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Saturday, February 19, 2011

Globalization and its discontent?

Walmart in South Africa

Feb 17th 2011 | JOHANNESBURG | from PRINT EDITION of The Economist

South Africa's Competition Commission approved Walmart's proposed acquisition of a 51% stake in Massmart, a South African firm that owns 265 wholesale and retail stores in South Africa and 25 more in 13 other African countries.

And Massmart's shareholders who love the 16.5 billion rand ($2.3 billion) deal have voted with their pocketbooks, 98% of them voted to approve it last month.

However, South Africa's powerful unions view the deal like a charging rhino in a narrow alley.

The unions argue that Walmart will cut wages and drive more humane employers out of business. They also fear that Walmart will source cheap products from China instead of buying locally.

Mere talk of the merger has already destroyed "thousands of jobs", they claim, by forcing other South African retailers to lay off workers and make working conditions worse in preparation for the great American onslaught.

The Congress of South African Trade Unions, South Africa's biggest union(COSATU), has threatened to stage "the mother of all boycotts" of Massmart products and a strike at all its stores if Walmart takes over.

Massmart insists it has no plans to make any lay-offs. On the contrary, it says it plans to open 54 new stores (net) over the next three years and add 6,300 new hires to its 27,000 employees.

Walmart did not become a $200 billion company without running down a few pedestrians. Few doubt that it will use all its skill and muscle to reduce prices and woo shoppers.

There is a chance that Walmart will reduce prices so much that it affects the national inflation rate, as it has in America. At a time of painfully surging food prices, that would be a hefty boon for low income earners.

South African retailers such as Shoprite, Pick 'n' Pay, Spar and Woolworths are highly sophisticated and offer a fine array of fresh food, at least in the big cities. But they cannot match Walmart's scale, global sourcing network or logistical brilliance.
Sent from my BlackBerry® smartphone from Zain Kenya

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