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25 October 2011 | Angeline Albert
US retailer Wal-Mart has argued South Africa cannot impose more procurement conditions upon its merger with Massmart Holdings because it would breach World TradeOrganization regulations.
Wal-Mart and Massmart made the claim during a hearing of the South African Competition AppealCourt (CAC's) stating they could approach the US government to prevent any further purchasing conditions being imposed by South African courts.
Wal-Mart finalised its majority stake purchase of retailer Massmart in June after the Competition Tribunal approved the acquisition on four conditions, including a condition volunteered by Massmart that it spend R100 million (US$14.1 million) on local procurement within the next three years.
The CAC hearing (held on 20, 21 and 24 October at Cape High Court) is considering an appeal brought by the South African Commercial, Catering and Allied Workers’ Union (SACCAWU) and three of the country’s government departments (Economic Development; Trade and Industry; and Agriculture, Forestry and Fisheries). The SACCAWU argues Wal-Mart’s buying conditions must go further with at least R500 million (US$63.9 million) allocated to procurement from South African suppliers. But Wal-Mart and Massmart said there was “no justification for such an enormous compulsory investment” considering the size of Massmart’s South African operations.
The CAC will decide whether the tribunal correctly granted merger approval or whether more conditions should be imposed.
Both the SACCAWU and the three government departments said the retailer’s merger conditions were insufficient to offset negative public interests including less local procurement and more imports.
Wal-Mart/Massmart’s lawyer, David Unterhalter, said South Africa’s manufacturers do “a few things very well and, where it is vulnerable, it will continue to be”. He added: “There is no enhanced risk from imports.” Unterhalter said forcing one competitor to freeze its imports would not help South African producers but assist rival retailers in the country.