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South Africa to push Walmart for better deal

South Africa said it will push Walmart to rejig the conditions of its US$2.4 billion Massmart deal, as Pretoria looks to wring bigger concessions from the world’s top retailer.

The government on Tuesday criticised Walmart’s plan to set up a $15 million fund for the development of South African manufacturers as inadequate, and said it was looking for a “package” of changes.

South Africa’s anti-trust regulator in May approved Walmart’s bid for 51% of discount retailer Massmart with minimal conditions, including the creation of the R100 million ($15 million) fund to develop local suppliers.

While legal experts say the government has little room to overturn the completed transaction, it could use political pressure to renegotiate the conditions.

“We are looking for a package of measures, one of which is a supplier development fund,” Economic Development Minister Ebrahim Patel told reporters at a briefing.

Patel’s department, together with the departments of trade and industry, and forestry and fisheries, have filed an appeal against the deal.

“A R100 million supplier development fund could pale into insignificance given the likely impact of substantial shift to imports by the merged entity,” the departments said in a joint statement on Tuesday.

Patel declined to further comment on what concessions the government was seeking.

Business Report newspaper said last week Pretoria wanted the fund increased to R500 million, citing a government source.

The political wrangling over the deal underscores the difficulty of investing in South Africa, home to the continent’s deepest capital markets and strong labour unions in an alliance with the ruling African National Congress.

Patel, a former trade unionist, and his colleagues are likely under pressure from unions that have opposed the deal from the start, said Paul Theron, chief executive at asset management firm Vestact.

“If you want an industrial policy that is interventionist like that, you must design one, get it approved in parliament and then ram it down everyone’s throat,” he said.

“It’s inappropriate to use a competition hurdle as an opportunity to try to affect industrial policy.”

Walmart and Massmart have said the current appeal will have no impact on their implementation of the transaction.

A spokesman for Massmart declined to comment, saying the retailer would release a statement later in the day.

South Africa has a history of imposing weighty conditions on foreign takeovers.

It recently approved a takeover bid from Kansai Paint for local paint company Freeworld Coatings, but stipulated the Japanese firm had to sell one of Freeworld’s businesses, build a factory and not cut jobs for three years. (Reuters)


Despite our best efforts, How we made it in Africa cannot cover every single business story on the continent. What you need to know tracks important developments originally reported on by other media organisations.


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