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‘Don’t kill’ SA suppliers

​​​Prof Stephen Gelb of the University of Johannesburg (UJ) comments on global value chains.

Published on : Times Live, 2011-07-27

The government’s review application of US retail giant Walmart’s R16.5-billion takeover of Massmart will not scare off future investors, an official said yesterday.
This comes after the departments of trade and industry, agriculture, forestry and fisheries, and economic development asked the Competition Appeal Court to review the Competition Tribunal’s decision to give the merger the green light. No date has been set for the appeal.
The tribunal approved Walmart’s bid for a 51% stake in Massmart, with conditions, on June 22.
Lionel October, director-general of the Department of Trade and Industry, said yesterday the publicity and controversy surrounding the deal would not chase away future investors. He said the review was necessary to ensure that local procurement would not be negatively affected.
“I think there has been a misunderstanding. This has nothing to do with foreign investment.
“We go all over the world trying to attract foreign investors to our country as we have done with other deals, including the Barclays-Absa bank deal.
“With other sectors, like manufacturing, you can come into the country and set up your business, and produce without problems.
“With retailers, it is a different ball game. It depends what they do. If they come in and displace our local suppliers, then we don’t want that kind of investment,” he said.
October said part of the conditions the department will ask for in the appeal is that Walmart increase its original R100-million supplier development fund – set up to assist emerging suppliers that could be prejudiced by the merger – to R300-million if the US retailer bought more imported products.
He said the government’s main concern was that local suppliers would be put out of business if Walmart bought a greater proportion of foreign goods.
“They have said this will not happen. All we want is an emergency clause. They say this will not happen but they refuse to sign. They are only willing to say verbally and in statements that this will not happen. We are not trying to overturn the merger,” October said.
Some of the merger conditions imposed by the tribunal include: a commitment by Walmart to give preference the 503 workers retrenched in February last year by Massmart if new jobs are created.
Mark Garden, Massmart’s attorney, said: “The proposal (to increase the supplier development fund) that October is talking about is not referred to in the review documents, and has not been raised formally with the merging parties.”
Meanwhile, Professor Stephen Gelb of the University of Johannesburg said that while South Africa was not benefiting from “global value chains”, Walmart’s acquisition of Massmart offered some hope.
Speaking at the United Nations Conference on Trade and Development World Investment Report 2011 in Johannesburg, Gelb said: “South Africa is not part of these global value chains which … are becoming a more important share of the global economy.”
But he said Walmart’s entry into South Africa would allow local firms “to get into Walmart’s chains internationally”.
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