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May 31, 2011

UPDATE: S AFRICA: Wal-Mart touts benefits of Massmart deal

Wal-Mart Stores today (31 May) championed the economic benefits of its acquisition of a majority stake in South African retailer Massmart after securing regulatory backing for the deal.

By Dean Best

Wal-Mart Stores today (31 May) championed the economic benefits of its acquisition of a majority stake in South African retailer Massmart after securing regulatory backing for the deal.

After South Africa’s Competition Tribunal announced that it had cleared Wal-Mart’s bid to buy 51% of Massmart, the world’s largest retailer outlined what it could offer the country’s economy.

Wal-Mart and Massmart had faced union opposition to the deal and attracted criticism from political circles for not making binding commitments on areas like procurement, safeguards for small businesses and black economic empowerment.

The backing of the Competition Tribunal did carry some conditions, including stipulations that the retailers maker no job cuts for two years. Wal-Mart and Massmart must honour existing labour agreements for three years and set up a ZAR100m (US$14.7m) fund to help support the development of local suppliers.

The US retailer said the combined business was planning a “significant” number of new stores, which would create “thousands of new union jobs” in South Africa.

Massmart, which runs DIY, general merchandise and electronics stores as well as food outlets, will see its grocery business grow by over 50% in five years, Wal-Mart said.

The retailers also said the “vast majority” of the fresh food in Massmart’s stores would come from South Africa, with a “substantial” development programme” planned for “thousands” of local farmers.

Doug McMillon, CEO of Wal-Mart’s international operations, said Wal-Mart was “pleased” that South Africa’s competition authorities had “recognised the benefits that our investment in Massmart can deliver”.

McMillon said: “We look forward to creating new jobs in South Africa, support for the development of South African exports, and providing previously underserved customers and communities with better prices and increased access to the products they want and need. All of this is consistent with the benefits we’ve delivered to markets around the world.”

Massmart CEO Grant Pattison said the retailer’s management “welcomed the prospect of becoming part of the Wal-Mart family”.

Pattison added: “We will now advance our strategy to ensure that our financial base is geared to accelerate growth through the opening of additional locations, which will provide more jobs and also career opportunities for our existing team, while bringing more outstanding products with lower prices to our customers.”

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