Walmart starts advertising price cuts, business opportunities - South Africa

Six days after United States giant retailer Walmart completed its acquisition of a controlling stake in Massmart, it started advertising price cuts and new business opportunities for South Africa.

Six days after United States giant retailer Walmart completed its acquisition of a controlling stake in Massmart , it started advertising price cuts and new business opportunities for South Africa.

An eight page colour advertisement in the Sunday Times newspaper was South Africa's first introduction to the Walmart brand.

The advertisement included a letter from "the people" of Massmart and Walmart announcing the merger and price cuts by the group's retailers Game, Dion Wired, Makro and Builders' Warehouse.

Massmart also said it intended creating 15,000 jobs in the next five years.

"While there are other exciting promotional campaigns planned, this offering so soon after the finalisation of the Walmart merger is a clear demonstration of Massmart and Walmart's intent to save people money to live better," Massmart CEO Grant Pattison said in a statement on Sunday.

Earlier, he told the Business Times there were no plans to open Walmart-branded shops as the local brands had "plenty of value", and there were plans to open 40 more of them in the next financial year.

However, these brands would be advertised under Walmart's blue and yellow logo.

Walmart completed a R16.5bn conditional transaction to buy a 51 percent stake in Massmart on Monday, after getting the go-ahead from the Competition Tribunal.

The merger was conditional on the setting up of a R100m supplier development fund, no merger-related retrenchments for two years, and recognition of the SA Commercial Catering and Allied Workers' Union for three years post the merger.

In the statement on Sunday, Pattison said the supplier fund was being created.

Walmart has 55 brands around the world in, among other countries, Canada, Brazil, China, Chile, Japan and Mexico.

Its share of Massmart would be a stake in emerging African markets.

Before the deal was concluded, the South African government and unions voiced concerns that it would lead to job losses and hurt local procurement.

However, the Competition Tribunal found that the conditions to counteract this, which were proposed by Walmart and Massmart, were sufficient and were enforceable.

"Both Massmart and Walmart remain committed to partnering with the South African government as well as all key stakeholders, and we stand by our stated commitment to encourage other international companies to invest in Africa's vibrant economy," Walmart CEO Doug McMillon said in the statement.

http://www.businessday.co.za/articles/Content.aspx?id=146837

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‘Balance African progress, climate change’

Climate change policy planning and funding of ameliorative efforts for global warming needed to take account of the “development trajectory” of the African continent, Finance Minister Pravin Gordhan told delegates to a climate change forum at the weekend.

Gordhan said he believed that Africa would be emerging as “a key player” in the world economy in the next 30 years.

He was speaking at the Climate Investment Funds (CIF) Partnership Forum, an annual event hosted by the African Development Bank (AfDB) and the World Bank where funding decisions on climate-smart development worldwide are taken.

“What Africa does require is that traditional paradigms of funding and aid need to be transformed,” he said.

“A new formula which links action on climate change to genuine development for the peoples of Africa for industrialisation and economic development… is needed.”

Such initiatives should be directed at genuine job creation and skills development “and urgent and systematic processes that will eradicate poverty on this continent as well,” he added.

Gordhan said he was “a firm believer” that Africa would become the site for research and development for new technologies and policies to fight climate change.

He said climate change was the “key issue facing humanity”, which he believed would test the human ability “to co-operate to overcome adversity, to overcome our instinct to act only within our own self-interest and attempt to act to redefine the global interest”.

“Let us ask ourselves how we can… reformulate the development trajectory on the African continent and use the opportunity… to ensure the benefits of growth don’t get left to a small elite,” he said, adding that the change should benefit Africa’s 1 billion people.

AfDB communications officer Chawki Chahed said that Africa would put nearly 40 percent, or $2.6 billion (R17.9bn), of the CIF’s $6.5bn to work across the continent this year.

The funding is earmarked for renewable energy and energy efficiency projects, climate-compatible development planning and sustainable forest management.

Delegates from 45 countries attended the forum. The African delegates hailed from Algeria, Burkina Faso, the Democratic Republic of Congo, Egypt, Ethiopia, Ghana, Kenya, Mali, Morocco, Mozambique, Niger, Nigeria, South Africa, Tunisia and Zambia.

Donwald Pressly  http://www.iol.co.za/business/business-news/balance-african-progress-climate-change-1.1088893


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Africa - Tripartite Free Trade Area negotiations

Launching the Tripartite Free Trade Area negotiations: opportunities and challenges

2011-06-15 Taku Fundira

Resources > By Topic > REGIONAL TRADE ARRANGEMENTS > SADC EAC COMESA Tripartite FTA

Taku Fundira, a tralac Researcher, discusses launching the Tripartite Free Trade Area negotiations: opportunities and challenges.

