COSATU supports Walmart review

The Congress of South African Trade Unions fully backs SACCAWU's appeal - to be heard on 20-21 October 2011 - against the decision of the Competition Tribunal to approve the Massmart-Walmart merger.

The federation also fully supports the three government ministers who are calling for a legal review of the Tribunal decision, based on their fact that the Tribunal unreasonably denied government departments access to information in the possession of the merging parties and took a far too narrow view of the merger.

The Competition Act requires the Tribunal to consider the competition and public interest effects of a proposed merger - whether it promotes employment and advances the social and economic welfare of South Africans - and not just the narrow interests of the firms who intend to merge.

In particular, COSATU insists that the application needs to be judged against the background of the job-loss bloodbath which has hit the country in recent years. Unemploymenttoday stands at 36, 6%, greater than any other middle-income country or any comparable economy.  

The labour market has been depressed for so long that many unemployed people are getting discouraged and leave the labour market for good - too discouraged to look for a job.

We agree with Ebrahim Patel the "the government departments have intervened to safeguard the public interest and in accordance with the rule of law," and that "the Competition Tribunal should be asked to reconsider the merger application, determine the extent of possible interest harm and to impose conditions that will fully and adequately address the harm."

It should have weighed the supposed value of Walmart's investment in South Africa against its foreseeable adverse impact on jobs and conditions, not only in the retail sector but also in manufacturing and other sectors that feed into the supply chain to Massmart such as agriculture, agro-processing, chemicals, clothing and textiles.

COSATU fully agrees with the three ministers that "the Walmart acquisition of Massmart can have a potentially devastating effect on local jobs and the transaction should be sent back to the Competition Tribunal for a proper consideration and more effective conditions to be imposed".

There is no evidence for Walmart's claim in the Tribunal that it would create 15 000 retail jobs in the next three years. And any such jobs could be more than cancelled out by the tens of thousands of jobs that could be lost in other local retailers and the local factories that currently supply Massmart.

Local employers in the retail sector are already beginning to attack workers, as they reposition themselves for Walmart's arrival.

It cannot be pure coincidence that Pick n Pay announced plans to retrench over 3000 workers.

Within the furniture retail industry, SACCAWU has observed continuous retrenchments and store closures, in particular Ellerines and JD Group, with the loss of thousands of jobs.

At Dion and Game there has been unjustified and unilateral retrenchment of close to 3400 workers, particularly active shop stewards and trade union members.

Protracted industrial action has taken place at Woolworths and Dischem, as these companies refused to recognise the union, in line with the philosophy of Walmartisation.

Metcash Africa Trading, with brands like Trade Centre and Friendly Grocers, have closed stores, resulting in retrenchments of almost 3500 workers within five years, whilst they have outsourced approximately 2000 jobs to labour brokers.

At Massmart itself, about one third of the workforce is made up of flexitime workers, whose hours are not guaranteed and fluctuate by as much as 15 hours a week.  At Massdiscounters, approximately 6,000 out of approximately 10,000 workers are flexitimers.

Massmart has already reduced its workforce by outsourcing services such as cleaning and security.  It also uses labour brokers to staff its stores. Most cashiers at Makro are supplied by labour brokers.

Given Walmart's documented track record of paying low wages to its workers, SACCAWU is concerned that, after the short period in which they have promised to uphold existing negotiated agreements ends, Massmart's workforce will suffer even further downward variation of its terms of employment, as Walmart pressures the local subsidiary to cut costs and extract greater productivity. 

It is not just jobs in the retail sector that are at risk. This deal could have a devastating effect too on South Africa's already declining manufacturing sector, which needs to be the mainstay of our economy and new growth path.

The sector declined from 20% of national income in 1995 to 17% in 2007. Between 2003 and 2008 manufacturing imports rose by almost 10%. Since 1975 the financial sector outperformed the non-financial sector in terms of growth performance. By 2005, the financial sector was growing almost twice the growth rate of the non-financial sector, which puts further limits to job creation.

Our economy has become even more over-dependent on the export of raw materials, while importing more and more manufactured goods. This is dramatically revealed by disturbing statistics from the Economic Development Department. They reveal that South Africa's top ten exports are: iron ore, platinum, ferrochrome, chromium ores, manganese ores, coal, diamonds, semi-manufactured platinum, nickel and zinconium ores, while its top ten imports are: laptops, shoes, cellphones, suitcases, telephones, TV sets, men's cotton trousers, women's cotton trousers, video machines, pullover and cardigans.

Sectors such as clothing and textiles, electrical machinery and durable goods have been hard hit by imports. And they are all likely to be further affected by the Walmart deal.  

It will adversely affect both big and small businesses which supply the retail sector. Shoprite's CEO has acknowledged that retailers will be forced to import more products in order to compete with the merged entity and that local suppliers and manufacturers would fail as a direct consequence of Walmart's entry.

Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Pettersson has revealed that already, "olive farmers in some parts of the country have been advised that they should no longer expect orders from Makro [a subsidiary of Massmart] for locally-produced olive oil, as they intend to import cheaper products". As she says, "If unchecked, the shift to imports is likely to have a catastrophic effect on local farmers and agro-processing manufacturers."

SACTWU argues that the merger will also have significant negative effects on the clothing, textile, footwear and leather sectors, and on South Africa's reindustrialisation programme. The union's legal team pointed to evidence from the United States and Mexico, where Walmart's import volumes were so substantial as to be noticeably detrimental to local employment.

As a giant in the retail sector, Walmart bullies farmers, manufacturers, distributors and suppliers to push down their prices. This has led to the collapse of many small and sometimes even big businesses.

Imports from China, India and Indonesia have destroyed labour intensive industries such as footwear industry in South Africa through dumping and other custom fraud activities such as under-invoicing. According to a NEDLAC study more than 50% of all imported footwear in SA have been imported illegally especially from China.

COSATU utterly rejects the absurd statement of the Democratic Alliance which attacks the ministers on the basis that "the real loser here is much needed competition in the retail space". Walmart's track record around the world shows that they destroy competition by abusing their vast size to drive rival companies out of business and create a virtual monopoly.

A study conducted by UNI Global Union, representing 20 million workers in the retail sector worldwide, reveals that every retail company operating within a five-kilometre radius from a Walmart stores have simply closed business.

In South Africa this won't just mean a threat to the future of big retail shops such as Shoprite and Pick n Pay but all SMMEs. Retail shops owned by emerging black entrepreneurs will simply disappear in no time. Already small shops operating in the townships that used to be owned by blacks have been taken over by foreign nationals.

The DA claims that the Walmart invasion is "a massive vote of confidence in South Africa as a gateway to the rest of the continent"! On the contrary, it is a declaration of intent to pillage the continent of its resources, exploit cheap labour and establish a stranglehold over the retail sector throughout Africa just as they have elsewhere in the world, which in turn has led to the worst forms of exploitation of women and children in developing countries, where suppliers had to drive down their own costs to make a profit.

SACCAWU's primary objective before the CAC is to secure a prohibition of the merger, but that if that is not granted, "conditions must be imposed that address the pre-merger retrenchments, the impact of the merger on workers' conditions in the retail sector and its supply chain, and local procurement requirements to protect small, medium and micro enterprises, economic development and local suppliers".

The conditions "must be detailed, of lengthy duration and include oversight, monitoring and enforcement mechanisms". They must impose binding and enforceable conditions to deal with the negative impact on the manufacturing sector and deal with the impact of increased imports and the subsequent reduced demand for locally manufactured products.

SACCAWU is calling for Walmart and Massmart to increase their supplier development fund to at least R500 million, from the R100m agreed with the Competition Tribunal, and for the companies to be prevented from spending less on domestic procurement than Massmart spent on domestic procurement ahead of the merger.

In particular, the union wants workers to be protected from the adverse effects of the Walmart model on employment levels, terms and conditions of employment, and the organisational rights of workers at the merged firm, and is calling for group centralised bargaining at the merged entity as well as the establishment of a closed shop.

SACCAWU has also called for the reinstatement of 574 Massmart workers who were retrenched ahead of the merger. "They must be reinstated by the merged firm, not merely given preferential status in uncertain future recruitment."

UNI Global Union confirms that Walmart is well known for its strong anti-union attitude and its ruthless approach to keeping down wages. Its induction training devotes as much time telling workers how bad unions are as on training them on health and safety. Where workers do get organised, as in the US and Canada, it simply closes down the store or department.

Walmart has refused to sign a global agreement with UNI Global Union to set fair standards for worker and union rights to organise and negotiate collective agreements. It faces numerous class action law suits, affecting hundreds of thousands of workers for, among other things, not paying overtime, gender, racial and other forms of discrimination.

COSATU has taken action under Section 77 of the Labour Relations Act to legitimise protest action against the Walmart takeover and we are ready to mobilise our members in the streets and in strike action. We are demanding that the Competition Tribunal should consider the possible impact of the proposed merger on efforts to achieve the developmental objectives of the country and specifically to highlight the following:

1. The monopolisation of the retail and wholesale sector, which is already dominated by a few major chains;

2. The impact on the local market and its impact on upstream suppliers, manufacturers and service providers, including small businesses and conventional township traders;

3. Walmart's track record in other countries where its entry has led to massive job losses;

4. Walmart's terrible industrial relations history and reputation.

Statement issued by Zwelinzima Vavi, COSATU General Secretary, October 10 2011

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