Dissertation

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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. Government 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. Media 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 Government 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 lower prices. Trade Unions 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.

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