The Southern and Eastern regional economic communities (RECs) of the Common Market for East and Southern Africa (COMESA); the Economic African Community (EAC) and the Southern African Development Community (SADC) on 12 June 2011 signed an agreement at a Summit in Johannesburg, South Africa to launch negotiations of an expanded free trade agreement (FTA). The COMESA-EAC-SADC FTA also referred to as the tripartite FTA will be the continent’s biggest FTA comprising of26 countries spanning from Cape Town to Cairo with an estimated market potential of US$ 1 trillion.

At the Summit, Heads of State adopted a developmental approach to the integration process that anchors on three pillars namely; market integration; infrastructure development and industrial development. Negotiations will be in three phases, two of which are expected to be concluded within three years of signing the agreement (by June 2014). These phases which will run concurrently include market integration and infrastructure development. The movement of legitimate business people will also be negotiated during this phase. The final phase which will look at Industrial development and other trade related measures has no time frame allocated to it.

Launching of this tripartite FTA has been welcomed with mixed feelings. As already noted in our previous discussions, there are some benefits that can come out of such an arrangement. These include: duty free access to an enlarged market; an opportunity to simplify the Rules of Origin requirements; and elimination of non-tariff barriers (Fundira, 2009). However, it should be noted that there will be winners and losers in this agreement. Based on a computer analysis of such an FTA, in a recent tralac publication “Cape to Cairo: An Assessment of the Tripartite Free Trade Area,” we note that there are more losers than winners. 

The Global Trade Analysis Project (GTAP)¹  latest pre-release Version 8 database used to assess the welfare and trade gains from this FTA as determined by duty-free merchandise goods access and with a small (two percent) reduction in assumed non-tariff barriers to both merchandise goods and services barriers also factored in, revealed interesting findings (Jensen and Sandrey, 2011);

a)  For the final tripartite agreement only the results show that there are significant gains to Southern Africa, but only for South Africa and Mozambique. South Africa welfare increases by US$1,321 million or 0.22 percent of the real Gross Domestic Product (GDP).
b)  Results for the rest of SACU (Lesotho, Namibia and Swaziland) are disappointing with a welfare loss of $84 million, while Botswana similarly loses $16 million. 
c)  Most other tripartite partners gain or lose very marginally, excepting Mozambique which gains $57 million.  This is because most countries other than South Africa and Mozambique have access to other FTAs through their multiple membership of overlapping FTAs.
d)  For agriculture, the tripartite FTA is only beneficial in sugar and then only for the South African and Mozambique agricultural sectors.  
e)  Manufacturing is the big gainer for Southern Africa, but again really only for South Africa with lesser gains for Egypt and rest of eastern Africa (Kenya). 
f)  Revenue for the SACU tariff actually increases by US$49 million as a result of South African manufacturing imports from non-African countries to replace increased exports to the rest of east Africa. Employment and real wage outcomes are both positive for South Africa.

Although the findings depict a bleak picture with regards to the “winners and losers” from such an agreement, there is optimism on the prospects of the tripartite FTA as a driver of economic growth and development. As the expanded economic zone helps boost the region’s economies, smaller countries that stand to lose in the interim should regard this as a short term temporary setback that in the long run will benefit, once they identify and develop sectors where they have competitive advantage. According to South Africa’s Trade and Industry Minister Rob Davies, “integration would enhance Africa's chances of capitalising on the two drivers of its faster growth rates - the mineral boom and the growth in the domestic market” (SAPA, 2011). 

Despite the optimism, if past experience is by all means regarded as indicative of future success, the prospects of a successful establishment of the tripartite FTA are minimal. Arguments for this notion are based on the fact that currently, within the individual RECs, integration has not been as smooth and there are still problems with implementation. 

For example, in COMESA, although in theory, the REC has attained customs status, some members have not adopted the common external tariff, while in SADC; already the REC has missed a 2010 deadline to attain customs status with some members still not yet implemented the SADC FTA. A lack of “political will” and implementation deficiencies to comply with a rules-based regional trading arrangement which they negotiated, within the existing trade regimes are some of the reasons for such problems. It is therefore necessary that such issues are addressed and that Members are encouraged to comply with their FTA obligations..

¹  See the GTAP website at https://www.gtap.agecon.purdue.edu/ for a full introduction to the model.  

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South Africa approves Wal-Mart bid, govt could take action

South Africa approved Wal-Mart’s R16.5 billion (US$2.4 billion) bid for control of retailer Massmart with minimal conditions on Tuesday, giving the world’s top retailer a big boost in its plan to expand in fast-growing Africa.

South Africa’s Competition Tribunal told Wal-Mart not to cut jobs for two years, honor existing labor agreements, and work to develop local suppliers, concessions the US firm had earlier proposed itself.

