Having attracted widespread criticism for appearing to oppose the merger at the tribunal, the government's actions will be closely watched by foreign investors.
In reply to a question in Parliament yesterday from Democratic Alliance MP Kobus Marais, Patel said his department would soon meet both retailers.
Should the government be dissatisfied with the outcome of the meeting it could lodge an appeal with the Competition Appeal Court, and has 20 days to do so after the tribunal unveils the reasons for its decision on June 29.
The discussions would deal with their commitments in light of the conditions imposed by the tribunal and statements made by Massmart and Wal-Mart executives during proceedings that they did not intend to increase the level of imports materially, Patel said in his written reply.
"Based on the outcome of the study of the conditions and the responses of Wal-Mart-Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage.
"We will study whether the specific measures and mechanisms set out in the conditions adequately meet the public interest tests set out in the Competition Act and whether they will secure the desired outcome, in particular ensuring that SA is not faced with large-scale job losses in supplier industries to Massmart-Wal-Mart (both in agriculture and manufacturing) and that the merged entity provides real and effective support for local manufacturers and small manufacturers," Patel said.
However, Nedbank Securities analyst Syd Vianello said it may be too late to unwind the deal.
The two companies are moving swiftly to conclude the transaction, and by next Monday the formal acquisition of a 51% stake in Massmart will be complete.
"If they are attempting to unwind the transaction it is bad news for foreign investment in SA. However, the meeting could yield good outcomes if they tackle the conditions imposed by the tribunal, such as how to practically protect local suppliers and develop new suppliers and how to make empowerment partners a major supplier," Vianello said.
The tribunal's ruling largely accepted the voluntary conditions the two companies had offered on the last day of the hearing last month to ease concern about possible job losses. The tribunal said the merged entity could not retrench staff for operational reasons for two years, and had to give priority to 503 Game staff retrenched last year when rehiring.
The status of the South African Commercial, Catering and Allied Workers Union as the representative of workers could not be challenged for three years.
Crucially, the tribunal rejected the demand by the government and unions to impose local procurement requirements. Rather, it accepted the companies' offer to set up a R100m fund to develop new suppliers and train them to sell to the Wal-Mart network.
"Instead of insulating local industry from international competition for a period, it seeks to make local industry more competitive to meet international competition," the tribunal said.
Vianello said: "All retailers import a certain amount of goods. Shoprite's direct foreign procurement, for example, is 1.6% of all goods. It's very small.
"Wal-Mart will not go on a drive to import all goods. It may procure one line (abroad), but not all 25 lines in a supermarket."
If a party appeals, the Competition Appeal Court may set aside the tribunal's decision, or amend it by ordering or removing conditions.
Razia Khan, head of Africa research at Standard Chartered Bank, said SA deserved credit if it did take further action. " SA is now demonstrating that it will still seek to secure the best possible deal when FDI (foreign direct investment) is offered to it. It's a remarkable demonstration of its sovereign rights.
"Ultimately, the authorities' strong focus on ensuring that SA sees the benefit of any FDI that comes its way, especially the requirement that this deal doesn't merely feed into import growth, speaks volumes about the seriousness of intent to see people-centric and jobs-centric growth."
Massmart spokesman Brian Leroni said: "We take note of the minister's comments and have nothing to add at this stage."
Asked whether his department would oppose foreign direct investment transactions, including from Chinese businesses, on the basis of labour practices conflicting with SA's labour regime, Patel said "any application brought before the competition authorities would be scrutinised".
Source: Business Day
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