Government ministers put on a brave face after the Competition Appeal Court confirmed the R15 billion investment by Walmart in Massmart, subject to a few new conditions.
While Deputy President Kgalema Motlanthe has repeatedly praised the Walmart investment in South Africa, Agriculture Minister Tina Joemat-Pettersson, Trade and Industry Minister Rob Davies and Economic Development Minister Ebrahim Patel have gone to great lengths to stop it.
At a media briefing at Parliament on Friday, two of the three ministers quickly responded. Patel and Davies described it as a good judgment and innovative, at least in parts. Judge Dennis Davis dismissed the application by the ministers who sought to review and set aside the Competition Tribunal’s approval of the merger. Patel said the judgment was innovative.
Patel and Davies pointed out how creative Davis had been in making an order of court that Walmart, Massmart, the three ministers and the SA Commercial, Catering and Allied Workers’ Union (Saccawu) draw up a report on how small and medium suppliers could participate in Walmart’s value chain.
Davies said: “On our initial reading we think there is a well-thought through process to come up with a solution in which we participate and come up with an evidence-based way of dealing with this merger in such a way that it ends up with positive benefits.”
The ministers and the union argued that the nature of the Walmart business to source cheap goods was counterproductive to job retention and job creation domestically. They also argued that local supply chains tended to suffer.
Davis did not grant the ministers’ call for a R100 million supplier development fund to be increased to R500m.
Saccawu spokesman Bones Skulu, Mduduzi Mbongwe and Mike Abrahams noted the decision to dismiss the application with costs, but argued that it upheld the appeal “in part”. Cosatu’s Patrick Craven supported Saccawu’s initial reading of the judgment.
The merged entity, Saccawu said, should ensure that there were no retrenchments based on the merged entity’s operational requirements for two years, that 503 workers who were retrenched in 2009 and 2010 should be reinstated. This they welcomed.
Business Unity South Africa believed the Davis judgment “successfully balanced the need to project South Africa as an investor-friendly economy, while simultaneously addressing the concerns around job losses and the role of small and medium suppliers”.
It remained essential that if South Africa was to attain its growth and development goals that it was perceived to be a investment-friendly destination.
“Walmart’s entry is likely to increase competition in the retail sector and play a role in creating the kind of competitive environment envisaged in the new growth path,” Busa said.
“The lower prices resulting from this will be a boon for consumers and will help to reduce inflation.”
Haniff Hoosen, DA economic development spokes-man, said the ruling was “a complete repudiation of the application from the three ministers”. He said the judgment made it clear that the three ministers had misunderstood the role of the competition authorities in this case. “The competition authorities are there to ensure that companies do not abuse their market power and that mergers are in the public interest. The ministers unfortunately attempted to use the competition authorities as a tool to further their own political agendas,” Hoosen said.
Davies dismissed concerns that the ministers’ challenge of the merger had sent bad signals to future foreign investors.
“The consistent message we have been sending out is that the issues that have arisen are specific to this transaction and arise from the nature of the transaction concerned and the specific parties involved. This is not a general statement about our position on foreign investment. We continue to work with foreign investors and… in this particular case, we are happy to engage… with the entity (Walmart).”
It appears that the ministers will not make further legal challenges although they said they would take further advice from their lawyers. In a statement, they said their departments would study the judgment in great detail.
Massmart closed 0.2 percent higher at R172.92 on Friday. - Donwald Pressly