South Africa: Govt to comply with Walmart-Massmart judgement
Compiled by the Government Communication and Information System
Date: 09 Mar 2012
Title: Govt to comply with Walmart-Massmart judgement
Pretoria - Government on Friday said it would comply with provisions in the judgement of the merger between Malmart and Massmart.
This as the Competition Appeal Court made its judgement on the merger of the two entities on Friday morning.
"On our initial reading of the judgement, we think that this is a well thought out process, to come up with a solution in which we participate and find an evidence-based way in dealing with this particular merger in such a way that it ends up with positive inputs," Trade and Industry (dti) Minister Rob Davies said in press briefing in Cape Town.
Government welcomed the judgement in that it endorsed issues around employment.
The dti and the Departments of Agriculture, Forestry and Fisheries, Economic Development had appealed the matter, wanting the merger to be reassessed. The departments had expressed concern at possible job losses as a result of the merger.
According to Friday's judgement, the court has ordered that a study be commissioned whereby three experts - one from government, the two merging retailers as well as labour - be appointed within one month of the order.
The experts will have two months to come up with a report for the court to consider. The experts are expected to look into the best possible way that small and medium suppliers can participate in Wal-Mart's global value chain so as to ensure that benefits spread to this sector as well.
However, government will be taking legal advice on the matter as well.
Economic Development Minister Ebrahim Patel said government believed that the critical test set out by the court was helpful. "We will clearly be taking legal advice on the issue but on a preliminary reading it does seem to us that we have a forum that is very creatively structured, an innovative forum," he said.
He added that the experts will report back to the court and that supplementary affidavits, if necessary, can be given in. "It does seem like an excellent route proposed by the court," explained the minister.
"It's a process with which the lawyers will have to give their input, we will have to consider that input but we've also read it and it seems an innovative way forward," said Patel.
In June 2011 the Competition Tribunal allowed the US retail giant to merge with Massmart with conditions resulting in Walmart acquiring a 51% stake in the South African retailer.
Included in the conditions is the setting up of a R100 million supplier development fund.
On whether the R100 million fund would fall away as a result of the judgement, Davies said the court does not have a basis on how the fund should be adjusted hence the study.
"It's an investment remedy specific to this transaction which is one that exposes local manufacturers and retailers and small business employment to global value chains which can have a result which is either positive or negative. We need to go through detailed work before we decide what the remedy is," explained Davies.
According to the ministers, there was inadequate interrogation of the proposal in relation to arguments put up by the intervening parties in the matter concerning possible problems of increased procurement by way of imports which would have the potential of exerting a negative impact on the South African economy.
On the question of government's decision to object to the merger and on whether this would send a message of SA being seen as hostile to foreign direct investment, Davies said had the two companies been of South African ownership, the provisions of the Competition Act would apply just the same as if with two foreign companies. The issues that arose from this transaction were specific to the transaction.
"This is not a general statement on our position on foreign investment, we continue to work with foreign investors," he said adding that it was not correct and is misleading to say that government departments are negative towards foreign investment."
Meanwhile, Business Unity SA welcomed the decision as successfully balancing the need to project SA as an investor friendly economy while also addressing concerns around job losses and the role of small and medium suppliers.
Reported by: South African Government News Service
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