After a three-year, costly legal battle it seems that at least one government department believes Walmart’s controversial acquisition of Massmart might be good for jobs.
Launching the Industrial Policy Action Plan 2013/14 last week, Trade and Industry Minister Rob Davies said his department had recognised that the economy needed to be more open to foreign competition with the goal of local companies getting access to other countries in return and then, according to media reports: “Walmart’s takeover of South Africa’s Massmart deal has begun to create jobs.”
Davies added that foreign companies coming into South Africa brought opportunities, “but we also want our companies capitalising abroad”.
He was referring to jobs that had been created as a result of the supplier development programme that had been established by Massmart as part of the Walmart transaction.
After a bitter and prolonged battle between the government and the merging parties, the Competition Appeal Court ruled that a condition of merger approval was that Massmart had to establish a development fund of up to R200 million. The programme, which has been set up by the fund, aims to develop opportunities for small, medium and micro enterprises in the agri-processing sector.
A spokeswoman for Massmart told Business Report yesterday that the development programme was starting to deliver results. She noted that in Limpopo the group had procured more than 500 tons of fresh produce to the value of R3m in the past six months, and that on average about 100 people were employed each month as a result of the programme, which has been extended to KwaZulu-Natal.
The spokeswoman also noted that in terms of exports, Massmart continued to look for opportunities to assist local producers and had prioritised wine listings in Walmart stores in the US and China. “This probably supports existing job preservation rather than job creation.”
Davies’ recognition that jobs were being created as a result of Walmart’s acquisition of Massmart represents a change from his earlier concerns that the high profile transaction could have “a potentially devastating” effect on local jobs.
Trade and industry was one of three government departments that had challenged the transaction on the grounds that it would destroy local jobs and industrial capacity. The government opposition was led by Economic Development Minister Ebrahim Patel and included the Department of Agriculture, Forestry and Fisheries.
In October 2011, the departments called for a review of the Competition Tribunal’s decision, which was to approve the merger with limited conditions.
In supporting his department’s decision to take the tribunal on review, Davies said: “The tribunal failed to take into account the enormity of the likely impact of the proposed merger on the… economy.”
The merger was approved by the Competition Appeal Court in March last year, but the approval was conditional on the findings of an inquiry by three economic experts.
Analysts said yesterday that it was probably still too early to determine the effect of the merger on local suppliers, but noted that the development programme and the weak rand had helped to create job opportunities in the short-term.