Cosatu backs state on Walmart appeal

2011-07-23 13:05

Cosatu president Sdumo Dlamini has welcomed the government’s controversial decision to appeal the Walmart-Massmart takeover ruling.

“We are happy, and welcome the review application by government because in the past we also made calls for a similar review,” said Dlamini.

His comments come after the decision by government ministers to appeal the Competition Tribunal’s approval of the deal was slammed as “shocking” and a bad joke by economists, business and opposition parties this week.

“The government should realise that to allow the deal to go through the way it is would be dangerous for South Africa, as (in) every country where Walmart operates, it destroy jobs, disrespects labour agreements and kills competition because it does not procure locally,” Dlamini told City Press.

“If this deal is left to continue in its current form, the country’s job-creation agenda will not succeed,” he said.

The appeal was brought by Economic Development Minister Ebrahim Patel, Trade and Industry Minister Rob Davies, and Agriculture, Forestry and Fisheries Minister Tina Joemat-Pettersson.

The ministers submitted the application based on the “irregularities” around the Competition Tribunal’s process in the hearing of the transaction.

Patel and his Cabinet colleagues allege they were prevented from fully discussing their concerns over the transaction.

They had good reasons for wanting access to certain documents, but their reasons were made laughable by the merging parties, according to the documents lodged with the Competition Appeal Court.

Christo Luüs, chief economist at Ecoquant, says this is the clumsiest “exercise” he has ever heard of.

“South Africa needs foreign investments. Right from the start everyone said that if this transaction is rejected, it boils down to South Africa saying it is not interested in foreign capital,” says Luüs.

Since the US giant showed interest in South Africa, Patel tried to get Walmart to place a limit on the total imports that Massmart would do under the Walmart name. Walmart opposed this provision, but accepted specific public interest issues.

Zubeida Jaffer, Patel’s spokesperson, defended the rights of the three departments to bring a review application.

“The three departments are acting within the provisions of the law,” she said.

Irvin Jim, secretary-general of the National Union of Metalworkers of SA (Numsa), demanded the establishment of a presidential commission of inquiry into the merger. Jim believes such a commission will set aside the tribunal’s ruling.

On Thursday Richard Levin, director-general of the economic development department, told Parliament the government was not considering a veto of the Walmart-Massmart merger, but believed public interest concerns made a review essential, reports Sapa.

Speaking during public hearings on the R16.5 billion merger through which the US giant took a 51% stake in the local retailer, Levin said this was the reason for the government’s application to the Competition Appeal Court.

The Walmart-Massmart merger was approved by the Competition Tribunal on May 31 this year, subject to certain conditions.

Kobus Marais, the DA’s shadow minister of economic development, said government’s approach was problematic.

“The submission underscores the problematic approach being taken by the economic development department in attempting to exert centralised control over the country’s economy,” he said.

“Investors should be allowed to choose where and how to invest their money, as this approach has always produced the best economic outcomes for
all involved.

National Consumer Forum president Thami Bolani said he was confused by the government’s decision.

“I am a bit confused because we had thought that after the Competition Tribunal approved the deal, this would spell the end of this deal being contentious.

“The government is acting within its rights to challenge the deal. But I am concerned about the message that this might send out to the international investor community,” said Bolani.

“As consumers, we welcome the merger because there would be more competition, innovative products and cheaper prices,” he said.

Peter Draper, senior research fellow at the South African Institute of International Affairs, was critical of government’s latest move.

“There is a case for screening investments, but I don’t think we should be in the business of screening every investment that comes in. The retail sector is not a strategic industry. There are certain kinds of investments that we need to screen, like those that strip off our natural resources and pollute the environment.

“Other countries, such as the US, Australia and Canada, screen investments on the grounds of national security. I am in favour of the Walmart-Massmart deal because it will shake up competition and may lead to lower prices for consumers.”

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