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.
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