The Wal-Mart Question Finally Hits Africa: South Africa Should Ensure Robust Scrutiny of The Deal

The next two months remain crucial in the history of foreign direct investment in South Africa. Wal Mart, the US retail giant is negotiating its grand entrance to Africa’s growing markets and this deal is reported to be its biggest acquisition since 1999 when it bought Asda, the British supermarket. A few months back, the international company offered to pay billions to facilitate its 51 % ownership share of South Africa’s biggest retailer MassMart. The deal was approved by Massmart shareholders in January this year. However, if recent objections in South Africa to Walmart’s anticipated entry into the African market are anything to go by, then it is assured an uphill battle in the next coming months.  South Africa’s powerful trade unions seem determined to take the retail giant head on and continuously express a strong desire to oppose the merger. Also, government has so far shown strong determination to oppose a deal that stands in contrast to South Africa’s economic development plans and its strategic priorities for the next years.

Since the announcement of the Massmart/Walmart merger numerous yet critical and necessary questions have arisen around the desirability of the deal in particular the implications it is likely to have for South Africa’s retail industry, small –to medium –sized enterprises and the country’s job creation project. The Competition Commission, a body tasked with regulating the South African market in the public interests recommended to the Competition Tribunal that the deal be approved without conditions. This decision was highly questioned by those who specifically maintain that Wal Mart needs to guarantee job security for its workers and voluntary bind itself towards using domestic suppliers.  The Competition Tribunal had scheduled public hearings on the deal last week but these have been postponed to May to allow opposing parties to the deal an opportunity to prepare for a cross examination of  witnesses provided by Massmart/Walmart.

Critics of Wal Mart’s operation and practices whether in the USA, Chile, Argentine, or India raise issues which create many uncertainties and questions about the deal. Also, Wal Mart’s alleged poor global reputation as an employer and increasing allegations of its lack of respect for workers rights including its negative attitude towards labour union activities cannot be ignored. Reports by Human Rights Watch and other human rights activists also paint a depressing picture thus making it absolutely necessary for South Africa to ensure a proper scrutiny of the merger. Obviously, there are two sides to any story and Wal Mart has in the past disputed the allegations. Nevertheless, the risks of ignoring the issues raised by those with direct experiences of Wal Mart operations are simply too much to be left unaddressed. When Norway disinvested from Wal Mart its pension fund’s ethics committee alleged that “Wal-Mart is involved in “serious and systematic human rights abuses”, consistently flouting international rules on child labour, health and safety, underpaying women and blocking unionisation in the workforce”. Can South Africa afford to turn a blind eye to these allegations?

What is in South Africa’s best interest? Without doubt, the country needs direct foreign investment, but at what cost?  Trade Unions maintain that they want ‘responsible’ foreign direct investment. It is therefore clear that South Africa needs to vigilantly apply its mind on this merger and any further dialogue should be in line with its strategic plans and priorities.