The Competition Appeal Court rules in favour of Walmart

Welcome to Walmart Watch

Welcome to the first edition of this bi-annual Walmart Watch bulletin. Walmart, America’s retail giant, acquired the 51% majority share in Massmart, a South African firm that owns local chain stores such as Game, Makro, Builders’ Warehouse and CBW. Walmart’s acquisition of Massmart has riled and captured the interest of trade unions and communities as the company is notorious for union busting and exploitative labour practices. Walmart is reputed to be the biggest company in the world with its turnover and profits dwarfing that of several national economies. Effectively it is an economic giant that profits from extreme exploitation and abuse of workers. It has now entered the South African economy and that of the continent, where workers’ income levels and rights are relatively low when compared to that of North America and Europe.

Like all large monopoly companies, Walmart will seek to expand its market here and try to out-compete the likes of Shoprite-Checkers and Pick ‘n Pay. This process has huge and potentially devastating consequences for workers and trade unions in the retail sector and indeed small business and communities. It is for these reasons that we decided on producing this bulletin. We will be monitoring Walmart’s company practices and report and inform you. Such information can contribute towards communities and trade unions better organizing themselves to respond to the bad labour and community practices that Walmart is well known for.

We start off with three articles in this the first bulletin to serve this purpose. We have an article that looks at the impact of Walmart in South Africa. Jobs are already being shed in South Africa’s retail companies so that they can cope with competitive pressures from Walmart and as is customary workers bear the brunt of this.

With South Africa already having positioned itself and being seen as a gateway for foreign direct investment in Africa and it is only a matter of time before Walmart takes over and dominates the retail and wholesale market in Africa. The second article looks at what impact the acquisition has had on the continent since Massmart and other South African big businesses are operating in different countries in Africa. We also include the press release from High Court judge, Dennis Davis, which provides a summary of his judgement on the case brought by the government and trade unions against the Competition Commission’s decision in favour of the Walmart takeover of Massmart.

A notable victory for workers and Saccawu in the judgement was the decision to reinstate the 503 workers who were retrenched by the company in 2010 to secure the deal with Walmart. However, this reinstatement order has already been mired in conflict between the company and the union with Walmart insisting that the reinstatement is not retroactive to the original date of the workers’ dismissal but rather the day of the High Court tribunal judgement. Workers and the union have also complained that in real terms most workers have not actually been reinstated as the company claims that they are unable to contact the workers. Many workers who have accepted reinstatement also complained that they are being offered different jobs at lower levels than previously or in stores far away from where they live.

The last article is about the corruption scandal in Mexico that Walmart has been involved in. With the high-levels of corruption in South Africa both in the public and the private sectors, it remains to be seen whether South Africa would similarly be fertile ground for Walmart’s corrupt practices in its quest to dominate the market here.

For more on Walmart and other issues that affect workers in South Africa and in Africa please visit our website and go to the podcast section. Also tune in into your community radio station, SABC Channel Africa, Cape Town TV (every Tuesday between 21h00-22h00 and Soweto TV).

We encourage all readers to also contribute to the bulletin either with relevant information or articles.

The next edition will be for October – November 2012.

Martin Jansen
Director/Editor
Workers’ World Media Productions

Contributors: Lindiwe “Tiny” Magija, Mzi Velapi and Martin Jansen
Design and Layout: Nicolas Dieltiens

Walmart Enters South Africa: the struggle continues

A court decision to allow Walmart to do business in South Africa has set a tone for the future of direct foreign investment in South Africa and Africa.  The decision is set to divide the working class even further. In preparing to compete with the retail giant, South Africa’s retail industry has already shed jobs.

At the end of 2010 Walmart, an American public multinational corporation, publicly announced its intentions to acquire a 51% majority share of Massmart on the Johannesburg Stock Exchange. The announcement was met with resistance by Saccawu, a South African trade union representing workers in the retail and wholesale sectors. “We are not happy because we believe that the deal would put us at a more disadvantage as a country than it would do any good and Wal-Mart has a track record of being anti-union and hugely exploitative”, Lucas Ramathlodi, coordinator of Saccawu Secretariat said at the time.

It seems that Saccawu’s statement was not just formed of paranoia. The company indeed has a dodgy track record. Founded in the early nineteen sixties it started trading on the New York Stock Exchange in the early seventies, Walmart grew faster and became a giant in the retail sector. However, the company is extremely anti-union and has grown as a result of promoting lost prices at the expense of workers’ wages and benefits. It even has a manual to guide its managers, illustrating how to keep itself free of trade unions.

Walmart faces roughly around 5000 lawsuits a year however they seem to have managed to win plenty of them. In explaining this Ramathlodi says “We have seen instances where some communities stood against Walmart and fought but unfortunately they couldn’t, with their power and ability to dictate terms and financial muscle they outmuscled such communities, with the weight of Walmart they can simply push everybody around”.  According to Saccawu Walmart has gone to the extent of closing shop where the “associates” as they call their employees have managed to unionize.

