Game! Makro! Dion Wired! Builders! Jumbo! Shield! Chances are that you, like me, have shopped in at least one of these branded stores over the past month. Chances also are that you don’t necessarily know, nor do you necessarily care, that these branded stores are collectively owned by a JSE listed company called Massmart.
Massmart is a highly successful company with 314 retail stores in 13 African countries. Not surprisingly, they caught the attention of the world’s biggest retailer, the US based NYSE listed company called Walmart.
When one refers to Walmart as “big”, it doesn’t really do justice to understanding just how massive it really is. To put this in perspective, South Africa’s GDP for 2010 (the total value of goods produced and services provided in this country for the year, measured by official exchange rate) was US $357-billion. Walmart’s revenue for the same year was US $401-billion.
So when Walmart offered to pay a little over US $4 billion for a 51 percent stake in Massmart, it was really small change. (By South African standards, it’s small change too — slightly less than the US $4,8 billion we spent on the much-maligned 1999 arms deal, and significantly less if one adjusts for 12 years of inflation.)
But while the 1999 arms deal has government’s stamp of approval, Walmart’s desire to take over of Massmart does not. After our Competition Tribunal approved Walmart buying out Massmart, government decided to appeal that decision.
Last week, Economic Development Minister Ebrahim Patel, Trade and Industry Minister Rob Davies, and Agriculture, Forestry and Fisheries Minister Tina Joemat-Pettersson filed papers at the Competition Appeal Court seeking to have the tribunal's decision to approve the merger set aside.
Well, depending on who you ask, Walmart is either a blessing or a curse.
For free market fans (such as myself), Walmart brings the benefit of substantially reduced prices. Conservative estimates are that US consumers benefit collectively to the tune of $50 billion a year in reduced food costs because of Walmart. And that’s only on food.
For the trade union fans (among which Minister Patel can definitely be counted), Walmart has a track record of low wages, has a high turnover (70 percent or more) of employees, and discourages payment for overtime. (Yes, this is not what I would call sheltered employment, but then if our schools were run by Walmart’s rules, none of us as parents would be complaining.)
Government also believes that Walmart will import more goods than Massmart currently does, and that this will lead to manufacturing jobs being lost in our country. Now I don’t know when last Minister Davies went shopping in Makro or Game, but I certainly don’t recall seeing that many items on sale that were sourced locally apart from foodstuffs. (Although middlecut for tinfish curry comes mainly from South America.)
The unions also believe that there will be job losses. Frankly, there is one category of job losses I would love to see — car guards.
I pull up in the parking lot at Makro where there is enough room to parallel park a 747, and out of the blue pitches up a clown who starts waving me into a space.
And I roll down my window and ask him: “Have you go a driver’s licence?”
The answer, of course, is no.
I then ask him, “where is your gun?”
The answer is “Eish, boss. I have no gun.”
Me: “So then how will you stop them stealing my car?”
Him: “I will shout.”
So I get back wheeling my trolley and he comes over offering to help.
“What is your job?” I ask.
“I look after cars,” he says.
Me: “So if you are packing my trunk, who is looking after the cars?”
So here’s my way to create a win-win situation for the unions and consumers – ban those car guards. Instead, insist that all Massmart centres charge a minimum fee for parking, and then pay salaries to real guards to look after vehicles.
Seriously though, the Massmart deal will go through in spite of government’s protests. Shoprite, Pick ‘n Pay, Spar, and the rest will lower their prices to compete with Walmart. We will all benefit from lower prices. And there will be many unhappy workers earning minimum wage.
But at least they will have jobs.