Global News Blog: Walmart Moves into South Africa

November 30, 2010  

Posted by Elyse Murphy

Two months ago, Wal-Mart made a non-binding offer of $4.6 billion to acquire South Africa’s Massmart Holding Ltd. This announcement was immediately met with resistance from labor unions and the South African government. The government was against the deal because they wanted Massmart to remain on the country’s stock exchange. However, labor unions feared Wal-Mart’s reputation of antiunion practices.

Last month, the South Africa Commercial, Catering and Allied Workers Union launched an “Anti-Wal-Mart Campaign,” to stop the “Walmartization” of the retail industry and express their concerns about the impact Wal-Mart’s arrival will have on local suppliers and manufacturers.

Despite unions concerns and efforts, Wal-Mart and Massmart reached an agreement that will allow Wal-Mart to acquire 51 percent of Massmart for $2.31 billion. By selling a majority stake, as opposed to 100 percent, Massmart gets to keep it’s listing on the Johannesburg Stock Exchange. This decision not only appeased the South African government, but also Massmart shareholders and Wal-Mart executives.

However, labor unions were not pleased by this decision, and their opinions about Wal-mart remain unchanged. In fact, after hearing the decision the South Africa Commercial, Catering and Allied Workers Union hired lawyers and plans to participate in the antitrust review of the proposed $2.31 billion deal.

Therefore, it remains unclear whether or not Wal-Mart will be a success in South Africa. In the past, Wal-Mart has had trouble making their stores a success in foreign countries such as Germany, South Korea and Japan. But on the other hand, their stores have done exceptionally well in China and Mexico, since there was an under-developed retail market where consumers were more tuned in to low prices than to premium quality. Therefore, only time will only tell if Wal-Mart can win over the favor of labor unions and consumers in South Africa.

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