Despite this background, a South African court has recently given Walmart a go ahead to trade in South Africa with very minimum conditions which include the rehiring of 503 workers retrenched as part of preparing for Walmart ‘s take over While the ruling is seen as a win-win situation by many the biggest fear is the impact Walmart’s entry in South Africa will have on the already exploited workers in the retail sector as well as outcompeting and closing down local small business. There is also a concern that Walmart will outcompete bigger rivals such as Pick ‘n Pay and Shoprite-Checkers through cheap imports and lower labour costs. Trade unions and the SA government are concerned about this and its impact on job-security of workers of these companies. They are also concerned about Walmart expanding its cheap imports with less local procurement of goods from local suppliers which could impact severely on local companies, jobs and the South African economy.

Hector Louw is an ex-worker of Game who left his employment due to what he calls “brutal working conditions”. Louw was employed as a casual worker for six years.  He says “it was a very precarious system where as a casual worker you didn’t have the basic rights that are enshrined in terms of the labour laws of this country, it was quite difficult to join a trade union because you would be victimized.”  According to Hector, as workers they were subdivided, “you would have part timers and flexi-timers and there was a difference between the two where you find other ones conditions were much better than the other ones’”.

Hector is just one out of thousands of the workers who knows about the exploitation in the retail sector. While the losses of the deal between the two companies seem to outweigh all the gains made over the past years some believe that this is a good investment for the country. Dr Nicola Theron, managing director of Econex who also heads the competitions practice says “on the positive side this is a large company that will bring stores to this country, that will certainly roll out stores with a variety of products at very cheap prices which to the consumer will be a positive aspect and that is why they have been welcomed into other countries”. However it seems that these cheap prices and employment opportunities will come at a very high cost. According to reliable sources, in Makro alone, since Walmart’s take over, conditions of employment have changed for the worse. “People get fired for petty things, they are looking for a new breed of workers and want to get rid of workers with long service, even though I go to work every day I worry that I might not finish the month still with a job”, said one worker who didn’t want to be named for fear of victimisation.

Meanwhile Phillip Malapela who worked for Game Stores for 15 years before being retrenched along with 502 other workers as a way of preparing for Walmart’s entry into the country, still bears the scars of his retrenchment. Pouring his heart out to Workers’ World about the impact of his forced retrenchment Phillip said “it impacted on all spheres of life, firstly I’ve got children I was unable to continue to sustain the life we were having, we had to downgrade.  As I am speaking to you now even buying a loaf of bread is a mission”. Malapela is very happy with the court’s decision to reinstate them, however he fears that he might never be reinstated as per the court’s ruling, “our colleagues that we were working with at Game stores said that they are being phoned to go and fill up positions at Cambridge stores, when you look at the working conditions within that stable of Cambrige and Game those are two different scenarios…” he said. Malapela believes the company is deliberately sidelining workers who were shop stewards.

However on further clarifying the reinstatement with the workers’ trade union Saccawu, Ramathlodi explained that the company is willing to reinstate all the 503 workers but the issue both parties were disagreeing on is how the reinstatement is to be done. According to Ramathlodi the company wants the reinstatement to be effective from the date of the court decision while the union wants it to be effective from when the workers were retrenched in 2010. Ramathlodi further indicated that as part of the reinstatement workers will not lose out and in places where their positions are no longer available, workers will be given positions that are equal or similar to those that they were holding before their retrenchment.

Key to Walmart’s promises is new job opportunities and cheaper prices and with South Africa having a high rate of unemployment and food prices escalating these promises could lead to divisions within the working class. Ramathlodi acknowledges this possibility and cautions the working class “I think it’s important that we also galvanize an understanding to the whole society…., it doesn’t make sense for someone to be saying that as long as I’ve a job its okay when in fact that job has come at a cost of four other jobs elsewhere’. A big question that is left without any answers is if indeed the company is in a position to create more jobs and why they were not willing to reinstate the retrenched workers in the first place. According to Ramathlodi the fight is far from over and Saccawu still has a battle to wage and war to continue with and vowed to protect workers at all costs.

Walmart in the rest of Africa
Is this a new form of colonization?

African trade unions that organize in the retail sector say that nothing much has changed since Walmart bought 51% shares in South Africa’s retail giant, Massmart. Despite fierce resistance from trade unions, Walmart, the world’s biggest retailer gained its first foothold in Africa after the R16, 5 billion acquisition of a 51% stake in Massmart. According to the company website, Massmart operates stores in 14 sub-Saharan African countries. Walmart is notorious for union busting and exploitative labour practices. It does differ from one country to other but the general consensus is that there has not been any noticeable change in working conditions since the take-over by Walmart.

