Implications of foreign direct investment for national sovereignty: the Wal-Mart/Massmart merger as an illustration

Abstract

The Wal-Mart/Massmart merger has caused concern about its possible influence on the South African economy, employment and the autonomy of the state. This study analyses strategic considerations for states that allow foreign corporations to engage in their domestic markets. Globalisation and transnational harmonisation have led to an impetus for corporations to extend their activities across national borders and foreign markets. Based on the theory of sovereignty, this is evaluated against a trilateral background of home country, host country and corporation. The outcome that emerges is that in some cases states have lost a significant share of sovereignty to multinational authorities. With the Wal-Mart/Massmart merger, role-players such as the government, competition commission and trade unions got involved early on and ensured maximum advantage to the country and its citizens. The final conclusion is that such partnerships between host, home governments and transnational corporations can minimise the loss of national sovereignty, but this can only be achieved against a backdrop of economic, societal and political stability and co-operation.