Photo: Reuters
Walmart deal will cost SA jobs, state warns tribunal
Report says procurement shift of just 1% towards imports may leave up to 4000 South Africans out of work as a result| MICHAEL BLEBY |
Published: 2011/05/09 06:34:36 AM |
THE government will warn of thousands of potential job losses if the Walmart-Massmart deal goes ahead without conditions, when the proposed merger faces scrutiny at a week-long Competition Tribunal hearing starting today.
The hearing, which is seen as a test case for foreign investment in SA, will see the government looking to extract employment guarantees from the US retail giant as a condition for it taking a 51% stake in local retailer Massmart in a R16,5bn transaction.
According to documents posted on the tribunal website on Friday, the government says as many as 4000 jobs from industries such as general merchandise — including clothing and footwear — and in food and beverage production could be lost by Massmart shifting just 1% of its procurement from local to imported sources.
For a government that has committed to the ambitious goal of creating 5-million jobs in 10 years, jobs are economically and politically crucial.
A coalition of four unions is opposing the deal. Congress of South African Trade Unions spokesman Patrick Craven is on record as having called for a boycott of Massmart, saying among unions’ concerns was Massmart’s future approach to procurement.
The economic analysis prepared for three state departments says: "It is apparent from the evidence and economic intuition 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, 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, according to the report, written by Johannesburg consultancy Genesis Analytics.
Trade and Industry Minister Rob Davies said last week that the government wanted "concrete commitments" that the deal would "not have some of the potential negative effects, in terms of job losses in particular".
Walmart yesterday reiterated its view that the deal would in fact create jobs.
"Should the Massmart transaction proceed, we foresee the creation of new jobs in SA, support for the development of South African exports, and provide previously underserved customers and communities with better prices and increased access to the products they want and need, consistent with the benefits we’ve delivered to market after market around the world," it said.
The tribunal must rule on whether the takeover can go ahead or not, or whether it can do so with conditions imposed.
In February, the Competition Commission recommended the deal’s unconditional approval. While the government cannot block the deal, it and the unions concerned have the right to make submissions based on the public interest and it is through these that the government is seeking to influence the matter.
The report does not prescribe conditions to lessen the predicted effects of the deal, saying these are up to the tribunal to decide, but it says conditions for sourcing of local content can be imposed on a post-transaction Massmart, without disadvantaging the company in relation to competitors such as Shoprite and Pick n Pay.
"Whilst there is seemingly an asymmetry in imposing this condition on the merging parties, the fact is without such a condition there will be asymmetry post-merger in the global sourcing of the merging parties relative to the current competitors. As such, the inability of the competitors to match such global sourcing means that they will remain in the current status quo (for import equilibrium) in which Massmart was already competitive," it says.
The report apparently rejects Walmart’s assurances that it will honour existing labour agreements, pointing to the company’s poor labour record in its home market, the US.
In doing so, it makes bold claims about the future behaviour of Massmart’s rival South African retailers.
"As the other retailers in SA do not have the reputation of Walmart for the systemic undermining of unions, and hence the pay and working conditions of their employees, it is highly unlikely that such retailers will in future engage in Walmart-type practices to gain some competitive advantage."
The report also criticises Walmart’s argument that consumers will benefit from lower costs resulting from improved procurement practices.
"It appears any potential cost reductions at the expense of the public interest will not be fully passed through to lower prices and hence any potential public interest benefit (which is still not substantiated) must be lower than the public interest cost," it says.
While Africa’s largest economy has more people working than it had a year ago, it shed a net 14000 jobs in the first quarter from the previous three-month period, official figures showed last week. While transport and construction industries were the worst hit, the number of people employed in manufacturing grew by 20000 in the quarter.
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