Still fighting the war against Wal-Mart

Posted on July 24, 2011


With the decision in June by the South African Competitions Tribunal to allow WalMart to take control of the South African-based Massmart chain, the world’s largest retailer cleared the last of the major hurdles it faced to gain entry to African markets. And despite threats from trade unions and consumer groups that they would appeal against the decision, there seem no grounds for any such action.

However, with backing from the government, an appeal has been launched. As a union organiser noted defiantly after the tribunal decision: “Battles have been lost, but the war is not yet over.”

However, the opposition to WalMart was, in part, a long-shot gamble by South Africa’s trade unions to try to have a degree of protectionism introduced for local industry and, therefore, the retention of local jobs. In this, they had the tacit backing of major local retailers. The hope was that, if the Tribunal agreed to introduce procurement restrictions on WalMart, these would be extended to other retailers as well.

On one level, the thinking was sound: it would be grossly unfair, even illegal, to place restrictions on WalMart that did not apply to other retailers such as Shoprite, Edcon and Pick ‘n Pay. It was something of a last-ditch attempt by the unions to halt the ongoing loss of local jobs, especially in the clothing and footwear sectors, caused by the increasing influx of cheap imports. Equal demands for local procurement would have put domestic business on a more even footing with Walmart, with its massive financial muscle and global supply networks.

With the effectively unconditional arrival of WalMart, despite the government’s support for an appeal, the sourcing of goods from the cheapest possible suppliers on a global scale, to the detriment of local jobs and overall wages and conditions, will continue at an even greater rate. Edcon, owners of Edgars and Jet stores, admits that, with WalMarts arrival, the Edcon group is preparing for a period that could mean “lower prices and margins or a possible decrease in market share”.

It was fears such as these that saw retailers giving support to the campaign by the unions. However, the protectionism implied in the demand that WalMart “buy local”, flew in the face of international agreements regarding free trade. But, given the severity of South Africa’s unemployment problem, there were hopes that the Tribunal could be persuaded to move in that direction. This, the protestors argued, would make for a more equal contest between WalMart and local business.

“As it is, what we have is a fight agreed between a heavyweight champion and several provincial lightweights. Some of the lightweights may do quite well, but it’s the heavyweight who will win in the end,” said an organiser of the South African Commercial Catering and Allied Workers’ Union (Saccawu).

In an attempt to defuse the protests, WalMart agreed that there will be no redundancies in the Massmart stores for the next two years; that 503 MassMart workers laid off in June last year would be given preference for any new job vacancies and that a three-year, $100 million, fund to encourage local suppliers will be made available, administered by an independent committee. These offers have been included in the Tribunal’s decision.

However, the arguments persist and the trade unions and consumer groups are far from mollified as the merged WalMart/Massmart entity prepares for its drive northwards. The merged company has made no secret of the fact that the potentially massive sub-Saharan market is its target; that South Africa is merely the convenient entry point.

Zwelinzima Vavi, general secretary of South Africa’s nearly 2 million-strong Cosatu trade union federation notes that this is part of a “global race to the bottom”; that Africa is almost a last frontier for global retail competition. The move this year to create a continent-wide free trade area, covering almost all of sub-Saharan Africa signalled the opening of a potential market of at least 500 million people.

That Walmart was aware of the looming free market trade talks there is no doubt. And chief executive Doug McMillon spelled out the US-based company’s approach shortly before the talks began in Johannesburg when he noted: “South Africa alone is an attractive market, but we are clearly interested in sub-Saharan Africa.” His Massmart counterpart, Grant Pattison, backs this up, pointing out that the merged company is already “trying to figure out ways to get into” markets such as the Democratic Republic of Congo, Senegal, Angola and Nigeria.

South African unions and supportive human rights groups point out that Massmart — as well as retailers such as like Shoprite, Edcon and Pick ’n Pay — have already spread north of the Limpopo and that this has often been to the detriment of local businesses. Floods of cheap imports and local job losses are also a reality in South Africa and elsewhere.

“So we are going to have to deal with more of the same, but on a much greater scale,” says the Saccawu organiser. Now a last, forlorn, hope rests with a highly controversial appeal.