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S.Africa to review Wal-Mart deal

South Africa’s government on Thursday said the approval of US retail giant’s Wal-Mart’s $2.04 billion takeover of the local Massmart group was flawed and it should be sent back for review.

The 16.5 billion rand (1.5 billion euro) deal is being challenged by three government ministries who want it sent back to anti-trust authorities who in May gave the world’s largest retailer its first foothold in Africa.

“The question before the court is whether the merger can be or not be justified on public interest grounds,” government advocate Wim Trengrove told the Competition Appeal Court.

Trengrove said the Competition Tribunal which approved the merger on May 31 had erred by not requiring that the two companies show how local business would be affected and what measures they would put in place to counter this.

“It should have placed the onus on the merging partners to demonstrate what the extent of the import substitutions will be,” he said.

The state said it did not have a calculation of cheaper foreign import options but that it was “unimaginable” that procurement decisions would be taken without costing.

The minsters of trade, economic development and agriculture fear that the merger will affect local suppliers and jobs through the US giant’s global buying power and want more measures to protect the local market.

They argue that the hearing was unfair and that the tribunal failed to allow a full airing of concerns about the deal.

Trade unions have also criticised the deal, with an appeal lodged by the South African Commercial, Catering and Allied Workers Union.

A group of protesters demonstrated outside the Cape High Court where the hearings are set to continue Friday and possibly Monday.

The two companies are opposing the review and appeal.

Wal-Mart was given the go-ahead by the Competition Tribunal on May 31 to buy a 51 percent stake in Massmart, provided the US retailer does not lay off any workers for two years.

The retailer also agreed to a 100 million rands ($15 million) fund to develop South African local manufacturers.

Massmart runs nine wholesale and retail chains with 288 stores in 14 African countries.