Wal-Mart Gets Go-Ahead

Werner Menges

10 June 2011

The High Court’s decision to set aside the conditions that the Namibian Competition Commission attached to its approval of American retail giant Wal-Mart’s planned takeover of South Africa’s Massmart group can now be implemented, it was ruled yesterday.

The operation of the High Court’s judgement, which was handed down by Judges Dave Smuts and Louis Muller on April 28, was suspended when the Namibian Competition Commission (NCC) and the Minister of Trade and Industry lodged an appeal against the court’s decision on June 1.

With the conditions that had been set by the NCC continuing to keep the multibillion-dollar takeover deal from finally going ahead, Wal-Mart returned to the High Court yesterday

with an urgent application in which the company asked that the court’s judgement be put into operation while the appeal remains pending.

Having heard arguments on the application, Judge Smuts ordered yesterday afternoon that the April 28 judgement is not suspended pending the appeal to the Supreme Court, and that the judgement is to be implemented.

He ordered the NCC and the Minister to pay Wal-Mart’s legal costs in the case.

The pending appeal in Namibia was the last legal obstacle in the way of Wal-Mart’s plan to acquire 51 per cent of the shareholding in Massmart in a transaction worth about N$16,5 billion.

The South African Competition Tribunal approved the proposed merger, with some conditions attached, on May 31. The next day, the appeal was filed in Namibia, presenting the American retail giant with the dilemma that it would be in breach of Namibian law if it went ahead with the Massmart merger.

Massmart’s Namibian subsidiaries include Game, Windhoek Cash & Carry and Builders Warehouse.

The NCC had approved the merger on February 9, but attached four conditions to this approval.

The conditions set by the NCC were that there should be no employment loss as a result of the merger, that the merger “should not create harmful effects on competition that may give rise to risk of the market becoming foreclosed to competitors”, especially small and medium enterprises, that the merger should allow for local participation “in order promote a greater spread of ownership, in particular to increase ownership stakes of historically disadvantaged persons”, and that the approval of the Minister of Trade and Industry had to be obtained for the transaction in terms of the Foreign Investment Act of 1990.

Under the reasons that it gave for its decision, the NCC stated: “In most instances mergers result in some workers losing their jobs. Commission encourages that retrenchments relating to this transaction be minimised so as not (to) exacerbate the already unacceptable unemployment situation in the country.”

In the April 28 judgement, the requirements were found to be impermissibly vague, poorly formulated, not rationally connected to the reasons given for them, or in conflict with the Foreign Investment Act.

The appeal has been lodged against the whole of the judgement.

From the NCC’s response to the urgent application that Wal-Mart took to court yesterday, it however appears that the NCC is only sticking to the condition that employment should be protected after the merger.

Senior counsel Jeremy Gauntlett, representing Wal-Mart, stated during the hearing yesterday that Wal-Mart is now giving an undertaking that no employees would be retrenched as a result of the merger for two years after the deal has gone through.

“My client is committed to the future of the country, its people, to employment,” Gauntlett told the court.

The Minister warned that irreparable harm could be done if the judgement is implemented while the appeal is pending.

Gauntlett however charged that no facts were placed before the court to show that there are reasons to fear that the takeover would result in job losses in Namibia.

Judge Smuts said he would give the reasons for his ruling at a later stage.

Mkhululi Khupe, from the Office of the Government Attorney, represented the Minister of Trade and Industry, while Nixon Marcus represented the NCC.

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