Devan Pillay

New South African Review 4


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conditions on the merger, primarily through expanded commitments to sourcing locally and to opening access to Wal-Mart global networks for local companies. The departments made a joint submission, based on their request to intervene on matters of public interest, particularly around local sourcing. The unions Saccawu, Southern African Clothing and Textile Workers Union (Sactwu) and Fawu and the Small, Medium and Micro Enterprise Forum also raised public interest concerns over Wal-Mart’s substitution effect, poor labour conditions, history of anti-union relations, and sourcing practices.

      South African competition law demands that any large merger must go through an evaluation of the anti-competitive effects of the transaction on the economy. Meant to address the highly concentrated, deeply intertwined, and generally white capital dominating the South African economy under apartheid, the reformed Competition Act sought to open up the market and also to diversify it for black ownership and participation (Roberts 2004). South Africa’s new law included a public interest clause which is relatively wide in scope. It requires a consideration of any concerns over the effect on employment, small business operations and social welfare. The stated purposes of the Act are threefold: ‘To promote efficiency, adaptability and development of the economy; to provide consumers with competitive prices and product choice; and to promote employment and advance the social and economic welfare of South Africans’ (Competition Act, 1998, section 2). Large mergers, specifically, must be assessed for their impact on a sector, on employment, on the competitiveness of small businesses, and on the ability of national industries to compete in international markets (Competition Act, 1998, section 12A; and see Hodge et al. 2013).

      Without rehearsing the drama of those events (see Kenny 2012a), the Tribunal hearings largely revolved around whether a public interest case could be made around Wal-Mart’s poor record on labour rights and on potential job losses/business closure upstream in local suppliers, manufacturers and producers as a result of Wal-Mart’s global sourcing. Acknowledging uncomfortably that there was some issue to provoke concerns of public interest, in May 2011 the Tribunal recommended the deal with four conditions: 1) that there be no retrenchments in Massmart stores for two years; 2) that the company give hiring preference to 503 retrenched (in June 2010) workers; 3) that the company honour existing labour agreements and continue to recognise Saccawu as majority union for three years; and, 4) that the company resource a fund of R100 million to help develop local suppliers and train local suppliers in how to do business with Wal-Mart (Competition Tribunal 2011).

      Saccawu appealed and the three ministers requested that the Tribunal decision be set aside by the Competition Appeal Court.3 Patel explained: ‘As government we are guided by the Constitution and the policies placed before the electorate … Employment and decent work are at the centre of our policies. They [the merging parties] will need to secure better protection for jobs in the Massmart supply chain than what we currently have in place.’4 They sought stricter conditions on the merger.

      The Appeal Court heard the case in late October. In March 2012, Judges Davis and Zondi rejected both the Department’s request for review and the union’s appeal of the merger. However, they strengthened the ruling’s conditions, and ruled that the 503 retrenched workers should be reinstated (rather than receiving preferential hiring) and that a committee of experts, one nominated from each of the merging parties, the union, and the government should convene to research and report on the financial costs and process requirements to facilitate access of small business to the company’s supply chain, rather than accept as evident the merging parties’ proposal of R100m. This expert committee included Joseph Stiglitz for the state, James Hodge for the unions, and Mike Morris for the merging parties. In June 2012, two reports were produced, with different recommendations (Stiglitz and Hodge authoring one and Morris the second). In October 2012, the Appeal Court judgment ultimately followed Morris’s narrower recommendations and determined that Massmart should contribute a maximum amount of R200m to a fund that would be used for the development of small and medium enterprises only. The judgment cautioned against ‘competition law being employed as a surrogate for coherent industrial policy’ and found no basis for the larger and longer-term fund proposed by Stiglitz and Hodge ‘which we consider falls outside of the parameters of the Act’ (Planting 2012). Debate over the use of public interest provisions in competition law to posit limits on capital returned to the position that these constricted competitive behaviour. The Wal-Mart merger case, then, opened up the possibility of using competition law towards broader developmental aims and, by its conclusion, shut it down again, in a firm confirmation of supply-side economics.

      The state moved to reassure capital that it was committed to facilitating foreign direct investment (FDI). The minister of agriculture, Tina Joemat-Pettersson, journeyed to Wal-Mart-supported strawberry fields in Costa Rica, posing with her Wal-Mart cap, to see the effects of small producers’ access to Wal-Mart supply chains (Mashala 2012), and Rob Davies, the minister of trade and industry, said he had changed his position, and now argued that Wal-Mart’s work with small producers was a model of developing South African capacity (Crotty 2013).

      The debates about the Wal-Mart/Massmart merger raised concerns over procurement because of the reputation of Wal-Mart, but missed the longer trend of state deregulation of the agro-food system in South Africa, in which South African retailers have very much followed the techniques pioneered by Wal-Mart and others, and have benefited from them – to the point of making Massmart an appealing acquisition in the first place. The merger of Wal-Mart with Massmart offers us an opportunity to engage with other questions about how development is being formulated in South Africa: what have been the relationships between retail capital, smallholder access, service employment and food security? Authors examining the internationalisation of retailing, as does Reardon (2005), have argued precisely that retailing can facilitate development in emerging economies through supply chain programmes. Retail appears as merely having capacity to support ‘development’, without promoting its own interests. In the same way, the state’s impulse to bind the deal to sourcing locally seems a willing myopia, disengaged from what retail’s role already suggests about our economic choices. Finally, using the merger to examine ‘development’ points to a similar shortsightedness of the labour movement, rallying mainly around conditions within shops and to protect jobs.

      FOOD RETAIL INTERNATIONALISATION AND THE ENTRY OF WAL-MART

      The South African retail sector had predicted the entry of a major transnational retail firm for some time. It was the inevitable progression seen in other parts of the world, and it made sense given the relative sophistication of its sector. Thus, Wal-Mart’s approach was not a surprise. The global circulation of retail capital has been a trend since the 1990s, particularly led by food and general merchandisers (Wrigley 2000; Reardon and Berdegue 2002; Weatherspoon and Reardon 2003; Humphrey 2007). By the 2000s, this investment turned toward the global South with a ‘deluge of retail FDI into the emerging markets’ (Coe and Wrigley 2007:342), and Wal-Mart was a prime mover. The share of Wal-Mart’s international sales increased steadily from 4 per cent in 1995 to greater than 20 per cent by 2005 (Durand and Wrigley 2009: 3). Wal-Mart is the world’s leading international retailer at the moment.

      The same expansionary impulse, of course, has been followed by South African retailers into Africa and other