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Walmart In South Africa: Retail Giant May Acquiesce To Workers, Suppliers

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First Posted: 05/18/11 03:40 PM ET Updated: 07/18/11 06:12 AM ET

WASHINGTON -- Walmart, long known for its tough stance on labor, may be forced to make concessions to unions and suppliers in its bid for control of South African retail conglomerate Massmart.

To help see the merger through, the companies said they would not lay off workers for a period of two years, would honor existing union contracts and would devote about $14 million to a fund aimed at developing South African suppliers.

Walmart offered to buy a majority stake of Massmart last September in a $2.4 billion deal that would pave the American giant's way into the sub-Saharan region.

The announcement came at the end of six days of hearings held by a South Africa's Competition Tribunal, a trade regulator. For most of the hearings, Walmart and Massmart had strongly opposed any stipulations on the deal that might be imposed by the government.

"Walmart was extremely intransigent and combative against everything put forward, every step of the way, right until the very end," said meeting attendee Michael Bride, a deputy organizing director for the United Food and Commercial Workers International Union (UFCW), which has long tried to organize Walmart workers in America. The counsel for Walmart and Massmart had even argued that the South African government should cover the costs of the hearings, according to Bride.

The Competition Tribunal has 10 days from Monday's conclusion of the hearings to bring forth its findings on the deal. Although it's unlikely the government would scuttle the merger entirely, Bride said, it could very well add the kind of labor and supply-chain conditions that Walmart is not accustomed to accepting. While the proceedings haven’t received much attention in the U.S., they've been closely watched by Walmart opponents, including the UFCW, which has joined South African unions in calling for legally binding conditions on the deal.

Walmart would not comment on the proceedings, but a spokesman said in a statement to The Huffington Post the company sees Massmart as a "compelling growth opportunity" and looks forward to the tribunal's decision.

"Should the Massmart transaction proceed," Kevin Gardner wrote, "we foresee the creation of new jobs in South Africa [and] support for the development of South African exports." The company, he went on, will "provide previously underserved customers and communities with better prices and increased access to the products they want and need, consistent with the benefits we’ve delivered to market after market around the world."

Americans can certainly recognize the arguments made by both sides in the South African merger: Walmart says it will create jobs and bring low prices to working people, while opponents say the company will kill jobs and drive down wages. But as Walmart makes a massive push into American cities and foreign markets, the South African case may indicate that the company is willing to bend on labor -- at least overseas -- to maintain its image as a growth company. Despite strong international sales, the company’s same-store sales in the U.S. are flagging.

But how much the company will bend remains to be seen. Although the Competition Commission initially said the merger should go through without restrictions, it surprised both sides by changing its position during the past week's hearings. It now recommends that a group of 500 Massmart employees who were fired should be reinstated as a condition of the deal's approval. Union representatives had argued the layoffs were made because of the impending merger.

In addition to workforce demands, the government could also force Walmart to accept conditions on how it supplies its stores. Opponents of the deal worry that Walmart will rely on its global supply network, hurting local suppliers and manufacturers in the process. A lawyer for the company said Walmart may walk away from the deal if conditions are set on its supply chain.

For Bride of the UFCW, the late-in-the-game concessions and the commission's reversal indicated just how different South Africa is from the United States when it comes to labor politics. Despite heavy pushback from labor organizers and left-leaning groups, Walmart's entry into American cities is usually a foregone conclusion. The company doesn’t need to accept major binding agreements with municipalities, particularly at a time when municipalities are happy to have any new jobs at all. Not so in South Africa.

The opposition to Walmart in South Africa has been considerable. Last fall the country's largest trade federation, the Congress of South African Trade Unions (COSATU), issued a list of demands that Walmart and Massmart would have to meet if the companies expected to have the labor coalition's support. The group's president then vowed to launch "the mother of all boycotts" if the conditions were ignored.

COSATU's list included some unsurprising demands -- including that Walmart commit to ending the "apartheid wage gap" and adhere to local labor laws -- but one of the conditions has stood out for its audacity. The union demanded Walmart end its opposition to the pro-labor Employee Free Choice Act, an American bill that would make it easier for employees to unionize and collectively bargain. In other words, the South African union coalition is telling Walmart what its attitude should be toward American legislation -- a remarkable show of swagger and an indication of how closely allied the group is with U.S.-based Walmart foes. The condition has been called "outlandish" by Business Day, but the coalition has not wavered on the point.

Although it is highly unlikely Walmart will acquiesce to that demand, UFCW said it appreciated the union's gesture. Bride, who returned to the U.S. this week, said there's a lot that American cities can learn from the hearings in South Africa as they consider opening their doors to Walmart.

"What I'd like to see is a debate in the United States," he said. "Why is it that the fears of South Africans should be allayed, but the fears of Americans don’t have the same weight with the company?"

"Walmart," he added, "hasn’t budged at all in the U.S."

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