South Africa has been warned.
A global coalition of organized labor converged this week on Pretoria, South Africa -- where a government office known as the Competition Tribunal is considering a mega-acquisition of MassMart by Wal-Mart that will reboot the retail landscape of an entire continent. MassMart owns roughly 290 stores in 13 African nations, and has been described as "the perfect African entry vehicle" for Wal-Mart.
Queued up against the plan is the Congress of South African Trade Unions (COSATU), in alliance with the UNI Global Union, a worldwide umbrella union representing 20 million workers. They are all part of an Anti-Wal-Mart Coalition which includes the South African Commercial, Catering and Allied Workers' Union (Saccawu), and the South African Clothing and Textile Workers' Union (Sactwu).
One of the most stark statements before the tribunal was presented by Sofia Scasserra, an economic advisor to the Argentine Federation of Commerce and Service Workers (FAECYS). According to Scasserra, Wal-Mart's worst impact was not on wages -- but on the nation's supply chain -- resulting in "a detrimental effect on the business middle class."
Instead of buying products, Wal-Mart de Argentina offers a "sale spot" to suppliers -- who bear the cost of unsold merchandise. "In the event the product sells," Scasserra explained, "the supplier gets paid, but if the product does not sell, then it was deemed never to be Wal-Mart's to begin with, and therefore the supplier bears the full adverse effect of the unsold stock... Wal-Mart does not take ownership of the goods until the product is sold." Scasserra said many companies were forced to close, especially in the food sector, where products are perishable. Some merchants were forced to sell on consignment, putting "immense pressure" on the supplier if goods don't sell.
Wal-Mart also forces supplies to wait at least three months to get paid, and to make matters worse, Wal-Mart uses a trade agreement between China and Brazil to import Asian goods, and then imports the merchandise from Brazil into Argentina protected from tariffs.
All these strategies, said Scasserra, "makes local producers unable to compete." Local apparel makers in Argentina watched as shirts, jeans and underwear poured in from China to Brazil, and then into Argentina through the tariff reduction agreement.
Even when Wal-Mart uses local vendors, "the suppliers are victims of constant pressure to lower the price of their products," Scasserra noted, "with the threat that the company will be better prices by bringing the merchandise from Buenos Aires."
In the case of home appliances, Wal-Mart would force its suppliers to give the retailer discounted and free merchandise, "and it advertises 'unbeatable deals', with the cost of these deals being forcibly absorbed by their suppliers."
Scasserra cited one case where Wal-Mart offered a discount on air conditioners -- without even consulting the supplier. "The first notification that the supplier receives is when they receive a check for less money than they were expecting," she told the Tribunal.
All these anti-supplier policies mean that "small producers are often left out of the equation," Scasserra explained. Wal-Mart cannot be counted on to support "a local sustainable supply chain," she concluded.
Labor relations with many of Argentine's unions were described as "troubled." In one case, Wal-Mart began outsourcing its union workers by laying them off, and hiring new workers from subcontract agencies.
Scasserra advised the South African Tribunal to force Wal-Mart stores to locate in "the outskirts of the city" to protect the "small neighborhood traders and their jobs." She also advised that "group collective bargaining be imposed as a condition," a sort of "centralized table" where workers could bargain with the huge retailer, rather than face fragmented negotiations.
Finally, Scasserra recommended that the policy of allowing a merchant to force the producer to be responsible for unsold products should be banned. Wal-Mart should be obligated to purchase the goods up front, and be limited to 30 days credit.
The American experience with Wal-Mart was also heard in Pretoria. "We have witnessed the devastating effect that the Wal-Mart model has upon small businesses, suppliers, and communities," said Michael Bride of the United Food and Commercial Workers International Union (UFCW). Bride urged the tribunal to "place the needs of South Africa's citizens at the center of its deliberations and ensure that if Wal-Mart does enter the country, that it does so on a basis that will promote economic development rather than destroy it."
For all its high-toned statements about sustainability, Wal-Mart's backroom practices in Argentina should be vivid enough to scare away any nation tempted by the "live better" motto. It shouldn't be too difficult for a 'Competition Tribunal' in South Africa to recognize the MassMart/Wal-Mart merger is the beginning of the end of retailing competition on the African continent.
At least no one can say they were not warned.
Al Norman is the founder of Sprawl-Busters, and the author of The Case Against Wal-Mart.
If Retail makes NOTHING....and Government makes only MORE DEBT....the only thing that can have a positive effect on communities is Small Business and companies that make stuff.
The picture of George Washington can float around a town six to eight times before leaving the community but if that dollar is spent inside of a big box store it will leave the same day that it entered.
Big Box stores like Wal*Mart can take in 200,000 George Washington's a day and that be a lot of "Liberty" "Pride" "Freedom" leaving town each day.
and they lost market share in China last quarter ....some people think it was because they put less than 5% foreign in their stores in China depriving all the nice people of China from purchasing foreign made products.
oh! and they working on eight straight quarters of declining same store sales in the United States of America.....some people think that is because of the port deal they made in Mexico back in 2006 and who they made it with.....
I do not shop at WalMart and no one I know does either. WalMart isn't just devastating to the communities it enters but discriminates, especially against women.
Take the advice offered by Argentina and just say no to WalMart.
If people want to talk about the social good of the corporation, consider that as a type of business organization the limited liability corporation is responsible for more human wealth than any other invention in the history of man. It should be regulated, sure, but aggressive pricing demands to suppliers are hardly illegal or unusual.
There's no right to stay business if you're inefficient and uncompetitive. We don't have village blacksmiths and witch doctors anymore, what value is there in a mom and pop appliance business with higher costs and the same quality?
In today's world, a business has moral and social obligations as well as economic obligations to its stock holders.
You can disagree, but there is no reason to limit the scope of responsibility that companies bear toi only money.
On a side note, I don't think being aggressive with suppliers is wrong in any way. Those suppliers are not forced into doing business with Walmart, they can go partner up with Target or one of Walmart's local competitors if they have good enough products to offer.
One thing people mistake the market for is some sort of parallel society. It is not. Market forces can be ruthless and cruel, and many people have lost their life savings, or their livelihood to poor management or poor luck. Companies are out to destroy their competitors and gobble up their market share in an ideal free market, only in a dysfunctional and illegal one do they cooperate with each other for profit.
That is especially true of a foreign business with a history of mistreating its workers and pulling dirty deals.
But Americans deserve what they get, since they choose to spend their money on a store that is destroying the US.
The easy way to stop Walmart is TO NOT SHOP THERE!