result in roughly 4000 local jobs being lost. In addition, it is argued that even if the acquisition results in
new job creation, Wal-Mart’s low employee remuneration strategies will not aid economic development
(Reuters, 2011c, Reuters, 2011a).
South Africa’s imports
In 2010, Wal-Mart’s (USA) imports from China, accounted for approximately 10 per cent of USA’s trade
deficit with China (Sehgal, 2011). The point has been made that when Wal-Mart sources cheaper good
from abroad, the only way local suppliers and retailing store can compete with Wal-Mart, is to source
cheaper goods from abroad as well. This vicious cycle of importing large quantities, will have serious
consequences in terms of the macro economy, especially considering SA has posted its largest trade
deficit (R3.9billion) in 6 months (Cohen, 2011).
Waterbed effects
‘Waterbed effects’ refer to a situation whereby a powerful company, such as Wal-Mart, is able to
exercise buyer power over an industry supplier to the extent that the supplier is forced to increase his
selling price when supplying to Wal-Mart’s competitors (UK CC, 2006). Consequently, WalMart’s
competitors (e.g. Pink-n-Pay) may be forced into increasing their selling prices. As a result, both Wal-
Mart’s competitors and their customers may suffer.
Tax payments and Repatriation of profits
It is undeniable that Wal-Mart is always trying to improve its profit margins. High profits translate into
higher tax payments to the SA Government. It is also possible that an expansion in the product offerings
at Wal-Mart stores may indeed stimulate higher consumer expenditure, which, once again, adds to the
value of tax payments that Wal-Mart will make to the South African government. In this regard, the
acquisition will indirectly benefit society since the Government will collect more tax from Wal-Mart, than
it did from Massmart. Although corporate tax payments are relatively well governed by the South African
Revenue Services (SARS), it is rather worrying for the South African government that Wal-Mart is well
known for its tax avoidance schemes (Wal-Mart Watch, 2007). It is also acknowledged that, despite the
initial investment of $2.4 billion, Wal-Mart is not expected to reinvest much of its earnings in SA. As it
has done in many other countries, WalMart will repatriate substantial amounts of its earning in SA, back
to the USA.
Food Security
Wal-Mart’s strategy to increase its food product offerings, could pose a threat to domestic food security
if these products are imported. The introduction of low cost food products may prove to be popular
amongst consumers, especially considering the recent food price hikes. It is almost certain that the only
way Wal-Mart will be able to execute this strategy, is to source cheaper foods from abroad. This in turn,
may force local farmers and producers to shut down. Consequently, food in South Africa may be at the
mercy of international fluctuations and varying exchange rates (Angotti et al., 2010, Ridyard et al., 2011).
