Competition Tribunal drags out Wal-Mart deal

According to Michael Bleby of Business Day (Massmart shares down on Tribunal delay, Mar. 22, 2011), the Competition Tribunal, “very, very reluctantly agreed to a union request to postpone the hearing into Walmart’s planned takeover of local retailer Massmart”. This after the Competition Commission last month recommended unconditional approval. The Tribunal’s Chairman set a stay in proceedings until May 9 (with the full hearing now taking place between May 9 and May 16). As this news emerged, Massmart shares lost 1.5 per cent of their value on the JSE, clearly jeopardising the proposed deal. General Secretary of the retail workers union Saccawu said the postponement, “[Was] quite a victory…we have won the first round of this battle”. The union wants conditions attached to a successful deal, such as local procurement guarantees. But one of the reasons Wal-Mart can achieve lower prices than its competitors is because it’s free to source the lowest cost suppliers, which are generally local suppliers who do not incur significant transportation costs, but may also include more efficient international suppliers. Ultimately, it is consumers who benefit from lower priced goods. With the extra cash in their pockets they can save and invest or simply use the ‘extra’ money to buy other goods and services.

The postponement is thus only a victory for the retail workers union and its vested interests and is not in the best interests of all South Africans. As I have noted before, no one is forced to shop at Wal-Mart nor is anyone forced to work at its stores. The reason people shop at Wal-Mart and other mass retailers is because the goods are generally cheaper. Moreover, Wal-Mart does not hold a gun to the unemployed’s head, forcing them to work the aisles and tills – they choose to do so, rather than face the bleak alternative of being unemployed in SA.

Author: Jasson Urbach is an economist with the Free Market Foundation. The views expressed in the article are the author’s.

FMF Policy Bulletin/ 22 March 2011