South Africa Tries to Block Wal-Mart Deal

South Africa Tries to Block Wal-Mart Deal

Even though the nation’s competition tribunal approved the U.S.-based retailer’s plan to buy a 51-percent majority share of grocer Massmart for about $2.4 billion back in May, the government has recently decided to appeal the decision.

Published July 22, 2011

The South African government has thrown a wrench into Wal-Mart’s multi-billion dollar plans to invest in the nation—a move that could potentially scare away other future foreign investors.

 

Even though the nation’s competition tribunal approved the U.S.-based retailer’s plan to buy a majority share of grocer Massmart for about $2.4 billion back in May, the government has recently decided to appeal the decision.

 

Officials from three different government agencies in particular (Economic Development, Trade and Industry and Forestry and Fisheries) aren’t pleased with how the tribunal handled the case in the original hearing, and would like to either cancel their ruling or have the deal sent back to them to be examined once again.

 

“The merger hearing was unfair and not in accordance with the principles of natural justice,” the appeal documents said, Reuters reports.

 

One of the major issues: Wal-Mart’s foreign imports. Critics of the deal are worried that the store’s tendency to import cheap foreign products would make it harder for competitors, not to mention the local manufacturers who need to make a living. Union groups in the nation also accuse Wal-Mart of being anti-union.

 

While the tribunal admitted in their May ruling that some in the country would lose out with the deal, they believed it would be beneficial to the nation in the long run and included key stipulations such as a no-lay-off policy for two years and required the company to adhere to the nation’s current labor agreements for three years.

 

But another broader issue is how other foreign investors of Wal-Mart’s caliber will view the hubbub surrounding this landmark deal.

 

For years South Africa has enjoyed its status as having Africa’s largest economy and being the continent’s gateway for foreign business. For instance, Wal-Mart, a store that has already expanded into South America, Europe and Asia, chose South Africa to launch its first business venture on the continent. South Africa also hosted last year’s World Cup games, the first African nation ever to do so, and was considering an Olympic bid up until a few months ago.

 

But in an attempt to protect local interests, the nation may lose out on other major foreign contacts, who might not think investing in the country is worth all of the stipulations imposed by the government.

 

Faced with the opportunity of advancing on the global stage, these officials appear to have chosen to look out for its citizens instead.

(Photo: DREW ANGERER/The Washington Times/Landov)

Written by Hortense M. Barber

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