U.S. retail behemoth Walmart has come to South Africa, to decidedly mixed reactions. Some hope Walmart's takeover of Massmart will result in many more jobs for South Africans, lower prices for consumers and many other benefits.
Others have greeted Walmart's entry into South Africa with trepidation. The unions are loudly hostile to the company's famed anti-union hostility. Small retailers are worried that Walmart will wipe them out by out-competing them in their market niche.
The South African government wants to be seen to be welcoming foreign investors, but is worried about the possible downsides of this global giant's unique requirements and known operating style. It has insisted that Walmart agree not to cut jobs for several years, a known part of the company's lean business model.
A trickier, more controversial aspect is how to make Walmart get many of its goods from local suppliers, rather than from its international supply network, aggressively developed for huge volumes, consistency of supply, uniformity and the lowest possible price. Attempts to tamper with this are seen as blasphemy to the religion of free trade, which South Africa anxiously wants to be seen as a devout adherent of.
In other words, many of the qualities that make it possible for the 'Walmart model' to work at offering international consumers low prices are a survival threat to many of the local manufacturing/supply sectors that are not 'competitive' enough to find a perch in its supply chain.
The South African government has negotiated/forced some concessions from Walmart, such as the moratorium on job reductions. It may wrangle a few more in its controversial efforts to modify the anti-competition authority's approval of Walmart's entry into South Africa. But such is the size and the power of Walmart that once it comes in and is established, nothing will ever be the same again for South Africa's retail sector, for better and/or for worse.
There are ironies in the fears of many sections of South African society that even as consumers gain from the hoped for lower prices and other benefits of Walmart's entry, significant other parts of the economy are in danger of being flattened by its weight and momentum.
In the last 10 years or so, many South African retail corporates have moved into countries all over Africa, using an aggressive 'Walmart-lite' business model. For the many countries that have never widely had a system of centralized large department-style stores as are common in South Africa and western countries, this has been welcomed by consumers. 'Reasonable' prices, choice and variety, convenience, jobs, tax revenues, etc have been among the touted and welcomed benefits.
Almost all the traded goods are imported from South Africa, which for the most part suits everybody just fine. The South Africans opened up new captive markets for their manufacturers, while the locals enjoyed the convenience of a range of 'prestige' goods under one roof that they might previously have had to go far for, or might not have had access to before at all.
But local suppliers felt angry, humiliated and passed over when perishable goods they could supply such as chickens, eggs, fruit and vegetables were flown in from South Africa. Bitter complaints have been heard, with calls for selected import bans or high tariffs heard in countries like Zimbabwe, Zambia, Uganda, Namibia and others, all of them recent target markets of South Africa's retail/manufacturing juggernaut.
''The South Africans are not only denying us opportunities to supply them, they have taken away our customers, we are going broke, '' is a refrain that has often been heard in the countries the country's retail chains have moved into in recent years. The same sort of fears the South Africans are experiencing as Walmart moves into their country today!
The South Africans' response to producers in Zambia, Zimbabwe, etc: locals suppliers can't meet our volumes, supplies-consistency, price, quality and other requirements, that's why we fly even fresh foods in. If that throws you out of business, tough luck.
As South African retail companies have done to weaker markets/economies than theirs, so might Walmart do to theirs. It's a dog-eat-dog world.
Trade Africa
http://www.tradeafricablog.com
