Adewumi Adedoyin Anne.
Wal-mart, the popular chain of supermarkets which was started in Arkansas, United States in 1962 finally took a step into planting one of its flagship stores in Nigeria, in the cosmopolitan city of Lagos. The envoy, headed by its head of lead by its President and Chief Executive Officer of Walmart Europe, Middle East, Africa and Canada, Shelly Broader visited the Lagos state governor on July 30, 2015 to intimate him of their plans to worm their way into the country. The governor, as expected was elated with the grand scheme as he even promised the envoy the fast tracking of the process of land procurement and others. It is understandable that the governor would like more revenue in taxes for the state and employment for her citizens but before the governor gets carried away by these two major advantages, there is a need to scrutinize the socio-economic effect Wal-mart would have on the nation.
Walmart is a huge establishment; with over 11,000 stores in 28 countries, so it knows its onions when it comes to fertile grounds, thus, it is not surprising that Nigeria is a target. On the 2015 African Retail Development Index report, which ranked top 15 countries according to market attractiveness for retail expansion along with those with the most potential, Nigeria was ranked 4th, a drop in its previous position, because despite its market size and room for growth in formal retail, true spending remains comparatively low because the true middle class is a lot smaller relative to the smaller countries ranked higher.
Walmart’s incursion into the country will have both its good and ugly side. Yes, the stores will create jobs to absorb the teeming youths on the street, but how many jobs will it create and by extension, how many families can these jobs cater for? Walmart is a one-stop shop known for selling items at the cheapest prices from groceries to furniture to car parts to even having petroleum products dispensation stations!
So if a store like that opens in Lagos, what would happen to the Mama Nkechi selling ugwu at Mushin, the Obinna at Alaba International market and the likes of them? These are people who make meagre earnings to support their families and they are likely to be pushed out of business.
In a comprehensive research called “Walmart’s Economic Footprint,” Bill de Blasio and the Hunter College Centre for Community Planning and Development released a comprehensive review of over fifty studies on the company’s economic impact across the United States. The joint review of key research showed that in New York for instance, opening of Walmart would likely eliminate more jobs that it creates, which would result in the loss of independently owned small businesses; the value of Walmart to the economy would more likely be less than the value of business and retailers it replaced. After a Walmart store opened in September 2006 in Chicago, 82 out of the 306 small businesses around it had gone out of business by March 2008! This is in a developed economy like America where there is a robust social welfare in place for citizens in need.
What will be the fate of hapless citizens that will be pushed out of their livelihood? Are there plans on ground to ease them out of the situation which a Walmart would create? Those out of jobs will have nothing to feed on thereby increasing crime rate in an already bludgeoning crime rate environment. And again, how many “unskilled” and “skilled” workers would Walmart employ at the end of the day, that if based on opportunity cost would mean foregoing the myriad of small businesses for Walmart?
Wal-mart is also known for paying below-poverty line wages to its employees in a country that has strong labour laws. Even in the United States, a Walmart spokesperson publicly acknowledged in 2004 that “more than two thirds of our people…are not trying to support a family. That’s who our jobs are designed for.” Walmart has stoked controversy in the US with allegations of anti-union policies, overpriced health insurance, predatory pricing and poor relations with staff.
Chain stores like Walmart send most of their revenues out of the community, while local businesses keep their revenue within the local economy, which in turn foster the development of that community. In the US, Walmart has admitted a failure to pay $2.95 billion in taxes for fiscal year 2009, if it can cheat the American government of its dues, how much more a country that doesn’t have strong institutions in place like Nigeria?
Since manufacturing companies in Nigeria are few, it is expected that most of the products to be sold in Walmart stores will be imported. This may affect the few local manufacturing and production companies, especially those into general merchandise and in food and beverage production. Except Walmart and such other chain stores are restricted from importing items that are produced in the country.
Furthermore, what structures are on ground to prevent the company from bringing in sub-standard products and turning Nigeria into a dumping ground? It took many years to discover the Indian company Chocolate Royale’s shady dealings regarding the ingredients used in the production of edibles for Nigerians, thereby putting consumers health at risk, and it was barely a month after the company was closed down that it was reopened with no arrests made.
In South Africa, where Walmart purchased 51% of the shares in Massmart, a local chain of stores, opposition followed this action from labour unions in the country questioning what the coming of the company would mean to South Africans in general. Walmart indirectly responded by communicating its intention of developing South Africa’s market and expanding to other economies by buying cost of its fresh food locally, leveraging from South Africa’s offering and from their global sustainable agricultural practices and that they it respect local regulations and exploit opportunities the local market offers in a responsible way. Still, there were worries about the retail giant’s purchasing power and how well it would keep to its promise.
To its credit though, over the years, Walmart has made some important improvements in employment and in eco-friendly policies, as it significantly focused on climate change issues by implementing zero waste corporate initiatives and launched relevant sustainable agriculture policies, including supporting farmers and their communities, producing food that consumes fewer resources and creates less waste and helping to develop eco-conscience. If this is implemented in Nigeria, this type of programmes could have a positive impact in the local market by encouraging a more efficient allocation of resources and pushing players to adhere to the industry’s best practices. From a study on Walmart’s presence in Mexico, the retail sector modernized its warehousing, distribution and inventory management and these changes in the retail sector, which have trickled down to other retailers, have resulted in a significant decline in distribution costs faced by Mexican suppliers. The expansion of Walmart in Mexico (Walmex) has allowed its suppliers reach a larger segment of the Mexican market.
Also, Walmart could help boost the local SME growth; by allowing small producers to deliver their products locally (using Walmart’s modern distribution systems) and have them distributed nationwide, Walmart can help small producers to become viable competitors of the larger players.
Thus, the entrance of a global player like Walmart in Nigeria could help “raise the bar” in terms of productivity, service delivery and price-efficiency within the retailing industry.
