Walmart Merger Gives South Africa Growing Pains

The country is divided over whether Walmart will bring paucity or prosperity.

Posted: 08/17/2011 02:20 PM EDT
Filed Under South Africa, Africa

Walmart Merger Gives South Africa Growing Pains

As Walmart prepares to bring its “everyday low prices” to the continent, the South African government is struggling to come to terms with the takeover.


Last month, Walmart completed a $2.4 billion acquisition of local retail giant Massmart. The deal was far from simple as South Africa's Competition Tribunal placed a number of restrictions on Walmart to ensure that workers would be treated fairly and that the local economy will not suffer when the low-price king finally comes to town.


Now, members of the government are speaking out against the deal, voicing concerns that the retail giant, whose worldwide revenue is more that the country’s GDP, will send local suppliers and business out of commission. Three government ministers have asked a court to refer the takeover back to the Competition Tribunal for further review on the grounds that there were technical irregularities in the documents used.


Although the government concern is in the name of the livelihoods of their constituencies, some businesspeople would prefer for the officials to stay out of private sector affairs.


“Walmart will be a huge challenge for us. We are going to have to dramatically change the way we do business to adapt to it. But it’s going to be good for the consumer because prices will come down and competition will increase,” said the chairman of South African retailer Pick n Pay, Gareth Ackerman.


South Africa drags behind other African nations such as Nigeria, Libya and the Democratic Republic of Congo when it comes to foreign investments, losing dollars some say are critical to the country’s economic success.


"As a small businessman, an entrepreneur and a capitalist, I want to live in a free-market economy. If we as a country come out with restrictions [on the merger] I cannot see how that would benefit me as a trader. The freer the market, the better for any entrepreneur,” Herman Mashaba, founder of the Black Like Me cosmetics brand, said.


Despite the seemingly real fears of the government ministers in protest, some say that all the chatter is just lip service used to further political ambitions.


"Walmart has paid up the money already, so there is nothing that they (the government) can do, which is why this is all theater," South African political analyst Moeletsi Mbeki told CNN. "It's about dramatics, making the poor black workers believe that their interests are being looked after."

 

(Photo: Spencer Platt/Getty Images)

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