Wal-Mart Stores’ move to buy a 51% stake in South African retailer Massmart Holdings is facing criticism from the country’s government.
The US$2.3bn deal was approved last month by South Africa’s Competition Commission on competition grounds, although the watchdog did note the transaction had raised a number of “public interest concerns”.
The Commission passed its findings along to South Africa’s Competition Tribunal, which will reach a final decision on a deal. In submissions to the tribunal, three government departments have now criticised the retailers for their unwillingness to make any binding commitments around the public interest concerns.
The Economic Development Department (EDD), Department of Trade and Industry and the Department of Agriculture, Forestry and Fisheries have outlined concerns about the impact of the merger on local procurement, food security and broad-based black economic empowerment.
“A merger of the size of the proposed Wal-Mart/Massmart transaction, and with the size and leverage of the parties which are involved, could, if not properly regulated, go some way towards undermining the New Growth Path”, the departments said.
The departments want the merged entity “at least maintain or increase the percentage of pre-merger local procurement by product category”.
The EDD said that negotiations with the two retailers have “stalled” following the Competition Commission’s recommendation that the merger be approved unconditionally. “For whatever reason the merging parties’ stance on procurement has show less flexibility since that favourable recommendation,” it said.
The department added that the recommendation hinged on negotiations between the EDD and the retailers around these public interest issues and “clarifying certain commitments made by the parties”.
In the submission, the EDD said: “It has now become apparent to the relevant government departments that there is only a small probability that a suitable agreement will be reached prior to the Tribunal hearing scheduled for 22 to 24 March”.
The departments have requested that the tribunal postpone the hearing scheduled for 22 March.
The departments said “an appropriate commitment” from Wal-Mart and Massmart on issues like procurement, safeguards for small businesses and BBBEE concerns was “not likely to materialise after all” despite a series of earlier assurances and “gentlemen’s agreements”.
They have therefore decided to intervene in the merger proceedings “as a matter of urgency”.