Wal-Mart deal survives South African pushback

Regulators approved Wal-Mart's 17 billion rand (about US$2.4 billion) bid to buy a controlling share of a South African chain in a ruling Tuesday that followed a fierce debate over protectionism in the country with the continent's most promising economy.

Unions and government officials are worried the arrival of the world's biggest retailer will hurt jobs and local manufacturing.

In its ruling, the Competition Tribunal, the government agency charged with promoting competition and protecting consumers, said Wal-Mart and South African retailer Massmart could not lay off any workers for two years, must respect Massmart's existing labour agreements for three years and must invest in training South African suppliers.

The deal was overwhelmingly approved in January by Massmart shareholders.

Those include South Africa's government-owned Public Investment Corp, which invests on behalf of civil-service pension funds, and Scotland's Aberdeen Asset Management. Massmart workers, most of whom are black, also have a stake through a trust set up as part of a South African campaign to help those denied economic opportunities under apartheid.

Wal-Mart has 8,692 stores in 15 countries, among them Brazil, China and India.

South Africa's Massmart operates in more than a dozen African countries, so buying in means Wal-Mart will have access to more than just 50 million South African consumers.

inadequate conditions

Wal-Mart and Massmart had already agreed to take the steps regarding layoffs and union agreements.

They also pledged to spend 100 million rand (about US$14 million) over the next three years to help farmers and other South African suppliers gear up to do business with Wal-Mart.

Opponents called the conditions inadequate. Powerful South African unions have threatened boycotts and strikes to keep Wal-Mart out.

The tribunal said Wal-Mart was likely to bring lower prices and "benefit consumers by strengthening rivalry and improving choice."

It said some losers were inevitable among South African retailers and producers as a result of the decision, but that it chose a path it hoped would make South Africans more competitive.

Arkansas-based Wal-Mart operates in Europe, Asia and across the Americas. Its interest in coming to Africa for the first time has been seen as a vote of confidence not just in South Africa's economy, but in the continent's potential.

planned expansion

Wal-Mart CEO and president, Doug McMillon, said after Tuesday's ruling, he expected the transaction to be completed in a few weeks, and that Wal-Mart would help Massmart with a planned expansion he said would create 2,000 to 3,000 jobs over the next few years.

Grant Pattison, the Massmart CEO who will continue in that role with the merged company, said shoppers would not see immediate changes in stores that will retain their South African names, but that new products and lower prices would steadily be introduced.

The unions and the government departments of trade, agriculture and economic development had argued Wal-Mart would flood South Africa with cheap foreign goods, forcing other retailers to do the same and putting local manufacturers out of business. They also argued during a week of public hearings before the tribunal earlier this month that Wal-Mart was anti-union, and that that would lead to lower wages and fewer jobs.

- AP