Wal-Mart Stores Inc. (WMT:US) should be required to set up a bigger suppliers’ fund than originally planned as a condition for its purchase of a stake in Massmart Holdings Ltd. (MSM), Nobel Laureate Joseph Stiglitz said in a report.
Wal-Mart’s purchase of Johannesburg-based Massmart was approved by South Africa’s Competition Tribunal last year, subject to the companies promising to refrain from firing employees for two years and setting up a 100 million-rand ($11.8 million) fund to assist local suppliers and manufacturers. Judge Dennis Davis, president of the Competition Appeal Court, ordered in March that three experts make recommendations on the mandate and conditions of the fund.
Stiglitz and James Hodge, managing partner of Genesis Analytics, called for the fund to be increased to 500 million rand to 2 billion rand allocated over five to 10 years. The third member of the panel, Mike Morris, a professor at University of Cape Town, said in a separate report dated June 9 that the fund should be smaller and more focused.
“There are a number of positive as well as problematic features with the current form of Massmart’s supplier development fund,” Stiglitz and Hodge wrote in their report. A fund of as much as 2 billion rand would be recommended if it “were to materially address the concerns of the court and provide sufficient incentives to Massmart to implement a serious program to empower local suppliers.”
The judge has given the companies, three government ministries and a retail workers’ union a month to respond to the reports. A date for the court’s decision hasn’t been set, the registrar said in an e-mailed response to questions.
“To require that the fund address all small and medium suppliers would be highly discriminatory,” Morris said in his report. “It would impose both very substantial costs and very substantial uncertainties on Wal-Mart/Massmart which are not borne by any of its competitors.”
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