* 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 (Reuters) - 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 project jobs.
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.”
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 Friday.
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 anti-apartheid struggle.
“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.