The Congress of South African Trade Unions congratulates and fully supports the three government ministers who are to appeal to the Competition Appeal Court for a review of the Competition Tribunal's ruling in favour of Walmart's takeover of Massmart Stores.

It is very good news that Rob Davies, Ebrahim Patel and Tina Joemat-Pettersson are throwing their weight behind SACCAWU, who are also to appeal to the Court. They are absolutely right to demand the imposition of tougher conditions to ensure that Walmart's invasion of South Africa does not lead to a loss of jobs, weaken the country's manufacturing sector or compromise its food security.

COSATU and SACCAWU still believe that the takeover should have been stopped, given Walmart's terrible record around the world of union-bashing, driving down wages and forcing its suppliers and competitors to push down their prices, cut jobs and impose worse working conditions in order to compete with the world's biggest company.

Under the Competition Act, the Competition Tribunal must consider the competition and public interest effects of a proposed merger, and not just the narrow interests of the firms who intend to merge. Given Walmart's size and notorious business practices, we believe the Tribunal should have weighed the supposed value of Walmart's investment in South Africa against its foreseeable adverse impact on jobs and conditions, in both the retail sector and in manufacturing and the effect on the country as a whole.

Manufacturing, on which the future of our economy and job creation has to be built, is already in decline. Following an uptake in manufacturing employment in the first quarter of 2010, employment levels resumed their downward trend in the second and third quarters of the year, declining by 6, 3% and 3, 6% respectively. The latest statistics, the Purchasing Managers' Index (PMI), which serves as a gauge of the health of the manufacturing sector, declined for the fourth consecutive month in July 2011, hitting a two-year low.

This is paralleled by a rise in the imports of manufactured goods. Between 2003 and 2008 the share of manufacturing imports in total imports rose from 73% to 81%. The biggest source of these imports has been China, where workers suffer from extreme exploitation.

China has ratified only four of the eight core ILO labour Conventions. According to the International Trade Union Confederation any effort to establish independent unions is repressed. Although there are some efforts to promote collective wage consultation systems, the right to collectively bargain is severely restricted and many Chinese workers are not covered by collective agreements.

Despite the lack of a right to strike except in cases of "health and safety work stoppages", many workers undertake industrial action to pressure for long standing unresolved issues, claim unpaid wages and demand better working conditions and wages. Industrial actions and protests have increased in recent years.

While national legislation stipulates that no children younger than 16 years old are allowed to work, the report finds that child labour is a serious problem in China. Children are sometimes employed in the worst forms of child labour. Work-study programmes, run under school auspices, frequently result in forced child labour. Forced labour is prohibited but occurs in commercial enterprises.

China imposes forced prison labour as a form of "re-education through labour", and a similar forced labour system for "rehabilitation" is in force for drug addicts.

Despite all these problems, Chinese workers have been able to start pushing up their low wages. But this has not solved but only moved the problem elsewhere. Increasing numbers of manufacturers are relocating plants from China to India, Vietnam, Burma and Cambodia, countries that pay even lower wages and have been stepping up efforts to attract business and investment.

Further exacerbating the problem of growing imports of manufactured goods is trade liberalisation, which has strengthened the power of multinational corporations, weakened the power of the state to direct industrialisation and led to disintegration of productive structures at local level. 

As a result, the ‘secondary sector' (manufacturing, electricity generation and construction) lost 350 000 jobs between 1995 and 2008. The policies of the past 16 years have thus failed to promote labour-intensive industrialisation, in line with historical positions of the democratic movement. 

Linked to this are financial liberalisation, including bank deregulation and interest rate liberalisation, exchange rate flexibility and the removal of exchange controls. The dominance of the money form of capital, which emerged in the 1970s, led to the rise of speculative financial activity as a distinctive area of fictitious capital accumulation. 

From the mid-1990s, exchange rate volatility increased after the removal of financial rand exchange controls. On the one hand high interest rates attracted short-term capital flows whilst on the other hand the relaxation of capital controls gave new impetus to capital outflows, which sapped the country of resources that could be investment domestically. 

The removal of exchange controls also facilitated the outflow of capital in the form of delisting of South African conglomerates from the JSE to the London Stock Exchange. Because of such large outflow of domestic resources, South Africa's dependence on short-term capital flows to finance its expenditures has increased.  High interest rates themselves served to depress domestic saving, which is insufficient to finance investment expenditure. 

On the other hand, these interest rates are required to keep attracting short term flows to finance expenditures. This way of managing the economy led to a rapid rise in foreign debt from $25 billion in 1994 to $78 billion in 2008, with relatively little increase in real productive investment in the private sector. 

In just 5 years, the share of foreign capital inflows in total savings rose of 75% by 2008, a swing from the outflows registered in 2002.  This makes our economy vulnerable to capital flow reversals and entrenches the power of global financial capital to hold domestic state policy hostage.

The wholesale and retail sector is critical for employment and is a weakness in the South African economy. It is labour-intensive, has low import penetration and high export orientation and comes second to the financial sector in terms of economic growth. The sector provides a link between productive output and final demand.  It makes or breaks downstream industries, especially those in food processing and light manufacturing consumer goods.  The sector has, in the past 16 years, seen:

Massive concentration and centralisation of ownership, which stifles the growth and development of small and medium sized producers and co-operatives[1]. 

An increase in foreign ownership, which changes the structure of governance and corporate culture[2]

COSATU's Growth path for Full Employment calls for interventions in this sector to break the power of conglomerates and to ensure that it carries local content to consumers.

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 has just announced plans to retrench over 3000 workers.

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 a 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. It has outsourced cleaning and security services and uses labour brokers to staff its stores. Most cashiers at Makro are supplied by labour brokers. At Massdiscounters, approximately 6,000 out of approximately 10,000 workers are flexitimers.

Dion and Game have unilaterally retrenched close to 3 400 workers, particularly active shop stewards and trade union members.

Given Walmart's documented track record of paying low wages to its workers, we are concerned that, after the short period in which they have promised to uphold existing negotiated agreements, 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.

The fate of South Africa's consumer goods manufacturing industry is also in jeopardy. This vulnerable sector has already seen job losses and now faces considerable risk from even more cheap imports. The farming, agricultural and agro-processing sector is also reliant on the retail sector for its survival and growth and therefore highly vulnerable.

The Walmart/Massmart deal is not only bad for the workers; it will also adversely affect businesses and their workers in both retail and manufacturing. 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.

As a giant in the retail sector, Walmart bullies farmers, manufacturers and suppliers to push down their prices and destroys rival companies by the use of ‘predatory pricing'. This has led to the collapse of many small and sometimes big businesses. It leads to the worst forms of exploitation of women and children in developing countries, where suppliers have to drive down their own costs to make a profit.

The proposed merger's impact will not just be felt by large retailers, but also by informal retailers and SMMEs that supply most of the retail sector's outlets. There has already been an increase in insolvencies and liquidation of smaller and independent players, resulting in increased concentration in the market.

The proposed merger cannot be justified. It will not promote but stifle competition, as Walmart strives to dominate and monopolise the sector.

COSATU has taken action under Section 77 of the Labour Relations Act to allow for protest action against the Walmart takeover. If a satisfactory settlement cannot be reached, we are ready to mobilise our members in the streets and in strike action to defend jobs and workers' rights.

We urge civil society, organisations, especially those representing the interest of consumers, to support the three ministers and get involved in the campaign to force Walmart to act in a way which will not destroy jobs and further weaken South Africa's manufacturing industries, on which are economic future depends.

Statement issued by Patrick Craven, COSATU national spokesperson, August 5 2011

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