By Glenn Ashton · 7 Oct 2010
So it looks like Wal-Mart may establish its African beachhead in South Africa. Rumours have flown around the South African business community for more than six months that Massmart, the South African based retail giant that includes well-known brands such as Dion, Game, Makro and Builders Warehouse, was a target for acquisition by the world’s biggest company, the retail behemoth Wal-Mart.
At the end of September the rumours were put to bed as Wal-Mart made a formal but conditional offer for Massmart, of R32 billion. To put this in perspective this amount is less than 20% of Wal-Mart's present annual operating income of $24 billion and a fraction of their $408 billion (R2.8 trillion) annual turnover.
While the South African business fraternity has lauded the possible arrival of Wal-Mart on our shores, labour, social and environmental insiders have expressed serious disquiet about the arrival of this giant at the gateway to Africa. It is eminently clear that Wal-Mart views the acquisition of Massmart as just that – an entry point into Africa and a bridgehead to build trade into the continent.
Massmart has developed considerable expertise in Africa, which is no doubt why it was targeted. Its wholesale, largely high volume model is also a good fit with the Wal-Mart model. Massmart’s 24 African subsidiary stores provide a neat foothold for Wal-Mart.
Wal-Mart International President and CEO, Doug McMillon, openly admitted this when the offer for Massmart was announced. "Wal-Mart's mission is to save people money so that they can live better lives,” he said, echoing his corporate catchphrase. “We believe this proposed acquisition is a great opportunity to deliver on that mission for all the people in the regions of the African continent where Massmart currently operates.” He clarified this further by saying that South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries.
While Wal-Mart aims to bring its low margin, high turnover model into Africa, it certainly does not do so as part of some sort of philanthropic project to uplift the local population by providing them with cheap goods. As a notoriously hard-nosed corporate, Wal-Mart’s first and guiding principle is generating profit for shareholders. While Wal-Mart may claim to support its suppliers, the environment and consumers, its real business is business and the maximisation of profit, demonstrated by its position as top global retailer by a significant margin.
Opponents of the Wal-Mart model of doing business question whether Wal-Mart’s various promises to green the company, to move to a zero waste model, to reduce carbon emissions, to promote organic farming and to support its staff and suppliers are realistically achievable in light of this single-minded focus on profit. Can the cognitive disassociation between profit and exploitation be reconciled?
In this light we must ask whether we, as Africans, are not simply opening ourselves up to further exploitation? When Wal-Mart repatriates profit from African operations, is this not the operation of a model eerily reminiscent the colonial relationship we have recently rid ourselves of? Is Wal-Mart not neo-colonialism writ large?
Wal-Mart’s interest in entering the South African market is also a convincing illustration of exactly the degree to which South Africa has pursued a neo-liberal path of development since our democratic transition.
This was neatly confirmed by Andy Bond, Executive Vice President for the UK and Africa statement that, “South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy.” It is interesting to consider to what extent this is simply a strategic corporate venture, or whether this is perhaps a larger shift in the great game of geopolitics, with the US government strongly supporting this move as a counter to the growing influence of China in Africa.
The arrival of Wal-Mart on our shores is also the logical consequence of the policy contortions by supposedly leftist groups like the SACP, who chose to maintain equilibrium in the tripartite alliance by supporting what are essentially neo-liberal policies that are now at the centre of our economic policy. The lack of consistent economic positioning by the left has seriously compromised their progressive credentials.
What sort of impacts could Wal-Mart have on the ground in South Africa? Andy Bond said, “We are fully aware and supportive of Massmart's Broad Based Black Economic Empowerment (BBBEE) program, and if the transaction is completed, we expect to continue and build on these efforts, working diligently …to be a corporate and retail role model.” While BBBEE is laudable in principle, the utter failure of its associated trickle down theories to provide benefits to the poor, underlines its inherent elitism. Wal-Mart is not about to change this reality either.
Wal-Mart has also promised to recognise and honour our stringent labour laws. This will provide interesting challenges to a company globally despised by organised labour for its union busting reputation. For instance, in the USA only one Wal-Mart department, the meat-cutting department, in one store, was ever unionised. Wal-Mart summarily shut down all meat cutting operations in all of its stores, nipping that little exercise of workers rights in the bud.
Whenever workers start to organise a union, Wal-Mart’s Bentonville, Arkansas headquarters parachute in a skilled team of union busters to first dissuade or subsequently dismiss any unionists. Martin Levitt, who consulted with Wal-Mart to smash unions, subsequently wrote a book called “Confessions of a Union Buster.” Levitt claims Wal-Mart has zero tolerance for unions. It has reluctantly accepted their existence in some countries such as Brazil.
