The R16,5-billion acquisition of Massmart by the world’s largest retailer, Wal-Mart, if successful, could open up the South African retail market to further acquisitions by foreign companies.

Econometrix senior economist Tony Twine tells Engineering News Online that there are other companies in the retail sector that could also be targeted.

“Such an acquisition would open doors for private equity takeovers or other large-listed entities to bid for locally-listed companies,” he added.

But, Twine alluded to the potential acquisition of Massmart by Wal-Mart, and the increased potential for foreign ownership in South Africa’s retail sector, as weighing more towards using South Africa as a springboard into Africa and not only the expansion into the local retail sector.

As trade unions threaten to strike should the Wal-Mart-Massmart go ahead, concerns, including significant job losses, poorer working conditions and local procurement, continue to be defended by Massmart at the Competition Tribunal hearings, which are under way this week.

A study commissioned by the South African government pointed out that about 4 000 jobs would be lost if Massmart shifted 1% of its sales to imports from domestic suppliers. The State wants employment guarantees from Wal-Mart as a condition for buying a majority stake in the local company.

But Massmart CEO Grant Pattison said on Tuesday that the acquisition would not have a material impact on fundamental economic determinants, and that Massmart’s basic procurement patterns were unlikely to be changed significantly by the proposed transaction.

He highlighted the folly of placing to much emphasis on foreign procurement strategies to the exclusion of a strong local supplier base, and added that local procurement is being, and would continue to be, pursued by Massmart and Wal-Mart because it made commercial sense to do so.

Massmart’s commitment to procuring from historically disadvantaged and small, micro and medium-sized enterprises suppliers was also emphasised.

“While corporate social responsibility cannot be ignored by firms operating in South Africa, local procurement in the wholesale/retail arena is commercially justifiable as profit-maximising conduct in its own right,” he said.

Pattison said he would be surprised if Wal-Mart adopted a procurement strategy that differed substantially from Massmart’s.

On Monday, the Congress of South African Trade Unions (Cosatu), in alliance with the UNI Global Union, reiterated its total opposition to the Wal-Mart takeover of Massmart.

Cosatu urged the Competition Tribunal to reject the view of the Competition Commission, which backed the deal, and endorse the view of South African Commercial, Catering and Allied Workers Union general secretary Bones Skulu, who said: “It is not in the best interest of South Africa for Wal-Mart to be allowed into our country, but that if they are, it must be under conditions that protect workers, suppliers, and the wider South African community.”

But should this deal be rejected, Twine said that it would speak to the potential impediments placed on the path of such ownership. He believed that the potential acquisition was a “major power play” of political development rather than economic development and that the future implications of such a deal was dependent on whether the opposition to it was Wal-Mart specific or specific to foreign direct investment.

He said that such a deal would enable consumers, which were higher in number than workers in South Africa, to purchase cheaper goods.