Working conditions

According to the Tanzania Union of Industrial and Commercial Workers (TUICO) Assistant Secretary General, Peles Jonathan, they have not seen any noticeable changes since Walmart takeover of Massmart. Trade unions in Ghana also say they have not seen any changes yet.  However, the Commercial, Industrial and Allied Workers Union (CIAWU) in Malawi says that even though there has not been change in working conditions, Massmart is continuing with recruiting senior staff from South Africa, a phenomenon that they have been fighting since Massmart set up shop in that country.  CIAWU’s general secretary, Mary Dzinyemba says that this practice has made them more suspicious and “this looks like they are trying to hide something”. Dzinyemba says that a local senior staff member contract was cancelled under suspicious circumstances and a South African filled the position.

Trade Union recognition

The company does recognize trade unions and trade unions do have collective bargaining rights. This, according to the trade unions is a result of the strength of the trade unions. TUICO’s Assistant General Secretary says that they are planning for collective bargaining with Game – one of Massmart’s trading brand stores- and that the negotiations will take place in August.

Comparison between South African companies to other multinationals operating in the country

This varies from one country to other and sector-to-sector. According to John Esiape from The Union of Industry, Commerce and Finance Workers, UNICOF, an affiliate of Ghana Trade Union Congress, the South African companies do not have a good reputation in Ghana. Esiape says the South African companies pay poor salaries and that “ they are among the worst labour unfriendly organizations and Shoprite tops the list in this regard”.  Shoprite is a South African based retail and fast food company. It operates over 1200 corporate and 270 franchise outlets in 16 countries across Africa and the Indian Ocean Islands. However, trade unions in Malawi maintain that South African companies are better than Indian companies in terms of respecting workers’ rights for example.

Way forward

International solidarity is going to be the key for African trade unions in dealing with Walmart. UNI global Africa recently held a regional collective bargaining programme for trade unions that organize Shoprite workers. This should be extended to Massmart-Walmart trading brand stores in order to co-ordinate their solidarity efforts.

Louisiana guest workers expose forced labor coverup at Walmart supply chain and take protest to Walmart board member’s home 

By Building Bridges(on New York community radio station): Community & Labor Report
National Edition Produced by Mimi Rosenberg & Ken Nash 
 
Mexican guest workers, who peel crawfish for C.J.’s Seafood in Louisiana confronted their bosses after being forced to work shifts of up to 24 hours, weren’t allowed to take breaks, were cheated out of their overtime pay and were threatened with physical violence. Ana Diaz, one of the workers said, “when we wanted to take breaks the supervisor threatened to hit us.  When one of our co-workers called thepolice because she couldn’t take the treatment, then our boss threatened to hurt our families.” Despite the threats, workers walked off their shift and demanded payment of their unpaid wages. The workers have extended their protest to Sam’s Club, a Walmart subsidiary that buys 85 percent of C.J.’s crawfish and marched on the New York offices and penthouse of Walmart board members.  
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All others go to: http://www.radio4all.net/index.php/program/61091 
or  http://archive.org/details/WalmartGuestWorkersFightForcedLabor  

Please email Building Bridges if you are broadcasting our 
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Walmart in corruption scandal in Mexico – South Africa next?

No action has been taken against the Walmart directors that were involved in the bribery scandal in Mexico. According to Reuters, an international news agency, Walmart shareholders at the company’s annual meeting earlier this month voted in far larger numbers than in the past against the re-election of Chief Executive Mike Duke and others to the company’s board in a rebuke after a Mexican bribery scandal.
Still, with a strong majority of votes cast in favor of each director, a boardroom shake-up at the world’s largest retailer is unlikely.

The issue was brought to light in an April 21 New York Times report which said that management at Wal-Mart de Mexico, or Walmex, allegedly orchestrated bribes of US$24 million to help it grow quickly in the last decade and that Wal-Mart’s top brass tried to cover it up.  After the bribery allegations Walmart sent investigators to Mexico City, the capital of Mexico and they found a paper trail of hundreds of suspect payments. However the company leaders shut down the investigation and neglected to notify US or Mexican law enforcement officials, the New York Times reported.

A former Walmart executive leaked the bribery scandal in an email to a senior Walmart lawyer and described how the retail giant had orchestrated a campaign to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country. The former executive gave names, dates and bribe amounts.  

Bribery of foreign government officials is a breach of the US’ Foreign Corrupt Practices Act (FCPA) and it could result in stiff fines and prison sentences. Walmart is also notorious for union busting and exploitative labour practices. Recently there have been groups that have filed derivative lawsuits against Walmart Stores Inc based on reported allegations of bribery in Mexico and the cover-up by Walmart officials.

