CHAIRPERSON: Good Morning

Competition Tribunal of South Africa

Hearing in the matter between

WAL-MART STORES INC

10 and

MASSMART HOLDINGS LTD

Case No. 73/LM/Nov10

held at

DTI Building Sunnyside 20 on

9 May 2011

Panel: N Manoim \ Y Carrim A Wessels 30 Case Manager: K Moodlaiyar

AMB Recordings and Transcriptions CC P O Box 326, Derdepoort Park 0035 Tel: (012) 819 1013/5; Fax: (012) 349 8218 Competition Tribunal Page 1 Wal-Mart Stores and Case No. 73/LM/Nov10 Massmart Holdings 9 May 2011

CHAIRPERSON: Good morning everybody. We are here to resume the hearing in the proposed merger between Wal-Mart and Massmart. The panel is Andrei Wessels, Yasmin Carrim and Norman Manoim presiding. If we can just reconfirm the attendances and I think just go around the room in a clockwise direction. Perhaps let’s start with the Commission. Just place yourselves on record, please. ADV MTSHAULANA: Patrick Mtshaulana for the Commission. I’m with my learned friend, Mr Ngcangisa and Mr Van Hoven from the Commission. 10CHAIRPERSON: Thanks. ADV ENGELBRECHT: Greta Engelbrecht, instructed by Deneys Reitz Attorneys for the Small Business Enterprise Forum. ADV GAUNTLETT: Jeremy Gauntlett for Wal-Mart and Massmart, instructed by Webber Wentzel and Edward Nathan Sonnenberg. Mr Gavin Marriott is with me. He is in another court at the moment because of a prior commitment, but he will be here shortly, and also Frank Pelser, who is in the row behind me. ADV KENNEDY: Mr Chairperson, I’m Paul Kennedy. I appear with Michelle le Roux and we are counsel appearing for SACCAWU, 20COSATU, FAWU and NUMSA. ADV McNALLY: Chair, Paul McNally, briefed by Werksmans Attorneys on behalf of the South African Clothing and Textile Workers Union.

AMB Recordings and Transcriptions CC 10 P O Box 326, Derdepoort Park. 0035 – Tel: (012) 819 1013/5; Fax: (012) 349 8218 Competition Tribunal Page 2 Wal-Mart Stores and Case No. 73/LM/Nov10 Massmart Holdings 9 May 2011

ADV BHANA: Thank you Chair, on behalf of the Government Departments, Rafik Bhana with Jean Meiring on brief by Deneys Reitz. CHAIRPERSON: Thanks. We are working off our timetable that’s been agreed. We are going to start with an opening submission from the Commission of 10 minutes, please. MR VAN HOVEN: Good morning Chair, Maarten Van Hoven. I will present a brief summary of the Commission’s recommendation to the Tribunal earlier this year. This transaction was notified to the 10Commission on the 3rd of November 2010. Wal-Mart is a company listed on the New York Stock Exchange. It is not controlled by any particular firm. Wal-Mart owns various firms worldwide, including in South Africa, namely a company by the name of International Produce Limited, a fruit exporter operating from Stellenbosch. Massmart is known to the Tribunal and in South Africa listed on the JSE. The majority of its shareholders are international shareholders. In terms of the transaction Wal-Mart is offering to acquire in excess of 50% of the entire issued share capital of Massmart and thereby acquiring sole control over Massmart. The purchase 20consideration amounts to R148.00 per share. As to the rationale of the transaction, Wal-Mart advised the Commission that it wants to enter the emerging markets, specifically South Africa and the Sub-Saharan region. Wal-Mart believes that South Africa is a key market within

Sub-Saharan Africa amounting to approximately 20% of consumer spending on the African continent as a whole. Wal-Mart further believes that South Africa is sophisticated and has a stable economic, political and regulatory environment within which it can grow and position itself for growth within Africa. Massmart is currently busy with extension or expansion operations and investments in South Africa and the rest of Africa, which includes expanding Massmart’s business by 20% over the next 3 years, building three new distribution centres and expanding into 10Africa further. The merger provides Massmart with access to skills, systems and processes already developed, tried and tested by Wal- Mart. The transaction provides Massmart with access to Wal-Mart’s leadership, sourcing and retailing of fresh produce, a product line which Massmart has recently entered into. With regards to the activities of the parties, Wal-Mart is the biggest company in the US. Wal-Mart retails a wide range of products, including groceries, electronics, clothing and furniture and operates within 15 countries with 55 different brands. It essentially has three divisions, which is called Wal-Mart Stores USA, Sam’s 20Club and Wal-Mart International. Massmart on the other hand is primarily a wholesaler of grocery products and a retailer of liquor and general merchandise. Massmart trades through the following four divisions, mass discounters, which is known as Game and Deon Wired, Mass Warehouse, which is effectively the Makro chain,

