Traders fear Wal-Mart entry

Johannesburg - Small businesses and consumers would only give the thumbs up to multinational Wal-Mart’s bid to acquire Massmart Holdings [JSE:MSM] if the world’s largest retailer promised not to rip off South Africans.

Rose Nkosi, the president of the South African Tuck Shop Business Association (Satsba), said: “Our main concern is whether Massmart will make it a contractual obligation for Wal-Mart to be involved in a social responsibility programme that aims to groom, grow and formalise township tuckshops.”
 
Satsba, which boasts 7 000 members, has an agreement with Massmart that sees small retailers receiving discounts whenever they buy in bulk.
 
Massmart – the South African owner of Game, Makro, Builders Warehouse and Jumbo stores – also supplies interest-free micro-finance to the small traders.

Nkosi said that if Wal-Mart discontinued supplying the bulk-buying discounts and interest-free loans, Satsba would cut ties with the US multinational.

“We are going to try to organise a meeting with the management of Massmart to express our wishes before this acquisition can go through.

“But we will vote with our feet if Wal-Mart comes in here and increases the prices of its products,” she said.

Her views come as Wal-Mart prepares to acquire Massmart for R30bn.
 
African Co-operative for Hawkers and Informal Businesses (Achib) secretary-general Mlungisi Ngwenya said the organisation, which represents about 130 000 hawkers and spaza-shop owners across the country, was opposed to the takeover bid.

“A culture has been developing where big retailers move into townships, oppress and then kill small traders instead of helping them to grow,” said Ngwenya.

He said Achib was finalising a research document that would result in the organisation setting up warehouses and factories that would compete with big companies. Achib is also planning to build 54 shopping malls by 2014.

But National Consumer Forum chairperson Thami Bolani said his organisation had no problem with the acquisition as long as the firm did not abuse the market.

“As consumers we will have a good relationship with Wal-Mart if it could sell goods of high international standards at the cheapest prices, show commitment in developing small enterprises and job creation, and source raw materials from local producers,” said Bolani.

No panic

Labour federation Cosatu is opposed to the deal.

The union federation’s spokesperson, Patrick Craven, said: “We are deeply concerned at the bid by Wal-Mart for Massmart, and share the view that Wal-Mart is one of the worst ¬union-bashing employers in the world.”

He added that Wal-Mart had a history of engaging in anti-competitive behaviour.

“We are also worried about the impact that a Wal-Mart takeover would have on local distributors, suppliers and manufacturers.

“The company has become so powerful that it can dictate to its suppliers the price they are prepared to pay for goods.

“This has led to many local suppliers, distributors and manufacturers collapsing, and resulted in the use of child labour and payment of poverty wages in countries such as Guatemala and Bangladesh,” said Craven.

Mncane Mthunzi, the chief executive of the Consumer Goods Council, a representative of local retailers, said South African laws were strong enough to deal with unscrupulous companies.

“There should be no panic because any company that operates in South Africa is expected to respect the rule of law, and I think Cosatu should meet with Massmart management to resolve these issues,” said Mthunzi.

He added that the council would not set any preconditions for Wal-Mart, especially in empowering tuckshops.

“We support an open-market society which offers consumers quality products and we cannot dictate to Wal-Mart to invest in spaza shops,” he said.
 
Massmart operates 290 stores predominantly in South Africa but it also has a presence in 13 African countries, focused largely on general merchandise, including electronics, and with a growing presence in food sales.

The retailer told investors this week that Wal-Mart had made a non-binding proposal to acquire its entire issued capital at a price of R148 a share, valuing the proposed deal at R30bn.
 
The offer is subject to due diligence and Massmart is uncertain whether a formal offer would be made.

Wal-Mart’s sales outside of the US account for more than 25% of its total sales, which hit $405bn last year.
 
- City Press

For more business news, go to www.citypress.co.za.
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