Opposition by government and unions to the entry of giant retailer Walmart into South Africa is understandable, but may deter foreign investment, says Reg Rumney, director of the Centre for Economics Journalism in Africa.
Rumney was speaking at the Pearson-sponsored Master Class for business journalists at Rhodes this week, where focused on the R16.5 billion Walmart investment as an example of how South Africa reacted to foreign investment.
Walmart, America's – and the world's – biggest retail group has been in the news of late for its proposed acquisition of a controlling stake in South African retail group, Massmart.
In the United States, Walmart has a bad reputation for cheap imports that drive out small retailers and unfairly squeeze suppliers. It is also accused of being anti-union and sexist.
He said given it was seen as a "monster" by some groups in America, it was not surprising some people were suspicious of it.
Three South African government departments have opposed the deal, even after the competition authorities gave it the okay, because they feared the effect on competition in the future.
The feared that food security might be threatened by increased imports, and jobs lost as competition increased.
Opposition by government and unions to the entry of giant retailer Walmart into South Africa is understandable, but may deter foreign investment, says Reg Rumney, director of the Centre for Economics Journalism in Africa.
Rumney was speaking at the Pearson-sponsored Master Class for business journalists at Rhodes this week, where focused on the R16.5 billion Walmart investment as an example of how South Africa reacted to foreign investment.
Walmart, America's – and the world's – biggest retail group has been in the news of late for its proposed acquisition of a controlling stake in South African retail group, Massmart.
In the United States, Walmart has a bad reputation for cheap imports that drive out small retailers and unfairly squeeze suppliers. It is also accused of being anti-union and sexist.
He said given it was seen as a "monster" by some groups in America, it was not surprising some people were suspicious of it.
Three South African government departments have opposed the deal, even after the competition authorities gave it the okay, because they feared the effect on competition in the future.
The feared that food security might be threatened by increased imports, and jobs lost as competition increased.
Unions have been strongly critical of the investment, on the grounds that Walmart is anti-union and have said its entry will lead to job losses.
They have asked the Competition Appeal Court to reconsider the Competition Tribunal's decision to let the deal go ahead with certain conditions.
However, the government's decision to legally oppose the Competition Tribunal's decision on Walmart has raised fears of increasing protectionism and an unwelcoming attitude to business. "Major criticism has surrounded the government for its uncertain response to the controversial Massmart and Walmart deal," said Rumney.
Noting that the government's opposition to the Walmart entry into South Africa was on the grounds of job losses, food security and increased import of cheap goods, Rumney questioned why the competition commission was used for this purpose. He said the commission's primary purpose was to increase competition, rather than to protect jobs or enforce other social obligations.
He said the problem was there was no overall foreign direct investment [FDI] policy. He said a clear and overarching policy would outline exactly what foreign investors needed to do differently from domestic companies to be able to invest in the country.
Rumney pointed out that onerous performance requirements could chase away investors, who might decide to rather invest in bigger markets that had a larger population, such as China and India.
Walmart, according to Rumney, would be entering into a retail space that had been ruled for some time by four major retail groups without much new competition. These were Shoprite-Checkers, Pick n Pay, Spar and Woolworths.
Rumney questioned what the entry of Walmart would do to these groups. He said none of these supermarket chains had the kind of black ownership levels that the government's Black Economic Empowerment policy advocated. "Will Walmart be any different?" Rumney asked.
He said that BEE had so far not been mentioned in discussing the deal, unlike during former President Thabo Mbeki's time in office, when it was a key focus of government.