Massbuild, which is the Builders Warehouse, Builders Express and Builders Trade Depot chains, Masscash, which operates mainly wholesale outlets supplying grocery products and liquor and general merchandise to independent traders, which include brands such as CBW, Browns, Wears, Finro, Jumbo and Shield monetary buying organisations. The Commission has looked at the activities of the parties and as I’ve said earlier, the only market or the only activity Wal-Mart has currently in South Africa relates to the export of fruit and considering 10that the parties do not compete in South Africa with each other, considering in particular some of the judgements of the Tribunal recently of Massmart activities and I’m particularly referring to the transaction whereby Massmart acquired Finro during 2009, the parties are found not to be competing in the same market and therefore from a competition perspective we concluded that it’s unlikely to substantially lessen the competition. We proceeded equally to look at the effects on public interest and this is obviously where the major focus of the proceedings is and the critical debate that hangs around this public interest debate. The 20Commission has started looking at the factors as required by the Act, in particular looking at employment and the test is whether or not the merger can or cannot be justified on particular public interest grounds and therefore we looked at employment, we looked at the effect on a particular industrial sector or region, we looked at the abilities of

SMMEs and HDIs to compete and we looked at international competitiveness. With respect to the effect on employment, there were four major themes that came out from our investigation, first of all whether or not Wal-Mart’s refusal to employees to the right of association, Wal-Mart’s low wages to workers, Wal-Mart’s violation of labour laws and fourthly the potential effect on employment as a result of the potential effect on local suppliers and competitors. This obviously goes hand-in-hand with the second issue relating to 10suppliers. Just dealing with the employment issues, regrettably Wal-Mart does have a bit of a legacy when it comes to the interest of employees and it often applies the minimum, as required by law, and often does not comply with legislation. The Commission does not condone this. However, like Wal-Mart various other firms in the South African economy have done exactly the same as Wal-Mart in other countries. The Commission has assumed that South African labour relations system is robust and strong enough to deal with transgressions in labour law and therefore it is not for the 20Commission to ask of Wal-Mart to comply with local legislation. It goes without saying that they must comply and if they don’t, they will have to justify their actions to a relevant court. We should be put faith in our system and actively enforce our labour legislation.

Turning to the issue of suppliers, there are two types of suppliers that the Commission effectively wants to place emphasis on. First of all, there are suppliers dealing with food products and second of all suppliers dealing on the issue of home wares. With regards to food products the Commission has identified that Massmart is a relatively small player compared to the other major food retailers in South Africa and according to our ranking they would be approximately the fifth largest food retailer in South Africa. Secondly, considering that the majority of the food procured 10are procured locally, considering the perish ability of the product, it is our conclusion then that it’s highly unlikely that Massmart will procure less food from local suppliers and considering the small size they are compared to their rivals, it’s unlikely that the foreclosure would occur with regard to local food suppliers and therefore we conclude that from that category of suppliers it’s unlikely ... the merger is unlikely to raise concerns. In dealing with home wares and this is the category in which we’ve identified in our recommendation and in detail so that this is an area of strength for Massmart, considering its activities in appliances 20and other general merchandise. The Commission’s analysis as contained in pages 26 to 34 of its recommendation, and there is a further reference on page 45 of our recommendation, show that the major local suppliers of these home wares could be classified into two categories. The first category is effectively suppliers that are locally

manufactured. The second category deals with locally supplied imported products, effectively agents importing product into South Africa and then selling them on to Massmart and the like. Interestingly, local manufacturers who are also major employers have a much lower exposure to Massmart and pre-merger therefore it is unlikely to significantly be affected by the prospect of receiving less orders from Massmart post merger. What we are trying to say here, Chair, is that local manufacturers have a much smaller exposure to Massmart as compared to the parties that I’ve categories 10them, agents importing the products and for that reason, and that analysis is contained as I said in pages 26 to 34 and on page 45 captures the employee numbers of those particular suppliers and for that reason we say considering the less exposure they have to Massmart and the options they have available to them, it is unlikely to significantly affect them. On the contrary, those suppliers that are effectively agents and have a much lesser workforce or employment base, those entities have a greater exposure to Massmart, but considering their much smaller workforce, the effect of the possibility of the merged entity 20buying less from them will have a small effect on the employee numbers in that group and therefore if one considers the effect on employment, it is unlikely to be significant. CHAIRPERSON: You are moving into injury time. MR VAN HOVEN: I’m concluding, Chair.

CHAIRPERSON: Okay. MR VAN HOVEN: As I’ve said, the merger does not substantially lessen competition. The parties don’t compete with each other and considering there are no significant public interest concerns, we recommend the merger to be approved unconditionally. CHAIRPERSON: Thanks very much, Mr Van Hoven. Mr Gauntlett, can we call your first witness, please? ADV GAUNTLETT: Yes, Mr Grant Pattison. CHAIRPERSON: Mr Pattison, if you could just come forward and sit 10over there. CHAIRPERSON: I can see why you are a good discounter. Thanks Mr Pattison, if you can just be seated. Good morning, you can just leave the mic on. Mr Pattison, can we just have your full names please? MR PATTISON: Grant Michael Pattison. CHAIRPERSON: Mr Pattison, do you have any objection to taking the oath? MR PATTISON: No. CHAIRPERSON: Do you regard the oath as binding on your 20conscience? MR PATTISON: I do. CHAIRPERSON: Could you please read out that first paragraph in the paper in front of you?

