SUNDAY TIMES - Why we should hail Walmart's arrival,,
Sunday Times STLive By CAROL O'BRIEN, 2011-03-05

Why we should hail Walmart's arrival

On February 7, US President Barack Obama took a short walk from the White House across Lafayette Square to the US Chamber of Commerce. On his arrival, he quipped to leaders of organised business that he was there "in the spirit of being more neighbourly".

Of course, Obama was visiting the chamber not just in the interests of good neighbourliness, but in an effort to mend fences with a business community that had become increasingly wary of his administration.

It appears, however, that the chamber was receptive to the president's overtures, and a thawing of relations might now well be on the cards. We at the American Chamber of Commerce in SA (Amcham) appreciate, as does Obama, just how influential the chamber of commerce is. For this reason, we work closely with the Washington-based chamber to influence not only the business and political elite, but also US public opinion in the direction of a greater appreciation of Africa's potential for investors.

Many sectors of US business already understand Africa's potential, and that South Africa is the ideal base from which to access the continent.

Three years ago, Amcham estimated US investment in this country at $200-billion. There are indications that the figure may have at least doubled.

Certainly, we know that bilateral trade has been worth as much as $16-billion annually - excluding US trade, via South Africa, with countries north of our borders.

And several significant announcements have been made recently: General Motors putting R1-billion into new manufacturing capacity in this country; Procter & Gamble announcing a R350-million nappy plant; and Amazon creating hundreds of call-centre jobs in the Western Cape.

But nothing the US Chamber of Commerce does compares with the impact that Walmart's $2.3-billion offer for Massmart will have.

Walmart is the world's largest retailer, a brand that is known throughout the US, and is almost a byword for business acumen. In many senses, Walmart is a leader, and where it leads, others will follow.

As with the other investments I mentioned, greater US involvement in South Africa's economy means more jobs and more opportunities for suppliers.

In countries as diverse as India, Brazil and China, Walmart sources 90% of its produce and merchandise from local producers - and it already has a buying operation in South Africa.

While local procurement of merchandise other than fresh produce is unlikely to reach similar levels in SA, Massmart has already signalled its intention of increasing its purchase of locally manu-factured goods as it expands sales of food and building materials.

Walmart is extremely good at driving down prices - good news for consumers, but something not always welcomed by suppliers, as at least one retail leader has said that South African shop owners will have to pull up their socks to compete. But, for those who can make this adjustment, there will be great opportunities to be had from working with a retailer such as Walmart. Opportunities that will, I believe, see many South African SMEs taking their businesses and their products into other African markets.

SA and Africa need American business, not just as investors, but as corporate citizens. The more than 500 American businesses invested in South Africa account for some 9% to 10% of GDP, but are responsible for as much as 20% of corporate social investment.

Investing in communities, in people and in worthy causes is part and parcel of the American way of doing business. For this reason, US companies have few difficulties meeting (and often exceeding) the requirements of South Africa's broad-based black economic empower-ment legislation. Enterprise development and preferential procurement are familiar concepts to most US investors.

I have no doubt that Walmart will come to be regarded as another American-headquartered good corporate citizen. Whatever one makes of its labour practices in the US, there is simply no getting away from the fact that, in SA, it will have to play by our rules and abide by the provisions of local legislation.

In fact, Walmart International CEO Doug McMillon is on record as spelling out Walmart's commitment to "active participation in supporting black economic empowerment".

I cannot presume to speak on behalf of Walmart, but it is worth mentioning, given the tone of much of what has been said locally about the company recently, that in December 2010 the same US Chamber of Commerce Obama charmed last month named Walmart as one of the five finalists for its prestigious corporate stewardship award.

The award recognises a company that understands "the linkages between its operations and society, and conducts business in a way that creates shared value: both economic and social progress over the long term". That sounds to me like the kind of company you want investing in your economy.

  • O'Brien is executive director of the American Chamber of Commerce of SA