SA needs flexible supply chain

2011-10-22 08:16

Competition Appeal Court Judge President Dennis Davis says Walmart is like a hurricane of globalisation hitting South Africa.

The question, he says, is whether it is the job of competition legislation to protect the economy against this. 

Walmart’s success is basedon the management of its supply chain. South Africa’s problem is that its manufacturing
sector is not able to respond swiftly enough to changes in market conditions.

On Friday, Davis and his two co-assessors in the court heard arguments in the appeal application by the South African Commercial, Catering and Allied Workers’ Union (Saccawu), as well as arguments by the ministers of economic development, agriculture, and trade and industry.

The parties are appealing against the Competition Tribunal’s provisional approval of Walmart’s R16?billion takeover of South African retailer Massmart.

Davis put it to advocate Rafik Bhana, acting on behalf of Economic Affairs Minister Ebrahim Patel, that the only thing the minister wanted was better conditions than were set by the tribunal.

What should actually be considered is how to make South African suppliers more efficient so that they can produce faster and at lower prices.

“It’s clear that protectionism doesn’t work...?Walmart wouldn’t have been a threat if South Africa’s manufacturing sector was competitive and efficient.”

The most important consideration must be how to get a supply chain that works. “We can’t set a condition that will perpetuate inefficiency,” Davis emphasised.

Patel wants the approval of Walmart’s takeover of Massmart to be subject to import control. His legal team insists that this does not mean that South Africa will violate any of the World Trade Organisation’s rules.

Davis says the courts are getting caught up in the middle of the process (where Patel is trying to get his own conditions enforced).

He says that if he has to refer the case back to the tribunal, it would have to be with very specific instructions. Davis says there is a danger of the case being thrown back and forth between the tribunal and his court until the minister is finally satisfied one day.

“If I were to send it (the case) back, it would have to be with very clear instructions. I don’t want to hear from you lot again.”

Davis wanted to know from Bhana whether the benefits of lower prices for consumers as a result of the arrival of Walmart could be taken into consideration in any way when considering the public interest (concerns over job losses and the possible closing down of small businesses).

Bhana’s reply was that it could not be taken into consideration in the way the tribunal had done. He then added that there was no reference in competition legislation to the aspects that have to be taken into account when considering the public interest.

It doesn’t play a role, Bhana finally said, when Davis wanted to know what he then had to do with this information.
According to Davis, South Africa’s competition authority will probably be the only one in the world that doesn’t take the benefit of lower prices for the consumer into consideration.

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