Economists recommend ZAR2 billion fund for Wal-Mart / Massmart merger

On 6 June 2012, government and the South African Commercial, Catering and Allied Workers Union (SACCAWU) submitted their economic report on the fund that is to be formed in terms of a condition imposed by the Competition Appeal Court (CAC) in the proposed acquisition of Massmart Limited (Massmart) by Wal-Mart (Wal-Mart).

The report calls for a fund in the region of ZAR500 million to ZAR2 billion. Professor Stiglitz was appointed by government to prepare the report jointly with James Hodge of Genesis Analytics, who was appointed by SACCAWU. The report calls for an increase in the value of the fund from its originally stipulated ZAR100 million. It recommends that a larger fund would serve as an incentive for Massmart to initiate a programme that would more adequately empower local suppliers.

The recommendations of the Stiglitz-Hodge report differ from those of Professor Mike Morris, from the University of Cape Town, who was appointed by the merging parties to prepare a report. Professor Morris suggests that a large fund would result in a discriminatory economic burden being imposed on the merged entity. He concludes that a large fund would be susceptible to mismanagement and possible corruption. Professor Morris argues that a smaller, more focussed fund would yield better results.

The experts have agreed that the outcome of the fund should be the sustainable development of suppliers that will outlast the fund.

The merging parties, as well as all the government and unions who were parties in the matter, have one month to respond to the reports before presenting their submissions to the CAC.

Webber Wentzel acted for Wal-Mart in the merger proceedings.


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