The Minister Of Economic Development And Others vs Walmart Stores Inc. and Others

THE COMPETITION APPEAL COURT OF SOUTH AFRICA: PRESS RELEASE, MARCH 9, 2012

The Competition Appeal Court today dismissed an application by the Ministers of Economic Development, Trade and Industry and Agriculture, Forestry and Fisheries who sought to review and set aside a decision of the Competition Tribunal in which the acquisition by Walmart Stores Inc. of 51% of the ordinary share capital of Massmart Holdings Limited (the merger) had been approved with conditions.   At the same time the Court upheld, in part, an appeal by the South African Commercial, Catering and Allied Workers Union (SACCAWU) against the order of the Tribunal.

The Ministers argued that they did not enjoy a fair hearing before the Tribunal when it decided to approve the merger between Walmart and Massmart. They contended that the Tribunal had erred in refusing to order the merging parties to discover a range of documents which had been sought by them and which, in their view, were wholly material to the determination of the merger.  Further, the Tribunal had erred in making certain scheduling decisions with regard to the oral hearing which then precluded the parties which opposed the merger from fully and adequately ventilating their concerns and in making sufficiently comprehensive submissions concerning the conditions to which the approval should have been made subject.

The court held, in evaluating these submissions, that the applicable test to determine the review application was not what the court might have done itself in making decisions about scheduling of a hearing and discovery of documents but what a reasonable decision maker, within the context of the mandate of the Tribunal, its workload, the available time and its expertise, would have so done. The court held that the Tribunal’s ruling had not been inflexible. Thus, if during the course of the hearing, the Ministers had considered that their case was severely compromised, they could have brought their concerns expressly to the attention of the Tribunal or launched an immediate application for review before this Court. The court also held that it was not unreasonable for the Tribunal to schedule the hearing in the manner that it had done. Hence, neither of these arguments justified the setting aside of the Tribunal’s decision and therefore referring the entire merger back to the Tribunal for a rehearing.

In dealing with the appeal against the approval of the merger, the court held that there was insufficient evidence to conclude that the public interest concerns set out in the Act, in particular, the merger’s effect on employment and on small and medium sized businesses, was sufficient to refuse the approval of the merger. The evidence indicated that consumers will benefit from lower prices and that these lower prices may, in turn, generate greater job creation than the job losses that may result from the merger. The court was not able to determine this question with precision but it was able to conclude, on the probabilities, that there was insufficient evidence to conclude that the detrimental effects of the merger would outweigh the clear benefits, to consumers which had been accepted by the various experts, who testified before the Tribunal, including the economic expert who testified on behalf of the Ministers.

The court also rejected the argument that SACCAWU was entitled to a condition that Massmart would become the subject of a closed shop agreement and that there should be group centralised bargaining. It found that these were issues which were the subject of the outcome of collective power between Massmart and SACCAWU. SACCAWU could not obtain these protections through competition law, in circumstances where it would not be able to obtain these claims as of right in terms of labour law. Although SACCAWU had raised significant concerns about Walmart’s labour policies (particularly in the USA), these concerns were well catered for by South African labour law and the independent institutions that adjudicate labour disputes.

The court held in favour of SACCAWU that 503 workers who had been retrenched were entitled to reinstatement.  The court justified this conclusion on the basis that the circumstances in which these workers had been retrenched from Massmart were so closely linked to the merger and its timetable that the suggestion that the decision to retrench had been taken some 6 – 8 years earlier was unsustainable. The evidence indicated that the retrenchment was sufficiently ‘merger specific’ to justify the reinstatement of these workers. The court also accepted that, although the merger should be approved, there were legitimate concerns about the effect of the merger on small producers and therefore consequent effects on employment. While it rejected the proposal that there should be a limit placed on Massmart’s ability to import goods in that this would create distortions and would be extremely difficult to implement, the court recognised that the provisions of the Act required measures to be taken to safeguard the public interest concerns as provided in the Act and,in particular, those regarding small producers.

Whereas the Tribunal had accepted without qualification the proposal of the merging parties to establish a programme aimed at the development of local South African suppliers, funded in the amount of R100-million by the merged entity, the court found that there was insufficient detail as to how such a condition would operate and whether it would fulfil the statutory requirements of the protection of the public interest. Accordingly, the court held that a study should immediately be commissioned by three experts, representing SACCAWU, the ministers, and the merging parties. The three experts must be appointed within one month of this order, and will then have a further two months to produce a report for the consideration of this court as to the best means by which South African small and medium sized suppliers could participate in  Wal-Mart’s global value chain and thereby ensure that benefits from this mergerwill flowto this important sector of the economy. Once this report has been completed the parties will have an opportunity to react thereto. The court will then be empowered to formulate the mandate and the conditions by which such a fund or similar proposal would operate, thereby ensuring the advancement of the public interest concerns, of the Act; in particular those of small and medium sized business and employment.

Read the full judgement of the Competition Appeal court judgement here (pdf).