Walmart’s Brand New Labor Headache

When Walmart announced their intent to buy South African retailer Massmart for about $4.25 billion, pundits could not stop talking about the implications for African business. But the big story is how South Africa’s unions will handle the retail giant.

Flickr user Galaygobi


When Walmart announced plans to buy South African retailer Massmart Holdings for roughly $4.25 billion last week, pundits could not stop talking about the implications for African business.

After all, Massmart is one of the country’s biggest retailers, with 232 domestic stores under brand names including Game (discount store) and Builders’ Warehouse (hardware/home), among others. Massmart has 24 additional locations throughout the continent, most of them in neighboring Botswana.

But the big story is how South Africa’s unions will handle the retail giant, who some labor factions say, is known for an anti-labor stance and accusations of worker mistreatment.

As the deal unfolds, Walmart, Massmart and South Africa’s labor unions are all strategizing and spinning as best they can. In the Congress of South African Trade Unions (COSATU), the nation’s largest trade federation, it is even causing internal rifts.

COSATU’s Western Cape branch announced its opposition to the planned purchase hours after news went public. Its statement accused Walmart of being “notoriously anti-union” and called for “urgent national action from the government to investigate this hostile move by Walmart … Companies whose practice it is to abuse workers rights are not welcome in South Africa.”

Meanwhile, COSATU’s national leadership is borderline bipolar. The labor federation put out a long list of concerns on behalf of constituent member the South Africa Commercial, Catering and Allied Workers Union. The COSATU national/SACCAWU statement praised Walmart for making Massmart’s share price jump by more than 10% while accusing the international chain giant of 14 different counts of anti-union activities. For good measure, Walmart was also accused of being “one of the worst and stubbornly anti-union companies in the world” and of enacting a “severe blow to all our intentions and attempts to build and develop local manufacturing.” However, the statement also left a door open to work with Massmart during the transition and indicated that the union is grudgingly accepting the likelihood of takeover.


As for Massmart, they are doing what every retailer who hits the multinational jackpot does: Playing it safe. The chain posted two short statements on Sept. 27 and 28, attempting to put the best possible face possible on the union front. The first statement hesitantly notes that “Walmart has relationships
with unions, at some level, in approximately half of the countries in which it operates.” Another statement takes great pains to note that Massmart is “committed to the principles of freedom of association for our employees and regard union membership as an important indicator of this commitment” and that “Walmart will honour pre-existing union relationships and abide by South African Labour law.”

The reaction on the South African street has been mixed. Massmart’s shares, as noted, have seen a solid jump. Above all, there seems to be joy on the part of South Africa’s business community that an African retail firm could score a multi-billion dollar deal. An editorial in the influential Mail & Guardian newspaper sums up the purchase as “the story of a dramatically changing world order, one in which cash is flowing ever faster out of developed economies towards the opportunities offered by emerging markets” that compensates for South Africa’s sub-BRIC performance. The Mail & Guardian‘s editors, however, also note that the nation is likely to enter a period of “truly savage retail competition” and that Wal-Mart’s relations with local unions will be, at best, rocky.

Jeremy Daniel of South African
business blog Memeburn also
notes the contrast. By email, he notes that the country’s business
community is “excited about the deal and sees it as a vote of
confidence in the country,” while also describing South African
unions as “extremely wary” and fearing a “loss of control”
once the likely Walmart deal goes through.

But the reality for Walmart’s labor union relations in South Africa, ultimately, is destined to be muddled—and an instructive lesson for other multinationals entering African retail. COSATU and other local labor federations are far more powerful than their American counterparts—and far more likely to take up an antagonistic attitude towards Yankee newcomers.

Then again, Walmart’s labor relations outside the United States have been far less contentious than American observers might expect. While union run-ins were a primary reason for Walmart shuttering their German operations in 2006, the multinational has had surprisingly smooth relations with Chinese labor unions.


[Image: Flickr user Galaygobi]