SA, WTO may clash on Wal-Mart

Wal-Mart is seeking approval from the Competition Tribunal to buy a 51% stake in Massmart, whose retailers include Game, Dion Wired, Makro and Builders Warehouse. The Competition Commission approved the transaction in February, recommending that no conditions be imposed.

However, the SA government and trade union Saccawu have been vocal critics of the deal, urging the tribunal to either block the transaction or impose strict procurement rules to ensure local jobs and manufacturing capacity are protected.

According to Paul Kruger, a researcher at the Trade Law Centre for Southern Africa, SA has committed to full liberalisation of certain sections of its retail and wholesale sectors under the general agreement on trade in services (GATS) in 1994. "Wal-Mart's activities fall squarely within the scope of these commitments," Kruger said.

"South Africa cannot deny market access for Wal-Mart or discriminate against it in favour of domestic suppliers. These GATS commitments were approved by parliament in accordance with the constitution. So if Wal-Mart's entry into the SA market is denied, or if Wal-Mart is treated differently than other retailers selling similar products, South Africa will be violating its international commitments," Kruger said.

Conditions imposed on Wal-Mart regarding local procurement and imports would therefore have to be extended to all local retailers, to remain in line with WTO rules, he said.

While the role these obligations could play in South African courts was not clear, dispute settlement proceedings could certainly be instituted at the WTO, he said.

Trade policy expert Peter Draper said while Wal-Mart's legal position seemed solid, it was unlikely that the company would fight an adverse ruling, as "it would run the risk of annoying the political powers".

More interesting was to note the way the government was using the competition authorities as a "quasi-investment screening agency", given its handling of the Wal-Mart and Japan's Kansai Paint transactions, Draper said.

The Department of Trade and Industry (DTI) asked the competition authorities to block Kansai's takeover of Freeworld, expressing fears of an over-concentration in the paint sector and in contrast with the state's drive to localise manufacturing. The deal was finally approved with strict conditions.

The DTI was expected to continue screening investments more carefully in future, he said, and SA had also reviewed its approach to bilateral investment protection agreements.

Source: Sunday Times