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S.Africa pressures Wal-Mart on local suppliers

Published on 02/08/2011

South Africa's government Tuesday said it wants more assurances from Wal-Mart that its $2.4-billion takeover of the Massmart group will not affect local manufacturing and cost jobs.

The South African “Government believes that given Wal-Mart’s global purchasing power, the merged entity will significantly increase imports and reduce purchases from local suppliers in South Africa,” the ministers of trade, economic development and agriculture said in a joint statement.

“This will affect entire value chains from the suppliers of raw materials and components to the producers of the finished product,” they said.

The three ministries have appealed against the merger, which competition authorities approved on May 31. The deal was finalised on June 20.

The ministers say they do want to overturn the deal, but to seek more restrictions to ensure that the merger will not cause job losses in South Africa.

Economic Development Minister Ebrahim Patel defended their appeal, saying the government had to take action “when there is a clear and compelling evidence of probable job losses or deterioration in the working conditions of South African workers due to increased imports as a result of the proposed transaction.”

Trade Minister Rob Davies said the appeal did not signal a shift in South Africa’s broader attitude toward foreign investment.

“What we are concerned to see is that the business model that comes in does not only see a number of short-term decisions that are going to benefit foreign suppliers over local suppliers,” he said.

Agriculture Minister Tina Joemat-Pettersson warned that the deal could hurt food processing in South Africa if Wal-Mart imports large amounts of packaged foods.

Although Wal-Mart has agreed to a 100 million rands ($15 million) fund to develop South African local manufacturers, the ministers said this was not enough.

“A 100 million rand supplier development fund could pale into insignificance given the likely impact of substantial shift to imports by the merged entity,” their statement said.

Massmart runs nine wholesale and retail chains with 288 stores in 14 African countries and the merger has given the world’s largest retailer its first foothold on the continent.