Walmart Massmart Acquisition
Wal-Mart’s acquisition of Massmart: will the effects be detrimental rather than beneficial?
The recently approved acquisition of a 51% stake in Massmart by Wal-Mart has brought about a lot of speculation as to whether this deal will mainly positively impact South Africa’s GDP or not. By investing in the African market, Wal-Mart will to a greater extent impact South Africa’s labour market as well as lead to the growth of the retail industry at a faster rate, thus positively impacting growth in the South African economy. This essay will therefore show how this particular case of foreign direct investment will possibly lead to potential growth in South Africa’s GDP through examples of the AS-DS model, similar examples of such acquisitions and a demonstration of the expenditure method of GDP calculation, therefore showing the importance of such a big investment in a rapidly growing and attractive market such as South Africa.
A four billion dollar offer to buy 51% of Massmart was made by Wal-Mart, which is currently the world’s biggest retailer and this offer was recently approved by the South African government. The deal will allow 51% of Massmart, the third largest retail distributor in Africa to be owned by Wal-Mart and the general terms of the deal involved a non-binding contractual agreement between the two companies which however requires certain conditions concerning labour and bargaining to still apply. On the surface, the deal looks extremely appealing, as it offers an investment of over four billion dollars into the economy, however it is necessary to unravel the whole issue and critically analyse the impacts of this investment on South Africa’s development and thus pose the question, will the acquisition, cause more harm than good?
As according to Maylie (2011), in order for the deal to be finalised, Wal-Mart has to adhere to certain conditions which include, freezing job cuts for the next two years as well as honouring union bargaining agreements in
The recently approved acquisition of a 51% stake in Massmart by Wal-Mart has brought about a lot of speculation as to whether this deal will mainly positively impact South Africa’s GDP or not. By investing in the African market, Wal-Mart will to a greater extent impact South Africa’s labour market as well as lead to the growth of the retail industry at a faster rate, thus positively impacting growth in the South African economy. This essay will therefore show how this particular case of foreign direct investment will possibly lead to potential growth in South Africa’s GDP through examples of the AS-DS model, similar examples of such acquisitions and a demonstration of the expenditure method of GDP calculation, therefore showing the importance of such a big investment in a rapidly growing and attractive market such as South Africa.
A four billion dollar offer to buy 51% of Massmart was made by Wal-Mart, which is currently the world’s biggest retailer and this offer was recently approved by the South African government. The deal will allow 51% of Massmart, the third largest retail distributor in Africa to be owned by Wal-Mart and the general terms of the deal involved a non-binding contractual agreement between the two companies which however requires certain conditions concerning labour and bargaining to still apply. On the surface, the deal looks extremely appealing, as it offers an investment of over four billion dollars into the economy, however it is necessary to unravel the whole issue and critically analyse the impacts of this investment on South Africa’s development and thus pose the question, will the acquisition, cause more harm than good?
As according to Maylie (2011), in order for the deal to be finalised, Wal-Mart has to adhere to certain conditions which include, freezing job cuts for the next two years as well as honouring union bargaining agreements in
References: Maylie, D. 2011. Wal-Mart, Massmart Deal Gets Nod in South Africa. (Online). Available: http://online.wsj.com/article/SB300014240527023036574045 76357132239525222.html [2011, June 01]. Makholwa, A. 2011. Trouble in store. (Online). Available: http://web.ebscohost.com/ehost/detail?sid=4400036b-ca22-47f5-8e6f-c709efd0e02e%40sessionmgr14&vid=1&hid=19&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=60818467 [2011, April 14]. Watson, L. 2011. Wal-Mart to focus on SA culture. (Online). Available: http://www.fin24.com/Companies/Retail/Walmart-to-focus-on-SA-culture-20110604 [2011, June 05]. Peters, D. E. 2008. The Impact of Foreign Direct Investment in Mexico. (Online). Available: http://ase.tufts.edu/gdae/Pubs/rp/DP11Dussel%20PetersApr08.pdf [2008, April]. Lipsey, R. G. & Chrystal, K. A. 2007. Economics. Oxford: Oxford University press Inc. Economist, 2011. The beast in the bush. The Economist. 398(8721): 72-74.