our policies. They [the merging parties] will need to secure better protection for jobs in the Massmart supply chain than what we currently have in place.’4 They sought stricter conditions on the merger.
The Appeal Court heard the case in late October. In March 2012, Judges Davis and Zondi rejected both the Department’s request for review and the union’s appeal of the merger. However, they strengthened the ruling’s conditions, and ruled that the 503 retrenched workers should be reinstated (rather than receiving preferential hiring) and that a committee of experts, one nominated from each of the merging parties, the union, and the government should convene to research and report on the financial costs and process requirements to facilitate access of small business to the company’s supply chain, rather than accept as evident the merging parties’ proposal of R100m. This expert committee included Joseph Stiglitz for the state, James Hodge for the unions, and Mike Morris for the merging parties. In June 2012, two reports were produced, with different recommendations (Stiglitz and Hodge authoring one and Morris the second). In October 2012, the Appeal Court judgment ultimately followed Morris’s narrower recommendations and determined that Massmart should contribute a maximum amount of R200m to a fund that would be used for the development of small and medium enterprises only. The judgment cautioned against ‘competition law being employed as a surrogate for coherent industrial policy’ and found no basis for the larger and longer-term fund proposed by Stiglitz and Hodge ‘which we consider falls outside of the parameters of the Act’ (Planting 2012). Debate over the use of public interest provisions in competition law to posit limits on capital returned to the position that these constricted competitive behaviour. The Wal-Mart merger case, then, opened up the possibility of using competition law towards broader developmental aims and, by its conclusion, shut it down again, in a firm confirmation of supply-side economics.
The state moved to reassure capital that it was committed to facilitating foreign direct investment (FDI). The minister of agriculture, Tina Joemat-Pettersson, journeyed to Wal-Mart-supported strawberry fields in Costa Rica, posing with her Wal-Mart cap, to see the effects of small producers’ access to Wal-Mart supply chains (Mashala 2012), and Rob Davies, the minister of trade and industry, said he had changed his position, and now argued that Wal-Mart’s work with small producers was a model of developing South African capacity (Crotty 2013).
The debates about the Wal-Mart/Massmart merger raised concerns over procurement because of the reputation of Wal-Mart, but missed the longer trend of state deregulation of the agro-food system in South Africa, in which South African retailers have very much followed the techniques pioneered by Wal-Mart and others, and have benefited from them – to the point of making Massmart an appealing acquisition in the first place. The merger of Wal-Mart with Massmart offers us an opportunity to engage with other questions about how development is being formulated in South Africa: what have been the relationships between retail capital, smallholder access, service employment and food security? Authors examining the internationalisation of retailing, as does Reardon (2005), have argued precisely that retailing can facilitate development in emerging economies through supply chain programmes. Retail appears as merely having capacity to support ‘development’, without promoting its own interests. In the same way, the state’s impulse to bind the deal to sourcing locally seems a willing myopia, disengaged from what retail’s role already suggests about our economic choices. Finally, using the merger to examine ‘development’ points to a similar shortsightedness of the labour movement, rallying mainly around conditions within shops and to protect jobs.
FOOD RETAIL INTERNATIONALISATION AND THE ENTRY OF WAL-MART
The South African retail sector had predicted the entry of a major transnational retail firm for some time. It was the inevitable progression seen in other parts of the world, and it made sense given the relative sophistication of its sector. Thus, Wal-Mart’s approach was not a surprise. The global circulation of retail capital has been a trend since the 1990s, particularly led by food and general merchandisers (Wrigley 2000; Reardon and Berdegue 2002; Weatherspoon and Reardon 2003; Humphrey 2007). By the 2000s, this investment turned toward the global South with a ‘deluge of retail FDI into the emerging markets’ (Coe and Wrigley 2007:342), and Wal-Mart was a prime mover. The share of Wal-Mart’s international sales increased steadily from 4 per cent in 1995 to greater than 20 per cent by 2005 (Durand and Wrigley 2009: 3). Wal-Mart is the world’s leading international retailer at the moment.
The same expansionary impulse, of course, has been followed by South African retailers into Africa and other parts of the world, most robustly by Shoprite, with all major corporate firms increasing the percentage of their turnover from business outside South Africa over the past ten to fifteen years (Macquarie 2013; Weatherspoon and Reardon 2003; Miller 2008).
Yet the discussions on international retail expansion have moved beyond noting this rapid and visible phenomenon to become more nuanced, suggesting that there are many reasons why transnational retailers do better in some markets than in others. In general, a number of writers have made the important point that transnational retailers require the firm to embed within specific regulatory, cultural and market relations, which changes both local contexts and the retailer itself (Coe and Wrigley 2007; Tilly 2007; Wrigley et al. 2005; Christopherson 2007; Bianchi and Arnold 2004). Writing about Wal-Mart’s entry into Mexico, Tilly (2006) argues that the conditions of entry helped set the terms of its advantage over local firms. Wal-Mart used the North American Free Trade Agreement (NAFTA) to enable it to import products and avoid building local distribution centres; it aggressively reduced prices to challenge local suppliers; and it managed product specifications in detail, putting remaining suppliers under pressure. Yet Tilly also found that local competitors benefited from imitating Wal-Mart’s strategies, and reduced the advantage to the company over time (Tilly 2006:198). In contrast, Christopherson (2006) explains that Wal-Mart’s unsuccessful entry into Germany (with its decision to disinvest) related to the very different character of market governance there than in the US – the power of German manufacturing, the system of occupational skills and training, the local regulatory context favouring existing firms—and ultimately to the disjuncture of Wal-Mart’s firm culture. Thus, analysis of the existing conditions of the retailing, food manufacturing and distributive systems is critical to understanding the effect that Wal-Mart will have on an economy.
Durand and Wrigley (2009) usefully consolidate much of this literature into three key issues which explain the success of the