The deal gives Wal-Mart a 51 percent stake of Massmart, a discount retailer that sells everything from liquor to televisions and has a presence in at least a dozen African countries.

The decision will be seen as a major advance for Wal-Mart, which had said it could drop its offer if the government imposed targets on using local suppliers.

“This is good news. It included concessions put forward by both parties so it’s a victory all round,” said Paul Theron, CEO of Johannesburg-based asset manager Vestact.


“It shows that South Africa is open for business, that large corporates are potential players for outside investment.”

Massmart must also “give preference” to reemploying 503 workers fired in 2010, set up a R100 million (US$15 million) fund to help develop local suppliers, and not challenge SACCAWU’s right to represent bargaining units for three years, the tribunal said.

The two companies said in a joint statement they were “pleased” with the decision and expected Massmart’s food business to grow by 50 percent over the next five years.

The decision was a victory for Wal-Mart, as it did not impose restrictions on where it sources it goods, said Brian Sozzi, a New York-based analyst at Wall Street Strategies.

“In two years it looks like they can go to town on labor costs,” he said.

“The whole thing with them is to get goods into the South African market as cheap as possible and sell them as cheap as possible.”

However, the ruling is a blow to South Africa’s influential labor unions, one of which is already considering an appeal.

“We are meeting with our legal representatives to explore legal options,” said Mike Abrahams, a spokesman for the South Africa Commercial, Catering and Allied Workers Union (SACCAWU), adding that the union could consider appealing to the Competition Appeals Court.

That could further delay the deal, which was first announced in September 2010.

The deal was a test case for major foreign investment in South Africa, which has the continent’s deepest capital markets but where unions are in a coalition with the ruling African National Congress.

Three government departments – economic development, trade and industry, and forestry and fisheries – and the unions had lined up against the deal, asking the tribunal to impose targets on local procurement and a freeze on job cuts.

The government and unions have said Wal-Mart’s global supply network could lead to a flood of cheap imports, sparking job losses and squeezing local companies.

“We would have hoped that the deal would be rejected or at least much more stringent conditions be imposed,” said Patrick Craven, a spokesman for the COSATU union federation.

“Our biggest concern remains completely unanswered, and that is the knock-on effect on jobs in other retailers and the manufacturing industry.”

The three departments said in a joint statement late on Tuesday they would need further study to determine whether the conditions were sufficient enough to prevent widespread job losses.

“Based on the outcome of the study of the conditions and the responses of Wal-Mart/Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage,” the three departments said.


http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=104482&cat_id=1026

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Walmart’s SA play leads to Africa

The Walmart issue stirred so many passions on both sides of the free market versus workers dictatorship divide that the only sensible decision the Competition Tribunal could settle on was something resembling the wisdom of King Solomon, who threatened to cut a disputed baby in half, prompting the real mother to speak up and save the child.

Except in this case, the tribunal simply split the issue down the middle, setting conditions that were not too onerous and making concessions that don’t cost too much.

Steven Kilfoil of corporate finance at Grant Thornton says, with a weather eye on potential foreign direct investment: “The decision is hugely positive. If they had imposed seriously onerous conditions, that would have been negative in a big way.

“We are trying as a country to get away from people just investing their money in (the JSE) and taking it away at a moment’s notice. We are trying to get them to invest properly in South Africa by building businesses. The South African play by Walmart leads to a much larger African play. If we had imposed serious conditions on Walmart, that would have been seen as prohibitive and anyone else contemplating investing here would have run away.

“Take the introduction of the Companies Act, we couldn’t get the dates right – amateurish is about the kindest thing that can be said about that. The foreign investor is looking for a place of safety and comfort and all he hears is talk of nationalisation and unions trying to intervene in how business is done. Let us just be glad that common sense has prevailed.”

That will give a lot of comfort to foreign investors.

Walmart

Attempts to elicit comment from the Economic Development Ministry of Ebrahim Patel on the landmark decision on Wal-mart being given permission by the competition tribunal – with certain conditions – to buy control of JSE-listed Massmart proved fruitless yesterday.

Understandably Zubeida Jaffer, the minister’s spokesman, could not comment as she took ill on Monday and was rushed to a Johannesburg hospital. Someone who answered her phone referred the matter to a Dumi Makwetla – apparently a new staff member – but he switched off his phone.

Jaffer’s assistant, Roslyn Daniels, was courteous, but unable to help. But she indicated that the minister was in a departmental meeting for two days in Johannesburg, with his senior staff. A call to Richard Levin, the director-general, was answered but he indicated he was “in an important meeting” and could not talk.

