Wal-Mart, the world's biggest retailer, can go ahead with its 17 billion rand ($2.2 billion) purchase of a controlling share of a South African chain, a South African regulatory appeals body said Friday.
The Competition Appeal Court upheld a ruling last year by the Competition Tribunal, the government agency charged with promoting competition and protecting consumers.
The appeal court, however, did call in its ruling for a study to determine the best way to protect small producers who might not be able to compete with foreign producers from whom Wal-Mart can import cheaper goods. Wal-Mart and Massmart had already agreed to spend 100 million rand (about $13 million) over three years to help farmers and other South African suppliers gear up to do business with Wal-Mart.
The appeal court also called for the reinstatement of 503 workers who lost their jobs in what unions said was a step by Massmart to make itself more attractive to Wal-Mart.
South African unions and some government officials worry Wal-Mart's arrival will hurt jobs and local manufacturing. Wal-Mart and Massmart contend that together they will be able to offer low prices and a range of goods that will benefit South African consumers.
The appeals court said Friday that "there was insufficient evidence to conclude that the detrimental effects of the merger would outweigh the clear benefits."
Potential investors had said they were closely watching for the ruling, which could signal South African openness to foreign investment. The Wal-Mart-Massmart partnership has been operating in South Africa since last year pending Friday's ruling.
Wal-Mart is entering Africa for the first time with the Massmart deal, and hopes to exploit Massmart's experience in South Africa and further north as a stepping stone to doing business across Africa.
In a joint statement Friday, Wal-Mart and Massmart said they were "keen to work with interested parties to develop local suppliers and producers."
Massmart CEO Grant Pattison added: "It is important to emphasize that notwithstanding the differences of opinion that have been expressed during this process, we want to build good relationships and enter into constructive partnerships with government, organized labor and other interested parties."
In a joint statement Friday, the government's ministers of agriculture, economic development and trade, who had challenged the deal, said they welcomed the appeal court's attempts to take into account the interests of small business.
"This has been at the heart of government's case during all the legal proceedings in this matter," their statement said.
Mike Abrahams, spokesman for the South African Commercial, Catering and Allied Workers Union, conceded in an interview that the way was open for Wal-Mart to operate in South Africa, but said the labor movement would work at the bargaining table to try to influence how the company operated. Abrahams, speaking to AP, did not rule out strikes as a tool.