PRESENTATION TO PORTFOLIO COMMITTEE ON ECONOMIC DEVELOPMENT ON THE WALMART/MASSMART MERGER

1. PRESENTATION TO PORTFOLIO COMMITTEE ON ECONOMIC DEVELOPMENT ON THEWALMART/MASSMART MERGER THUR, 21 JULY 2011

2. INTRODUCTION • We appreciate the initiative of the PCED to host the public hearings and grant us an opportunity to present • The presentation is made on behalf of the SAYC • Our interest on the merger

3. PREMISE • We note with grave concern the oversight that has been given on the notorious global track record of Walmart in the areas of: • Labour issues (conditions, wages, unionisation, • Procurement practices • Suppliers • Disregard for competition laws • Employment • Local economic development

4. EMPLOYMENT • The merger is likely to bring about further loss of much needed jobs within the merged entity, their supplier base, suppliers of their competitors, and other retailers • There is sufficient evidence to suggest that Walmart kills 3 local jobs for every 2 they create and reduce retail employment by an average of 2.7% • In 2005, the National Bureau of Economic Research found that the average Walmart store reduces earnings per person by 5% in the county in which it operates • The perceived lowering of prices comes at a great cost to employees who are compelled to take lower wages and poor working conditions (Therefore, the cost of the “lower prices” is at a very high cost) • Massmart’s expansion plan of grocery stores in rural areas will squeeze existing small enterprises out of market, thereby leading into job losses • In our view, the merger will be the site for escalated casualisation, undermining of labour laws, and most seriously undermining the intent of the NGP and the DWCP

5. LOCAL DEVELOPMENT • No economy thrives on FDI alone • The intro of Walmart into the SAn market will reinforce the oligopolistic concentration of this sector into few owners • This will work against the national efforts of distributing ownership, control and wealth to our already unequal society • The merger will trounce local retailers as a trend in communities and economies in which it operates • The adverse results of high imports will lead to casualisation and displacement of workers subjecting many households to chronic poverty • The merger is likely to contribute in turning the South African economy into a nation of consumers rather than producers • The proposed R100m fund for supplier support will be meaningless tokenism if it is not guided to promote the spirit of the NGP

6. LOCAL MANUFACTURING • Walmart is notorious of importing its supplies from cheap labour countries • Without a thread of doubt, the merger will compress other retailers, and the demand for local products in their value chain and downstream procurement opportunities • This will lead to a significant foreclosure of domestic manufacturers and suppliers • Local businesses will not match the resources and economies of scale available to potential foreign suppliers

7. RECOMMENDATIONS • We would like to caution Parliament and call for their vigilance on the following issues: • That Parliament should ensure inclusion social justice in Foreign Direct Investment agreements in a form of job security, social security and compliance to decent work agenda • Foreign direct investment must be in line with industrial development strategy and should be directed to new industries to stimulate growth, create decent jobs and decent living standards for struggling households • Parliament should call for a long term planning of how will the merger contribute to industrial development without importation of cheaper goods, or multinational price transfers • That Parliament should call for development of a monitoring system that will calculate the multiplier effect of the Walmart commitments e.g. R100 Million Supplier Development • Parliament must call for the inclusion of textile and clothing sector in the New Growth Path as priority sector • Parliament should call for the imposition of local content quotas so as to save jobs.

8. THANK YOU THE END!