The Competition Commission on Wal-Mart

I was reading an article by an Associate Professor from UCT about the Wal-Mart/Merger (Financial Mail Dec. 2011) to be referred to the trade authorities for resolution as it is a trade and not a competition issue.  He supported this argument stating that Wal-Mart’s price competitive strategy has more to do with its import business strategy that cripples the domestic supply networks more than anything therefore he instead proposed for import tariffs to increase thereby penalizing Wal-Mart’s favoritism in supplying the middle-to-low income consumers (LSM 1 – 4) affordable goods.  Firstly, whilst this suggestion appears reasonable it discourages local companies to be innovative and competitive in the FMCG industry.  Secondly, why should Wal-Mart be penalized by looking out for the interest of the consumer; thereby, increasing the social welfare/rate of investment and not just the private rate of investment. Thirdly, now that South Africa passed the Consumer Protection Bill earlier this year isn’t it high time South African companies start revisiting their current business model to ensure that they incorporate the safety and security of the consumer.  After all, this is truly both a competition issue as well as a trade issue. 

So far, the government, the competition tribunal has allowed Wal-Mart/Massmart merger, it is still seeking additional conditions that may come as a result of the deal, according to the Financial Mail (Dec., 2011) as follows:

1. Impose a domestic content requirement on Wal-Mart’s sales and/or
2. Increase in the R100m Wal-Mart offered to boost local supply networks

Much like what Edward suggested in his article, these remedies assume that Wal-Mart deal will harm the local economy and the problem and solution has been identified correctly.  Firstly, when Wal-Mart entered the South African market it employed approximately 3,000 people.  How is that harming the local economy?  Secondly, it correctly identified an opportunity in the middle-to-low-income consumer (LSM 1-4) category via a blue ocean strategy; thereby supplying to a ‘new’ market that the local businesses value-propositions either ignored, were indifferent or had not noticed.  How is that harming the local economy?  Local business should stop pointing fingers to new foreign entrants in the market with the balance sheet and the social entrepreneurship skills to deliver more than just dumping their imported products in the growing SA economy but also ensuring the needs of ALL SA consumers are taken care of.  Thus, local business’ such as potential and existing SMEs should see this as an opportunity to enter the market by developing innovative local supply networks for both local companies and big companies like Wal-Mart in the FMCG industry to make the industry more competitive domestically, and in turn internationally via export prospects offered by Wal-Mart’s global reach.  In the end the consumer always benefits as new innovative strategies lead to cost-savings passed on to the consumer.  In addition, recent events show that the South African government has insisted that 75% of goods sold in the domestic market to be locally produced.  So, it appears to me that the Local producers and suppliers already have the upper-hand in this macroeconomic model.  Thus, the way I see it as long as the fiscal, labour policies and the agricultural output continue to affect South Africa’s manufacturing sector, no matter which way you look at it, the real problem here are the current governance structures that may not necessarily support the domestic firms.  Therefore, neither imposing import duties as prescribed by Edwards Financial Mail (Dec., 2011); nor insisting on the two presuppositions outlined above will cure the apparent disharmony in the FMCG industry.  Local companies should seek to see this as an opportunity to formulate private sector policies that have long been needed to regulate and support the FMCG industry in SA.  After all, we don’t want to see another Tiger Brands’ price collusion facilitated and reincarnated in the likes of Wal-Mart as a result of current governance structures that actually give life to such white-collar crimes. 

Copyright @ 1 November 2011.  BlogSpot by Tambudzai Ndoro, Principal Director of Ndoro Resources (PVT) Ltd, (2011)

Emerging Scientists and Researchers need to be multidisciplinary

The 21^st century is a global village in which the environments we dwell in are slowly and most times already complex adaptive systems politically, socially and economically.   From an organizational theorist point of view changes in an organization during the industrial revolution shows an increasing trend of division of labour at work, which was admired by the Scottish economist Adam Smith, in his book , Wealth of Nations (1776). This led to highly specialized roles in many sectors from manufacturing to scientific research.  However, such organizational systems have had such a negative impact on social systems.  We see that in today’s big firms and banks.  For example, as the major banks in Southern Africa business’ practices have not been lenient to the middle and low-income consumer.  Hence, middle and low-income consumers are subjected to an average of ZAR200 bank charges per month.  In addition, banks in Zimbabwe have not provided ‘convenience’ as an innovative product offering to consumers.  Consumers are still required to carry cash as opposed to using their bank cards everywhere they choose to do shopping.  When one finds themselves paying with a visa, master card or credit card in an establishment, consider it a rare privilege bestowed upon you.  This shows that organizational systems like the Banks that are highly specialized, mechanistic structured organizations generate spillovers into the social systems they reside by propagating severe limitations of inflexibility and lack of innovative ability as the organizational system is designed to achieve predetermined goals.  In addition, employees, scientists or researchers can develop ‘tunnel vision’ approaches in addressing problem in organizational performance which has direct social impact on the market they seek to serve.  Thus, it becomes imperative to integrate the needs of the consumer with that of the organization via multidisciplinary market research that seeks to create value through social innovations with a positive social impact. 

It has been shown that work in many parts of the globe have shown that in designing any kind of social system, such as an organization the interdependence of technological and human needs must form part of the business model.  This perspective is in line with the open-system framework of Tom Burns and G.M. Stalker (1950).  To put this more practically let’s look at the Renewable Energy sector in advanced economies compared to developing and emerging market economies.  The Renewable Energy sector has been in business for the last 3 decades or more in countries like Denmark, Germany & Netherlands.  They have managed to benefit from the insights of industrial revolutionists like Adam Smith in the specialization of skills.  This may be due to the fact that the environment in which these organizations conduct Research & Development where at most times stable and NOT complex systems. Rather systematic and mechanic.  This means the organizational culture most times adopted the national culture of prescriptive strategies.  Hence, one would find that in such society the degree of standardization and the degree of specialization of a Researcher/Scientist in the energy sector is fairly high and in response and in line with the embedded social system of the country.  Whereas, in countries like South Africa, Zimbabwe and Kenya, Renewable Energy, (in my professional opinion), research in this part of the world is more of an Art than a Science.  This is due to the fact that the social systems, in which these countries seek to change are constantly changing politically and economically.  Thus, it requires researchers and scientists with a multidisciplinary approach in understanding ALL of the social systems at play in one country and not just the renewable energy technological implications on the consumer.  Hence, the prescribed socio-economic terms ‘developing’ or ‘emerging markets’ is indicative of a constantly growing economy.  Thus, emerging young researchers/scientists need to be multidisciplinary when they seek answers or solutions to Africa’s development requirements.  This means open and flexible styles of research methodology with a high degree of standardization and medium-to-low degree of formalization are required in the African markets.  

Copyright @ 1 November 2011.  BlogSpot by Tambudzai Ndoro, Principal Director of Ndoro Resources (PVT) Ltd., (2011)