20110510
reuters

PRETORIA (Reuters) - South Africa's government could jeopardise Wal-Mart's $2.4 billion bid for retailer Massmart if it demands local procurement targets, the chief executive of the South African retailer said on Tuesday.

South Africa's competition authorities are hearing testimony until next Monday on whether to allow the U.S. retailer to go ahead with its 16.5 billion-rand offer for 51 percent of Massmart, a discount retailer.

The government and unions are concerned Wal-Mart's global sourcing network would open the country to a flood of cheap imports, undermining local suppliers and threatening jobs.

South Africa's main service industry union, which is opposed to the deal, said it could consider legal action if the acquisition is approved without conditions set such as assurances on jobs and supply targets.

Massmart's chief executive, Grant Pattison, told the hearing local procurement targets could harm the deal.

"Should it change the dynamics and the fundamentals envisioned in the economics of the transaction, I would imagine that it could put the transaction at prejudice," Pattison said, when asked about the impact of such conditions.

Currently Massmart sources about 60 percent of its products from South African manufacturers and Pattison said the company would continue to use local suppliers.

"Local procurement is being, and will continue to be, pursued by Massmart and Wal-Mart because it makes commercial sense," he said.