11 May 2011 Welcome Walmart
The entry of Walmart into South Africa scares a lot of people. It has led to a perfectly absurd spectacle before the Competition Tribunal, in which competitors are whining about competition, and the government is putting the dampers on trade, industry and economic development. [A brilliant opinion piece by Ivo Vegter on the brilliant newsy SA website, The Daily Maverick.]
You have to hand it to them. For sheer farce, you can’t beat the South African government. Witness the perfectly nonsensical spectacle that ensued after the Competition Commission ruled there was no reason to prevent a buyout by Walmart of Massmart, the group that brought you emporiums like Makro, Game, Dion’s and Builder’s Warehouse.
The spectacle of a Competition Tribunal being asked to rule that more competition is bad for competition is patently absurd. That it is being asked to do so by one government department that exists to promote trade and industry, and another that is responsible for economic development, is farcical.
We should all ignore them, and the Tribunal should reject the application with contempt. It is good for us that they’re scared. The problem is that most economic analysis, and almost all of it at government level, looks only at very immediate effects, such as potential job losses at Massmart (a prediction the company disputes), or potential harm to local producers because of growing imports.
However, the economy isn’t quite that simple. It is a highly integrated network of causes and effects, and what appears to be a negative effect for one – being competed out of business, or out of a job – is very much a positive effect for many more – who now see their hard-earned money stretch a little further.
Walmart is one of those excellent companies that is a catalyst for such processes. It has a reputation for selling things at low prices. If its advertising is to be believed, it prides itself on this, and rightly so. Low prices mean that consumers, many of whom are quite poor, will have a little more left over after buying their month’s groceries than they otherwise would have had. This really does, to quote Walmart’s slogan, permit them to live better.
It frees up money that they can use to save, invest, or spend on other needs. Those needs might be urgent, such as healthcare or education. They might be beneficial, such as charity. They might merely extend to an extra bar of chocolate at the weekend. But however they choose to spend it, it will do two things: it will make them better off, and it will stimulate production and create jobs elsewhere in the economy.
In short, Walmart’s trade and industry will create economic development in the rest of South Africa…..