Wal-Mart’s takeover of South African retail group Massmart is a big deal – at $2.4-billion (U.S.) for a 51 per cent stake in the company, the U.S. retailer’s largest acquisition in more than a decade. South Africa’s antitrust commission approved the takeover on Tuesday, imposing conditions to protect jobs, and Wal-Mart says it plans to close the deal in the next few weeks.
But perhaps even bigger than the deal itself is the symbolism of Wal-Mart’s first foray into Africa.
Johannesburg-based Massmart has 290 stores in 13 African countries, and Wal-Mart plans to use this as a launching pad for expansion into the continent. Wal-Mart’s purchase of Massmart is an example of Africa’s growing importance as an emerging market of middle-class consumers – and, Wal-Mart hopes, would-be purchasers of low-cost goods.
Significantly, when such a high-profile U.S. retailer comes to Africa, it can also help change public perceptions of this continent, broadening awareness of changing economic realities while shifting the focus away from war, famine and suffering.
But in South Africa, reaction to the deal has been less than enthused.
At competition tribunal hearings, government and trade unions railed against Wal-Mart. Union leaders threatened protests if the deal went ahead, and warned of thousands of jobs lost and local markets flooded with cheap Asian imports.
Jobs are a serious priority for President Jacob Zuma’s government. The unemployment rate in South Africa is officially 25 per cent, and unofficially closer to 40 per cent. Mr. Zuma’s administration has promised to create five million jobs by 2020.
In the end, Wal-Mart and Massmart agreed to a number of conditions “to protect the public interest,” and said they were pleased with the outcome. No job cuts will be allowed for two years after the takeover, existing labour agreements are to be honoured for three years, and a $14.6-million fund is to be created to develop local suppliers.
But South Africa’s powerful trade unions – politically connected, and capable of rousing the masses for huge and disruptive protests – expressed “grave disappointment” that the deal had received competition tribunal approval.
Patrick Craven, spokesman for COSATU – the main South African trade union federation – said there was no guarantee that this "notoriously anti-union company" would respect the conditions or whether it would "revert to the union-busting tactics for which they have become notorious around the world."
Now that the deal has been approved, the antitrust authorities must publish the full reasons for their decision within the next 20 days.
If any of the parties are unhappy with the ruling, they can still appeal – a step the unions are considering, and potentially yet another delay for this landmark deal.Report Typo/Error