South African antitrust authorities approved Wal-Mart Stores Inc. (WMT)’s acquisition of a controlling stake in Massmart Holdings Ltd. (MSM), its biggest in more than a decade, on condition no jobs are cut for two years.
The companies must also ensure that existing labor agreements are honored for three years after the takeover, the Pretoria-based Competition Tribunal said in an e-mailed statement today. Wal-Mart and Massmart will also establish a 100 million-rand ($14.6 million) supplier development fund, it said.
The South African government and labor unions opposed Wal- Mart’s 16.5 billion-rand purchase of 51 percent of the nation’s largest wholesaler, saying Wal-Mart’s entry will cause a surge in cheap imports, harming manufacturers, suppliers and local rivals. President Jacob Zuma’s administration has pledged to create 5 million new jobs over the next decade to cut the nation’s 25 percent unemployment rate.
Wal-Mart, the world’s largest employer with 2.1 million workers, will expand Massmart’s South African business, adding to jobs, Andy Bond, Wal-Mart’s executive vice-president responsible for the U.K. and Africa, said on May 11 at hearings held by the Competition Tribunal. It aims to use Massmart, which has almost 300 stores in 14 African countries, to lead its expansion in sub-Saharan Africa.
“The big deal is Africa,” Chris Gilmour, an analyst at Johannesburg-based Absa Management Ltd., said in a phone interview yesterday. “The continent is the flavor of the month for investors.”
The Competition Tribunal will give full reasons for its decision within 20 days, the antitrust regulator said.
The acquisition of Massmart is Wal-Mart’s second-biggest after the $11 billion takeover of U.K. retailer Asda in 1999. Massmart Chief Executive Officer Grant Pattison said on May 9 that the company plans to expand trading space by 20 percent over the next three years. Growth in floor space will boost sales by a similar margin and will also increase jobs while securing current posts, said Pattison.
The conditions imposed by the Competition Tribunal meet proposals made by Wal-Mart and Massmart during hearings held in Pretoria earlier this month.