COSATU urges Competition Tribunal to reject Walmart/Massmart deal

Federation says take-over would have negative effect on SA's developmental targets

COSATU urges Competition Tribunal to reject Walmart/Massmart deal

The Congress of South African Trade Unions, a member of the Anti-Walmart Coalition, in alliance with the UNI Global Union, reiterates its total opposition to the Walmart take-over of Massmart.

We urge the Competition Tribunal, which is holding a hearing this week, to reject the view of the Competition Commission which backed the deal, and endorse the view of SACCAWU General Secretary, Bones Skulu, that "it is not in the best interest of South Africa for Walmart to be allowed into our country", but that if they are, it must be under conditions that protect workers, suppliers, and the wider South African community.

Walmart, the world's largest company, with sales of more than US$405 billion in 2010, has massive power to dominate the world's global supply chains, and national retail sectors and to dictate the conditions of trade to thousands of supply firms in other sectors.

COSATU deeply regrets that the shareholders of Massmart, which operates Makro, Builders Warehouse, Game, Deon and other stores, put their narrow interests before those of the country and voted to accept Walmart's $4.2 billion offer to acquire a 51% controlling stake in the company.

They ignored warnings, like that in the South African Government's submission to the Tribunal, of thousands of potential job losses if the deal goes ahead without conditions. They estimate that as many as 4000 jobs from industries such as general merchandise - including clothing and footwear - and in food and beverage production could be lost if Massmart were to shift just 1% of its procurement from local to imported sources.

"It is apparent from the evidence and economic intuition," says the report, written for the government by Johannesburg consultancy Genesis Analytics, "that there will be a merger-specific increase in imports as a result of the transaction. This is because the unique global purchasing power of the world's largest retailer will result in a reduction in the price of imported products.... Furthermore, the sheer size of Massmart in domestic retail means the impact on domestic manufacturing and assembly will be substantive."

In addition, says the report, with the wholesale and retail sector's contribution to gross domestic product likely to remain constant at about 12%, any job growth coming from a Walmart-strengthened Massmart would likely not increase the overall number of people in work, but would just take jobs from other retailers.

Christy Hoffman of UNI Global Union, the worldwide umbrella union representing 20 million workers, urges the Competition Tribunal "to take the experience of workers from around the globe under advisement as they deliberate on this vital matter. In many of the countries where Walmart workers have union representation, the company cuts back on the rights of workers at every opportunity.

"In countries where Walmart was not forced to accept a union because it acquired a company without an organised workforce (such as the United States and Canada), Walmart employs severe tactics to silence workers and keep them from having a voice on the job. It is clear that if the Competition Tribunal takes the rights of Massmart's workers in particular and South African workforce in general seriously, they must set conditions now to protect those rights."

Further evidence of Walmart's negative impact comes from Michael Bride of the North American United Food and Commercial Workers International Union (UFCW), who says that "in North America we have witnessed the devastating effect that the Walmart model has upon small businesses, suppliers, and communities.

"We urge the South African Competition Tribunal to place the needs of South Africa's citizens at the centre of its deliberations and ensure that if Walmart does enter the country, that it does so on a basis that will promote economic development rather than destroy it."

The Competition Act of South Africa empowers the Competition Commission to recommend to the Competition Tribunal the blocking or setting of binding conditions on parties in a proposed merger. The commission is charged with considering public interest factors such as the effect of a possible merger on employment, small businesses, or particular industries or geographic regions.

The Tribunal therefore has a duty and authority to look at all these broader socio-economic factors. COSATU expects and demands that the Tribunal should reject the proposed merger, and not base its recommendations on the narrow interests of Massmart Shareholders but the potential impact of the proposed merger on South Africa's developmental targets, particularly in the following aspects:

  • The possible impact on concentration and domination of the retail and wholesale sector, which is already saturated and dominated by a few major chains;
  • The impact on the local market and upstream suppliers, manufacturers and service providers, including small businesses and conventional township traders;
  • The impact on the local supply base that could arise from the merged entity's procurement policies and practices;
  • Walmart's track record in other countries where its entry has led to massive job losses, and its tendency to dictate sector trends that compel all to adapt to Walmartisation in order to compete and survive;
  • Walmart's terrible industrial relations history and reputation.

If the merger is allowed to go ahead without the necessary safeguards, COSATU and its partners in the Anti-Walmart Coalition have vowed, in the words of the federation's first Deputy President, Tyotyo James, "to organise a mother of all boycotts against Massmart".

Statement issued by COSATU, May 9 2011

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