Wal-Mart Gets The Green Light To Expand Into Africa

Atlanta Post, by Brittany Hutson, January 18, 2011

Wal-Mart scored a major win for their international expansion campaign when Massmart Holdings Ltd., a South African-based retailer, accepted the retail giant’s offer to buy 51 percent of their company. Though Wal-Mart has 8,692 stores in 15 countries, including Brazil, China and India, this deal marks their first entry into the African market.

According to the Associated Press, Wal-Mart offered 148 rand (about $20) per share in a 17 billion rand (about $2 billion deal). Grant Pattison, CEO of Massmart, said Massmart will continue to operate the stores while Wal-Mart will be the main owner. Massmart runs about 290 big box, pharmacy, electronics and other stores in 14 African countries.

Wal-Mart expressed interest to buy Massmart back in September for an initial offer of 32 billion rand, or $4.6 billion. They have been looking to extend their reach in emerging markets including Russia and the Middle East, thereby expanding their international business, which makes up a fourth of the company’s nearly $405 billion in annual revenue, as reported by the Wall Street Journal.

Interestingly, Wal-Mart hasn’t had a stellar track record internationally. They have sometimes failed to cater to local habits and markets; in 2006, they abandoned its Germany operation after spending eight years trying to crack the market and they pulled out of South Korea last decade.

Businesses are confident that Wal-Mart’s arrival will make the continent more competitive; however, the company’s less than positive reputation for being anti-union hasn’t fallen on deaf ears across the Atlantic. Sidumo Dlamini, president of the Congress of South African Trade Unions, said the deal will do “nothing for the workers.” But Pattison assured unions that no jobs would be lost nor would any labor contracts be violated.

It’s noble that international companies are taking an interest and recognizing Africa’s growing economies, but only if their intentions are chaste. Only time will tell if Massmart’s deal with Wal-Mart is in the best interest of South African consumers and the economy.