make Wal-Mart unwelcome”, the government “demonstrated a poor
level of maturity in full view of the global investment community”; “The G...
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This document was uploaded on 01/24/2014.
- Winter '14