ANC spokesman Jackson Mthembu’s phone was engaged but then rang. It was subsequently switched off. The phone of second spokesman Keith Khoza took messages, not returned. A third man listed as spokesman Moloto Mothapo, a spokesman at Luthuli House during the municipal election campaign, has returned to Parliament in Cape Town to his old job as the chief whip’s spokesman. He indicated he could not answer questions on the ruling, which was a Luthuli House matter.

Finally spokesman Brian Sokutu said while the ANC welcomed the ruling “we share sentiments expressed by labour federation Cosatu that this massive investment which is certainly set to stimulate economic growth… should not lead to job losses. Job creation is one of the key ANC priorities with (the president) already having announced a special fund to create jobs”.

The silence of Economic Development, however, is perplexing, especially as Patel sought from Walmart in February “strong local procurement, that the South African supply base is supported and that our capacity to create jobs locally is highlighted”.

The conditions of the ruling pretty much carried out that mandate.

Competition Tribunal

For those puzzling over the what many consider to be rather light conditions imposed on Walmart and Massmart, the following from the Competition Tribunal may shed some light.

“Our job in merger control is not to make the world a better place, only to prevent it becoming worse as a result of a transaction.” These are the words of the tribunal in a statement issued yesterday, which announced its decision to approve Walmart’s acquisition of 51 percent of Massmart, with conditions.

It added: “This narrow construction of our jurisdiction has not always been appreciated by some of the interveners who have sought remedies whose ambition lies beyond our purpose. It is not our task to determine whether those ambitions are legitimate public policy goals; only whether they lie within our powers.”

This goes some way to explaining why the conditions imposed on the merging parties are so moderate, especially given the effect the deal will have in South Africa, on suppliers specifically. A full explanation from the tribunal is expected in 20 days.

The tribunal says it is required by law to be aware of public interest concerns, but the law limits its ability to remedy concerns. In addition, the purpose of public interest concerns is not to protect firms from losing out to market forces, but to protect a substantial public interest.

So it may see a problem looming, but not have within its scope the means to remedy it. That is not to say that the tribunal has taken the view that the deal will present problems. In fact, it says a likely outcome of the merger based on Walmart’s history is low prices and consumer choice.

But it concedes that just how significant those benefits will be is not clear.

Walmart itself cannot (or will not) put a number to this claim, despite many acquisitions over many years in many parts of the world, which could provide quite specific details on just how much (or how little) consumers have benefited.

Questions over the merits of this deal are not likely to evaporate now that it has been approved. Instead evidence of the many touted benefits are eagerly awaited.

Edited by Peter DeIonno. With contributions by Peter DeIonno, Donwald Pressly and Samantha Enslin-Payne.

http://www.iol.co.za/business/opinion/business-watch/walmart-s-sa-play-leads-to-africa-1.1076735

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WORLD INDUSTRIAL PRODUCTION ON THE RISE

World manufacturing output has grown by 6.5 per cent in the first quarter of 2011 compared to the same period last year, the United Nations Industrial Development Organization (UNIDO) reported today.

“The figure clearly indicates the progress of the recovery of world industrial production from the recent financial crisis,” UNIDO http://www.unis.unvienna.org/unis/pressrels/2011/unisous085.html said, in the first edition of its new plan to report industrial statistics quarterly. Formerly the presentations were annual.

The report, based on an analysis of quarterly production data, said developing countries were in the lead with their manufacturing production increasing by 11.5 per cent. The major contribution to this growth was by China, with its output growing by 15 per cent.

Newly industrialized countries also performed well, with Turkey displaying a growth rate of 13.8 per cent, while Mexico’s was estimated at 7.4 per cent and India’s at 5.1 per cent.

The manufacturing output of industrialized countries increased by 4.4 per cent during the named period, with strong growth of 7.1 per cent observed in the United States, the world’s largest manufacturer.

Major European economies, including France, Germany and the United Kingdom, also demonstrated significant growth in manufacturing output. But other European countries, such as Greece, witnessed a 6.9 per cent drop, while Portugal and Spain maintained a marginal growth of less than one per cent.

Japan’s figures fell by 2.4 per cent. The full impact of the March Tsunami disaster was not yet reflected in manufacturing production data for the first quarter.

Negative growth was observed in North Africa, where the manufacturing output of Egypt and Tunisia fell by 8.9 per cent and 7.4 per cent respectively.

The UNIDO report also contains the growth estimates for the first quarter by major manufacturing sectors. It suggests that production of general machinery has increased by more than 15 per cent, electrical machinery and apparatus by 12 per cent, and medical and precision equipment by 11 per cent.

While industrialized countries performed well in high-tech sectors, their growth in traditional manufacturing areas such as food and beverages, textile and wearing apparel was quite low. Developing countries maintained higher growth across all sectors.

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