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Wal-Mart demurs over terms to buy SAfrican chain

Wal-Mart demurs over terms to buy SAfrican chain

Wal-Mart may abandon efforts to buy a South African chain if the government demands it stock a specific amount of South African products, the giant retailer said Monday.
Wal-Mart raised the possibility of pulling out on the last day of hearings on the 17 billion rand (about $2.4 billion) deal before the government agency charged with ensuring competition and protecting consumer interests. The Competition Tribunal is expected to rule in the next week on whether Wal-Mart can go ahead with the purchase of Massmart.
During hearings in a high-rise in the South African capital that have resembled a trial, South African unions and some government officials have joined foreign activists in arguing the deal should be rejected unless Wal-Mart is required to take steps to protect jobs. Wal-Mart says requiring it to buy an undetermined percentage of South African goods _ to protect local manufacturing jobs _ would give an unfair advantage to competitors not subject to such conditions.
In a joint statement to the tribunal, Wal-Mart and Massmart said such conditions would violate world trade regulations and were not guaranteed to be an efficient or effective way to safeguard jobs. They said if such conditions were imposed, they would be forced to appeal "or reluctantly to walk away from the transaction."
Wal-Mart is the world's largest retailer, and its interest in a South African business had been seen as a vote of confidence not just in South Africa's economy, but in the continent's potential. If the deal were to collapse, it could raise concern among other investors about whether South African bureaucrats and unions put up too many hurdles to doing business.
After months of speculation Wal-Mart was considering entering Africa, it announced its offer to buy 51 percent of Massmart last year. The deal was approved in January by Massmart shareholders. Those include South Africa's government-owned Public Investment Corp., which invests on behalf of civil service pension funds, and Scotland's Aberdeen Asset Management. Massmart workers, most of whom are black, also have a stake through a trust set up as part of a South African campaign to help those denied economic opportunities under apartheid.
Wal-Mart, based in Bentonville, Arkansas, has 8,692 stores in 15 countries, among them Brazil, China and India. But it has not until now ventured into Africa.
Massmart would give it a jump-start on the continent. Massmart operates in more than a dozen African countries and is Africa's third-largest distributor of consumer goods, the leading retailer of general merchandise, liquor and home improvement equipment and supplies and the leading wholesaler of basic foods.
South African unions have been opposed to the deal from the start, and threaten boycotts and strikes if it goes through. They say Wal-Mart is anti-union, and that its buying strategy will destroy local manufacturers and competition. International groups who say Wal-Mart's enormous reach even has environmental consequences _ driving factories and farms to pollute in pursuit of producing cheap goods for the retailer _ have joined South African unions in opposing the Massmart deal.
Wal-Mart and Massmart told the Competition Tribunal Monday that its opponents' fears were not supported by evidence. But the companies made some concessions Monday, pledging not to fire any Massmart employees for the next two years and to respect Massmart's existing labor agreements for as long as the tribunal says is necessary _ the tribunal's staff has suggested three years.
Wal-Mart and Massmart also say they will spend 100 million rand (about $14 million) over the next three years to help farmers and other South African producers if the deal goes through. Officials said they were still working out how to spend the money, which is intended to help South Africans gear up to supply Wal-Mart.
Unions said Monday the pledges were not enough to address their concerns.


Updated : 2021-06-15 16:18 GMT+08:00