Economy Watch: Wal-Mart Seeks South African Expansion

The retail giant wants to buy South African-based Massmart Holdings, a retail leader in that country, and has offered $4.6 billion for that purpose.

September 28, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Soctech

Wal-Mart is serious about being the retail king of the world by sounding “the vuvuzela on African expansion,” as The New York Times so curiously put it on Monday. The retail giant wants to buy South African-based Massmart Holdings, a retail leader in that country, and has offered $4.6 billion for that purpose. For comparison, Wal-Mart has a market capitalization of about $200 billion, while South Africa had a GDP of about $287.2 billion in 2009, according to the International Monetary Fund.

But southern Africa is on a growth trajectory, which is probably why Wal-Mart is so eager to get a piece of the retail action there. The IMF forecasts that sub-Saharan Africa will see 6 percent annual economic growth after 2011, with South Africa far and away the leader of the pack. Besides its home country, Massmart operates in Botswana, Ghana, Malawi, Mozambique, Namibia, Zambia and other places.

The deal would represent the U.S. retail behemoth’s first foray into Africa, but hardly its first international venture. About a quarter of Wal-Mart sales are currently from non-U.S. locations, though it hasn’t been a success everywhere it’s gone. In 2006, for example, the company left Germany and South Korea after poor showings in those countries.

SF Fed Sees No Employment Growth in ’11, or Worse

The latest Federal Reserve Bank of San Francisco’s Economic Letter, written by David Lang and Kevin J. Lansing and released on Monday, warns that such growth as the nation might see into 2011 will probably not lead to job growth. In fact, even as the recovery continues, unemployment might actually rise.

“[For] more than a year after the end of the most severe recession since 1947, the recovery is proceeding at a tepid pace,” the paper noted. “Forecasts derived from the Chicago and Philadelphia Fed business cycle indicators predict that real GDP growth through the first half of 2011 will remain at or below potential. When translated into a forecast for the labor market, our analysis suggests that the unemployment rate could rise anywhere from 0 to 0.5 percentage point during this period.”

This has happened before, the report also said, which is cold comfort to everyone living through it now. “In a comprehensive historical review of periods leading up to financial crises and their aftermath… episodes of prosperity that are fueled by easy credit and rising debt are typically followed by lengthy periods of deleveraging characterized by subdued growth in GDP and employment,” Lang and Lansing explained.

What Were Rating Agencies Doing in the Mid-2000s?

Late last week D. Keith Johnson, a former president of Clayton Holdings, a specialist in mortgage pools, told the Financial Crisis Inquiry Commission that about half of the 911,000 mortgages loans for 23 investment or commercial banks that he analyzed during 2006 and the first half of 2007 were shoddy goods–they didn’t mean quality benchmarks for securitization, in other words, but were securitized anyway. He also said that he told the major rating agencies of his findings before the credit squeeze in mid-2007.

Collectively and individually in other testimony and statements at various times, the ratings agencies have denied that such shenanigans were going on at the peak of the housing bubble. In fact, it might be said that the industry is “shocked, shocked” at the idea that underwriting standards were ignored at a time when it was temporarily profitable for everyone to ignore them.

Wall Street was headed for another day in positive territory on Monday, but wilted at the last minute, with the Dow Jones Industrial Average dropping 48.22 points, or 0.44 percent. THe S&P 500 was down 0.57 percent and the Nasdaq lost 0.48 percent.