Wal-Mart enters wary South African market | Africa | DW | 14.03.2012
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Africa

Wal-Mart enters wary South African market

Wal-Mart’s merger with South African retailer Massmart, has been largely applauded as a positive sign for investing in South Africa. However, a task force will watch over the implementation of the deal.

People leaving a Wal-Mart store. (Photo by AP)

A Wal-Mart store in the US:

South African shoppers could soon have a new port of call. The country's Competition Appeal Court gave the nod to the US shopping giant's bid to purchase controlling shares in the country's local retailer, Massmart. However, the court appointed a committee to study the effects on the deal on local producers.

The ruling was well received in South Africa's business community. Raymond Parsons, Deputy Executive Officer of South Africa's Business Unity (BUSA), told DW that the merger was a positive development for foreign direct investment.

"We need this kind of investments in South Africa," Parsons noted. At the same time, the country needed to draw necessary lessons from the deal to lay a sound foundation for future foreign investors, Parson added.

Wal-Mart's entry into South Africa was not as smooth as many would have thought.

No easy road to African market

South African unions and government officials were worried that the arrival of the US retail chain would hurt jobs and local manufacturing. Some members of the South African government had earlier warned that the deal would hit local suppliers and lead to huge job losses.

Striking workers holding signs. (Foto by AP)

Unions are concerned merger cut lead to job losses.

The court's decision sought to allay their fears and concerns. In his ruling, the judge allowed Wal-Mart to invest more than $2 billion (1.5 billion euros) in its takeover of South African Massmart. The US based company would then aim to promote South Africa's small business sector, by purchasing goods from local farmers. It would also reinstate more than 500 Massmart employees, who had been laid off pending the outcome of the merger.

In addition to that, a task team was to be set up to analyze the effect of the merger on the economy.

However, South Africa's union gave a lukewarm response. Mike Abrahams, spokesperson for the Commercial, Catering and Allied Workers Union of South Africa, said there was a huge difference in terms of interest, between workers and trade unions and those that the business fraternity had when it came to Wal-Marts take-over. "Generally what is being said is that we cannot really tell what the real impact of this deal will be," Abrahams added.

Getting ready for business

According to South African economist and analyst Dawie Roodt, Wal-Mart's move into South Africa could be seen as both a blessing and a curse, because some South Africans have said that Wal-Mart was using Africa's biggest economy as an entry point into the rest of the continent.

In a joint statement, Wal-Mart and Massmart said they were "keen to work with interested parties to develop local suppliers and producers."

Potential foreign investors had been closely watching the ruling, which according to analysts was to signal South Africa's openness to foreign investment.

Author: Subry Govender / cm ( AP, AFP)
Editor: Daniel Pelz / rm

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