Walmart decision good for business

South Africa's image was somewhat restored on Friday when the Competition Appeals Court dismissed pleas from labour unions and three ministries to have the Walmart-Massmart R16.5-billion deal re-examined.

"Looking at the recent budget speech, government indicated it was looking to attract increased levels of foreign direct investment.

"There is enough savvy from some [members] in government to apply strong pressure on them [the three ministers] not to appeal. They are well aware of the importance of investor perception," said Abri du Plessis, portfolio manager and CEO at Gryphon Asset Management.

After a long and arduous ordeal, Friday's stamp of approval means the transaction, dubbed a test case for South Africa in the eyes of global investors, has now been independently endorsed by all three arms of the competition authorities.

It gives the US giant a perch in Africa and access to its often quoted 1billion potential consumers.

The entrance of a global player the size and strength of Walmart is likely to add a healthy dose of competition to the retail sector, dominated by the reigning Big Four: Shoprite, Pick n Pay, Woolworths and Spar.

The Competition Tribunal approved the deal in May, subject to four caveats: that existing labour contracts are honoured, the 503 retrenched employees be re-employed, a R100-million fund to assist local suppliers and manufacturers be established, and no job cuts for two years.

However, three departments and the SA Commercial Catering and Allied Workers' Union bizarrely contested the decision in October, shaking investor confidence and tainting the reputation of a country whose economic and political stability has been a drawcard for investment.

Although the ministers denied being anti-investment, the move deterred foreign companies from injecting cash into South Africa.

While Judge Dennis Davis upheld the tribunal's approval, he accepted that there were legitimate concerns about the effect of the deal on small producers and employment.

He ordered a study on how local small and medium-sized suppliers could participate in Walm art's global value chain and ensure that benefits from the merger flowed into this sector of the economy.

Saccawu's media officer, Mike Abrahams, said the union was both disappointed and vindicated by the ruling, while Economic Development Minister Ebrahim Patel said the government would cooperate with the study.

Economist Mike Schussler said: "It seemed quite foolish to try and stop inward investment by a major foreign company . we were shooting ourselves in the foot. We need to just get on with it, and welcome foreign investment."