State is likely to give Walmart bid go-ahead

2011-01-30 21:46

Retailer Massmart will know on Tuesday what the government thinks of its proposed R16­ billion takeover deal with US giant Walmart.

Massmart’s chief executive, Grant Pattison, is scheduled to meet Economic Development Minister Ebrahim Patel on that day to discuss the findings of a task team Patel set up to advise him on the deal.

Patel appointed Standard Bank chief economist Goolam Ballim, Industrial Development Corporation chief executive Geoffrey Qhena, Pan African Investment and Research Services chief executive Iraj Abedian and deputy director-general of economic development Neva Makgetla to the task team in November.

On February 15 Massmart is scheduled to hear from the competition authorities after the Competition Tribunal extended the deadline for the Competition Commission to submit its recommendations on the proposed merger.

The South African Commercial, Catering and Allied Workers’ Union (Saccawu), which had earlier opposed the deal, appears to have resigned itself to the likelihood of it being ­approved.

Saccawu president Amos Mothapo conceded that they did not expect their submission to the Competition Commission to have an adverse effect on the bid.

“Whether we like it or not, the deal will go through,” said Mothapo after the union met with a Massmart ­representative on Wednesday.

“We are trying to use this opportunity to exert pressure on Massmart and Walmart to have them agree to some of our demands,” he said.

“The Massmart management just asked for clarity on the issues we raised.”

Saccawu’s demands include that Massmart closes the wage gap and other disparities across the group, converting casual labour contracts to full-time employment and ending all labour ­broker agreements.

Retailers’ association Consumer Goods Council chief executive Mncane Mthunzi said other Massmart competitors such as Shoprite and Pick n Pay had made ­public pronouncements welcoming the ­takeover bid.

He said it was fine for labour to raise objections, but he criticised it for making 11th-hour submissions.

“I don’t think there was a need for the Competition Tribunal to extend the deadline by 15 days, because if labour was serious about their anti-takeover views they should have ­formulated their opinions on this ­matter a long time ago,” he said.

Law firm Bowman Gilfillan’s competition expert Derek Lotter said the Competition Tribunal would focus on competition and public interest issues when it reviewed the proposed transaction.

“The competition issue is unlikely to be a major factor because Walmart’s entry will bring more competition into ­local retail,” ­Lotter said.

The public interest issues include the possible impact of the merger on jobs.

Pattison, who was interviewed by the task team, said the merger was likely to lead to more jobs, because in its proposal Walmart commits itself to helping Massmart open between 100 and 150 new stores over the next five years.

“These stores cost an average of R100 million and each shop creates about 200 jobs,” said Pattison.

He said it was unlikely the deal would put Massmart’s local suppliers – nearly 60% of all the group’s suppliers – out of business.

“We will continue to buy manufactured products that are economically viable to procure from local suppliers. These include building supplies such as timber products, bricks, doors and steel,” he said.

Pattison said local Massmart suppliers could benefit by becoming part of the larger Walmart procurement network.

“The deal may open up new markets for manufacturers whose products have a global mass appeal. For an example, black haircare range Black Like Me may be able to export to the US and South America if people there like their ­offerings,” said Pattison.

As Walmart prepares to enter the local market, its recent track record in emerging markets has been mixed.

A combination of stiff trade regulations that disallow foreign companies from opening retail businesses there and resistance from small traders has meant that Walmart has found it tough going in India.

Since partnering with Bharti Enterprises in 2007, Walmart has managed to open three wholesale stores in India. However, in China things have been rosier as Walmart has been operating there since 1996 and now has 300 retail ­outlets in the country.

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