Walmart-Massmart merger: Ministers Davies, Patel and Joematt-Pettersson get it wrong again

Today, Ministers Davies, Patel and Joematt-Pettersson held a press conference to justify their appeal of the Competition Tribunal's ruling on the Walmart-Massmart merger. The Democratic Alliance (DA) strongly disagrees with the rationale behind the Ministers' appeal. In short, the ministers are overestimating the potential risks involved in this merger and underestimating the opportunities.

Most strikingly, the ministers seem convinced that Walmart's entry into South Africa will lead to job losses in local procurement and food production. The rationale is that Walmart will import huge amounts of goods from other countries at discounted rates and that this will lead to job losses here. This is an overly simplistic view of the situation that ignores the significant opportunities for job creation that Walmart's entry into South Africa would entail.

If Walmart is indeed interested in procuring goods en masse for its South African operations - and for possible expansions into Africa - South African firms will surely be able to compete for the production and delivery of those goods. There will also be numerous opportunities for South African firms and South African workers to get involved in and take advantage of Walmart's value chain development as it expands in South Africa and into Africa. The Ministers seem intent on viewing this situation as a threat, as opposed to viewing it as an opportunity.

Furthermore, the Ministers seem overly concerned with South African firms' ability to compete with foreign competitors in terms of Walmart's procurement. The fact that South African firms can undercut foreign competitors on transportation costs, can get goods to Walmart faster, and have local knowledge means that opportunities abound for South African firms to do business with Walmart.

Furthermore, the Ministers are consistently attempting to address issues through the Competition Act and the competition authorities that are not relevant to questions of anti-competitive behaviour. The facts are clear. Walmart's entry into South Africa will not cause any form of anti-competitive behaviour. Although the Competition Tribunal is empowered to take "public interest" issues into consideration, the scope of the current appeal and indeed the original petition against the merger fall far outside the reach of the Competition Tribunal.

The Competition Act does not empower the Competition Tribunal to set policy or precedent on foreign direct investment (FDI) issues as far reaching as this. We can therefore only infer that the Ministers are appealing this transaction on an ideological basis to make a point.

In conclusion, Minister Patel at one point during the briefing suggested that this issue was not about FDI. This underlines how the Ministers have fundamentally misread this situation. The Walmart-Massmart merger is at its core about FDI; and our openness to it. If our economy is to grow between 5 and 7% in order to achieve the significant job growth we need to break the back of unemployment and poverty, then FDI is an absolute necessity.

We need to signal to the world that we are open for business and investment. That will require adopting a pro-investment and pro-growth mindset that identifies the opportunities in foreign involvement in our economy. The Zuma administration has failed to adopt this mindset and that is a major stumbling block in our path to prosperity for all.

Statement issued by Kobus Marais MP, DA Shadow Minister of Economic Development, August 2 2011

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