The only country where Wal-Mart has failed has been Germany, where unions, together with established competition, played a major role in undermining its model, forcing it to withdraw. It will be interesting to see who blinks first in South Africa. As most other nations in the region have less stringent labour law than South Africa, Wal-Mart may tolerate our powerful unions in order to spread its tentacles into more compliant countries.
Wal-Mart has a rather quaint approach to labour that approaches corporate cultism. Their employees are called “associates,” in an Orwellian doublespeak way of aligning them with the dominant corporate ethos. This is also illustrative of the apparent contempt that Wal-Mart holds for externally founded collective organising. Will South African unionists enjoy their new role as “associates,” one wonders? Our unions are evidently not sufficiently naïve to buy Wal-Mart’s euphemisms and their loins appear girded for battle.
While labour may be sufficiently organised to deal with the threats Wal-Mart brings to our shores, there is real concern just as to how Wal-Mart will treat local suppliers that have traditionally supplied Massmart.
Wal-Mart will certainly demonstrate little sentimentality regarding support of locally produced goods. While they may profess to embrace local producers, the reality is Wal-Mart is the world’s eighth biggest trader with China. If it can source goods more cheaply elsewhere, there is little reason to believe that Wal-Mart will not simply pursue its core ethos of providing the cheapest possible goods to its customers.
Even if Wal-Mart does adopt a benign attitude to local producers, many of them are bound to be rudely shocked. Wal-Mart has punitive delivery standards. If they are not met, suppliers are rapidly, if not summarily cut off. While there may be benefits for local consumers, many local businesses may be sidelined for long established supply channels that Wal-Mart has both internally and with other international partners.
Wal-Mart has recently begun to project a greener face, which has been widely dismissed as mere green washing. Environmental monitoring groups insist the Wal-Mart model is incapable of becoming either green or sustainable. Wal-Mart’s claims that it is moving toward a zero waste model and reducing its energy footprint are widely dismissed as misrepresentations of the very concept of zero waste or reduction of embedded energy in the Wal-Mart model of business.
It appears that Wal-Mart is prepared to deal with the surface issues like recycling its waste on site, but is unable to deal with the issues of long supply lines from China and elsewhere on the other side of the world. This is of course a hugely costly exercise from a fuel and resource aspect and effectively externalises its environmental impacts in a widely discredited model. Neither does Wal-Mart deal meaningfully with the embedded issues of excess packaging and the sale of cheap, throwaway goods, not to mention the negative environmental impacts of the consumer culture that is central to its ethos.
So while both local economists, market pundits and credulous politicians prepare to welcome Wal-Mart with open arms, there is a significant sector of society profoundly concerned about the arrival of the king of uber-consumer culture on our shores.
Wal-Mart’s arrival may perhaps assist us in facing up to some of these issues about our own consumer culture. Just as US style fast food has led to worrying rates of obesity that have in turn increased the load on our local health system, the arrival of Wal-Mart equally risks the threat of diminished social, labour and environmental rights at the cost of promoting an unsustainable and unthinking consumer culture.
The advantages of Wal-Mart establishing itself here appear transitory and ethereal, especially when we remember that its profits will be repatriated for the benefit of shareholders, not for South Africans. The pending arrival of Wal-Mart heralds the further entrenchment of predator capitalism with all of the negative impacts associated with this blight on our world.
It's a Sad Day
While it is a sad day for a local corporate to sell to an overseas one, it is how big business operates in general. Companies are allowed to corner entire markets and with the promise to be cheaper, they consolidate market share, destroy real competition, strangle suppliers, source cheap imports, destroy local industry, increase the carbon footprint of goods and services, destroy the environment and expatriate profits abroad with no real socio-economic benefits for local people.
Cheap is has never had a bigger price tag than it has now that Wall-mart is to enter the economy.
From cornering markets under Apartheid at the cost of the development of black people, the next step is the logical one. It makes a lot of sense( pardon the pun) if you are in the big business world in SA.
Is it any wonder that there are people out there who believe they have to destroy everything in order to build something of value to them?
The High Cost Of
We can't compete with the Far East..
When we buy a Chinese t-shirt we export that job away from south africa to the East.
The High cost of low prices is thus bourne by our locals who are now unemployed coz they can't make that t-shirt for the same price.
And neither would I expect them to make it for that same price.
To achieve that competitiveness, the South African employee would have to work a 14 hour shift, sleep next to their machines in a factory dormitory, consume a cup of tea and a bowl of rice with 2 sardines at each mealtime and take 3 days of paid leave a year and only Sunday off in a week as Saturday would be a full working day.
I don't expect my fellow south african to live like that.
I'ts inhumane, and the social cost to children growing up without parents is unfathomable.
Produce South African, buy proudly South African.
If that South African t-shirt is 4 times the price so be it, we will just live a smaller life and buy 1 instead of 4.
It's a very small price to pay for quality of life and quality time spent at home rearing your family.