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CHAPTER 3
Citizen Wal-Mart? South African food retailing and selling development1
Bridget Kenny
INTRODUCTION
In public debate throughout 2011 and much of 2012, Wal-Mart’s entry into South Africa’s economy sparked fierce debate. The Competition Tribunal and Competition Appeal Court processes became a match between the formidable US multinational – the world’s largest private employer with some 2.1 million employees in fifteen countries2 – and what appeared to many as activist ministries within the state, fighting to uphold ‘public interest’ in its merger with Johannesburg Stock Exchange (JSE) listed Massmart Holdings, Inc., trading as subsidiaries Game, Dion, Makro, Builder’s Warehouse and Cambridge Foods, among others. South African unions, most notably the South African Commercial, Catering and Allied Workers Union (Saccawu), with support from global union federation UNI Global and the US union the United Food and Commerical Workers (UFCW), put up a resolute defence against an uncomplicated and quick merger approval (Kenny 2012b).
Wal-Mart/Massmart claimed to offer cheap goods to a growing middle and working class consumer base, and as such their ‘everyday low prices (EDLP)’ would bring the majority of South African consumers, previously excluded from consumption, into participation in this market. The chief executive officer (CEO) of Wal-Mart International, Doug McMillon, wrote in an op-ed in Business Day on 26 January 2011 that the company’s ‘core mission – to save people money so they can live better’ would be its contribution to South Africa. He concluded, ‘Walmart looks forward to earning our credentials as a responsible and productive citizen of SA.’
But the protracted merger approval process was to belie any easy acceptance of Wal-Mart. In its report in February 2011, the Competition Commission recommended, in what can only be acknowledged as a political misstep, that the deal be approved with no conditions. When the Competition Tribunal in March and May of 2011 rolled around, the hearings had become the terrain of battle. The state’s representatives, led by the minister of economic development, Ebrahim Patel, became increasingly frustrated with the merging parties’ unwillingness to provide information or come to informal agreement over conditions for the merger. The Departments of Economic Development (EDD), Trade and Industry (DTI) and Agriculture, Forestry and Fisheries (DAFF) were concerned about the effects of Wal-Mart’s entry on South African manufacturing and agricultural jobs in the context of the power of this global buyer to import through its supply chain the most competitive commodities from around the world. They sought stricter conditions on the merger, primarily through expanded commitments to sourcing locally and to opening access to Wal-Mart global networks for local companies. The departments made a joint submission, based on their request to intervene on matters of public interest, particularly around local sourcing. The unions Saccawu, Southern African Clothing and Textile Workers Union (Sactwu) and Fawu and the Small, Medium and Micro Enterprise Forum also raised public interest concerns over Wal-Mart’s substitution effect, poor labour conditions, history of anti-union relations, and sourcing practices.
South African competition law demands that any large merger must go through an evaluation of the anti-competitive effects of the transaction on the economy. Meant to address the highly concentrated, deeply intertwined, and generally white capital dominating the South African economy under apartheid, the reformed Competition Act sought to open up the market and also to diversify it for black ownership and participation (Roberts 2004). South Africa’s new law included a public interest clause which is relatively wide in scope. It requires a consideration of any concerns over the effect on employment, small business operations and social welfare. The stated purposes of the Act are threefold: ‘To promote efficiency, adaptability and development of the economy; to provide consumers with competitive prices and product choice; and to promote employment and advance the social and economic welfare of South Africans’ (Competition Act, 1998, section 2). Large mergers, specifically, must be assessed for their impact on a sector, on employment, on the competitiveness of small businesses, and on the ability of national industries to compete in international markets (Competition Act, 1998, section 12A; and see Hodge et al. 2013).
Without rehearsing the drama of those events (see Kenny 2012a), the Tribunal hearings largely revolved around whether a public interest case could be made around Wal-Mart’s poor record on labour rights and on potential job losses/business closure upstream in local suppliers, manufacturers and producers as a result of Wal-Mart’s global sourcing. Acknowledging uncomfortably that there was some issue to provoke concerns of public interest, in May 2011 the Tribunal recommended the deal with four conditions: 1) that there be no retrenchments in Massmart stores for two years; 2) that the company give hiring preference to 503 retrenched (in June 2010) workers; 3) that the company honour existing labour agreements and continue to recognise Saccawu as majority union for three years; and, 4) that the company resource a fund of R100 million to help develop local suppliers and train local suppliers in how to do business with Wal-Mart (Competition Tribunal 2011).
Saccawu appealed and the three ministers requested that the Tribunal decision be set aside by the Competition Appeal Court.3 Patel explained: ‘As government we are guided by the Constitution and the policies placed before
