S. Africa approves Wal-Mart takeover of Massmart

South Africa cleared the way for Wal-Mart to gain its first foothold in Africa as competition authorities approved on Tuesday the US retail giant's bid to buy a controlling stake in local firm Massmart. "We have decided to approve the merger subject to the undertakings made by the parties becoming conditions for the approval," South Africa's anti-trust tribunal said in a statement. Key among those promises was a pledge by the world's largest retailer not lay off any workers for two years. "The merged entity must ensure that there are no retrenchments, based on the merged entity's operational requirements in South Africa, resulting from the merger for a period of two years." In January, Wal-Mart signed a $2.5-billion (1.87-billion-euro) offer for a controlling stake in Massmart, which runs nine wholesale and retail chains with 288 stores in 14 African countries. The deal raised concerns from South Africa's politically powerful unions over labour practices at Wal-Mart. Wal-Mart was given an order to honour the existing labour agreements and practices of the Massmart group and not challenge the position of the country's largest retail sector labour union, the South Africa Commercial, Catering and Allied Workers Union (Saccawu). "The effect on employment may not be confined to the jobs of those employed by the merged firm, it may extend to those not employed by the firm, but whose jobs may be threatened as a result of the merger," the tribunal said. The deal will for the first time give Arkansas-based Wal-Mart a foothold in Africa and increase its market share in emerging markets, which have been driving its profits as US retail sales have slowed. The company believes South Africa is a key market for growth, accounting for approximately 20 percent of consumer spending on the African continent as a whole. The tribunal acknowledged the merger was likely to have losers, as Wal-Mart's entry might displace certain small businesses and reduce the market share of some of the country's major retailers. "That is an inevitable consequence of the competitive process," it said. Unions had raised concerns that Wal-Mart's would flood the local market with cheap imports, resulting in job losses at local manufacturers. The country's largest labour federation, Cosatu, also accused the retail giant of being "one of the worst union-bashing employers in the world". Massmart shares jumped 0.64 percent to 140.95 rand (20 dollars) after the announcement at 1200 GMT.