* Court throws out government appeal
* Rules that 503 workers must be rehired
* S.Africa has no plans to contest the ruling
* Victory for Wal-Mart, S.Africa image abroad
By Tiisetso Motsoeneng and Wendell Roelf
CAPE TOWN, March 9 A South African court
on Friday largely dismissed an appeal from government and unions
to roll back approval for Wal-Mart's $2.4 billion
acquisition of retailer Massmart, ending months of
uncertainty about the status of the deal.
The Competition Appeal Court shot down the government's
request to have the deal re-examined, although it did rule that
about 500 previously fired workers should be reinstated.
The ruling is likely to be seen as a victory for Wal-Mart
Stores Inc in its plan to expand in fast-growing Africa. It is
also likely to soothe investors, who had feared a retroactive
ruling against the deal would tarnish South Africa's reputation
as being open to foreign capital.
"Finally logic prevailed. Questions about how open South
Africa is to foreign investment will still be there, but this
ruling is a big positive for its image as an investment
destination for foreign companies," said Nic Norman-Smith, a
fund manager at Lentus Asset Management in Johannesburg.
"It's unfortunate that we had to go through all this, but
the right decision was made in the end."
The Cape Town-based court rejected proposals that Wal-Mart
should meet targets on using local suppliers, which the
government said would protect jobs.
However, the court said 503 Massmart workers laid off
directly before the acquisition should be reinstated, as their
firing was "closely linked" to the merger.
Wal-Mart and Massmart have agreed to set up a 100 million
rand ($13 million) fund to develop local suppliers, but the
court said it was not clear whether that would be enough to
It ordered Massmart, the government and labour union SACCAWU
to set up a commission to study how small suppliers can best
participate in Wal-Mart's supply chain.
"It's clear that the size of the fund is in question," said
one South African competition lawyer, who declined to be
identified because he was not authorised to speak to the media.
"I guess the study will determine if the fund is increased,
or if the fund itself is the best way to protect suppliers."
NO MORE APPEALS
The government has no immediate plans for a further appeal,
Economic Development Minister Ebrahim Patel told reporters.
"We welcome the judgement. We welcome the fact that it
endorses some of the central concerns that government expressed
during the course of the legal proceedings," he said.
Patel's was one the three government departments that lodged
the original appeal.
South Africa's anti-trust regulator, the Competition
Tribunal, in May approved Wal-Mart's bid for 51 percent of
discounter Massmart Holdings with token conditions. That
prompted the government and the main service workers union,
SACCAWU, to launch their separate appeals.
The state's case centred on procedural issues during the May
hearing, such as government access to Wal-Mart documents and an
alleged lack of time for cross-examination.
"Neither of these arguments justified the setting aside of
the Tribunal decision," the court said in its statement on
A Massmart spokesman said the company welcomed the decision.
Wal-Mart and Massmart have said they plan further expansion in
Africa, aiming to gain a bigger slice of the small but
fast-growing middle class.
Massmart plans to double food sales in Africa in the next
five years, pitting it against established grocery retailers
such Shoprite and Pick n Pay.
A handful of SACCAWU members picketed outside the court
where they did the "toyi toyi" dance made famous during the
"I think this is something we can welcome on the question of
conditions," SACCAWU spokesman Mike Abrahams told reporters.
"The judgment says they are not satisfied with the conditions
that the Tribunal has agreed upon."
Shares of Massmart were little changed after the ruling,
down 0.09 percent at 172.34 rand at 1412 GMT. The benchmark
Top-40 index was also little changed.