MR PATTISON: I swear that the evidence I shall give shall be the truth, the whole truth and nothing but the truth. So help me God. I solemnly affirm that the evidence... CHAIRPERSON: No, you don’t need to read that. That’s fine, thank you. Who is going to be commencing the cross-examination of Mr Pattison? ADV GAUNTLETT: Mr Kennedy. ADV KENNEDY: Yes, if we may, Mr Chairman, with the agreement of our colleagues. Mr Pattison, various undertakings have been 10recorded on behalf of the merging parties, including Massmart, that have a bearing on labour. Of course, one of the important areas of focus for our client’s various unions, apart from SACTWU and I have a separate team, part of our focus will be on that area and particularly public interest issues as well. Now, one of the undertakings that has been made, may I just ask Mr Chair, we have prepared a core bundle for use with witnesses. They do include some of the confidential material. We will obviously deal with that when the time comes in the manner appropriate that is normally followed by this Tribunal. May we have your leave to hand 20a copy of that bundle to the witness and also to make available copies to everybody else? Mr Chair, may I also indicate that these comprise just extracts of the record? So, nothing comes by way of surprise for anybody. It’s simply a convenient way of collating in a brief form. CHAIRPERSON: That’s fine, hand them up please.

ADV KENNEDY: Do you have copies for the Commission? Oh, they’ve got. CHAIRPERSON: We’ve got two bundles, SACCAWU bundles. Which one do you want to start with? ADV KENNEDY: It’s marked “core bundle”. There is only one bundle that we are referring to. It’s referred to as “core bundle for cross-examination”. Mr Chair, I may have misunderstood. There may not be copies available for my colleagues. We are just trying to find out if that was done. If it hasn’t been done, I apologise, if we can just 10ask our colleagues if they wouldn’t mind to look at the record at the relevant page number. We have two, I’m afraid, only two. So, perhaps our colleagues can share. I do apologise. I thought we had enough for everybody. CHAIRPERSON: Go ahead, Mr Kennedy. ADV KENNEDY: Thank you. Mr Pattison, could I ask you in that bundle please to first turn to page 2503? 2503 is an extract from one of the documents that has been filed by the merging parties and you’ll see it’s divided into A and B. I’m interested in A, which is the employment related undertakings. If I can just read it out to refresh 20your memory “Massmart and Wal-Mart undertake (1) not to cancel any existing agreements with trade unions and honour pre-existing union agreements and abide by South African law; (2), to afford all future employees the benefit of association with a trade union of their choice; (3), to create jobs; (4) to respect the rights of unions and

workers and not to engage in any activities, which undermine its existence and activities of these unions; and (5), to increase job security for all current and future employees”. Do these remain undertakings that Massmart is committed to? MR PATTISON: They do. ADV KENNEDY: In relation to the paragraphs marked 1, 2 and 4, that relates particularly to relationships with unions. You’ve had a relatively harmonious relationship with the unions over the years until recently. Would that be fair to say? 10MR PATTISON: It would be fair to say. I think it’s important just for me to make the point that the recognition agreements the unions have in the Massmart Group operate at a divisional level. So, Mass Discounters, Masscash, Mass Warehouse and Massbuild, that is where the operating relationship tends to sit, but yes, I think it would be fair to characterise it as overall a relatively good relationship. ADV KENNEDY: And more complicated in the last few years, not so? MR PATTISON: Not necessarily across the group. I think it would be fair to say that in two of the divisions we have had perhaps more 20disagreements than we’ve normally had. In fact, in the two other divisions relationships have improved and we’ve had a relatively clear time. ADV KENNEDY: There has been no connection between the possibility of the merger taking place with Wal-Mart on the one hand

and complications that have arisen in the last few years in relation to the union relationship. MR PATTISON: Certainly not on behalf of the Massmart Group, no. ADV KENNEDY: Alright, well we will get back to that a little later. I would like to now look at the two remaining ... sorry, before we leave 1, 2 and 4, of course, you are bound by existing agreements, whether or not you make a formal undertaking here and you are bound by South African labour law in any event, as the Competition Commission has just recently put it a moment ago, not so? 10MR PATTISON: Are you asking if we are bound by South African law? ADV KENNEDY: You are bound by South African law. MR PATTISON: We are bound by South African law. ADV KENNEDY: Quite regardless of any undertakings that you give here, not so? MR PATTISON: I would assume so, yes. ADV KENNEDY: So, agreements you are still bound by and the labour legislation you are still bound by. That includes benefit of associations with a trade union of fair choice and likewise respecting 20the rights of unions and workers and not engaging in activities, which undermine the existing and activities of those unions. All of those actually add nothing to the protection that is given to workers and unions in any event by South African law and also by the agreements that you already have in place, not so?

MR PATTISON: I’m sorry, I’m not sure I understand your question. ADV KENNEDY: The undertakings add nothing to the agreements that you are already bound by and labour law that you are already bound by, not so? MR PATTISON: I think fundamentally I would agree with you. I think, however, there is an intent over and above that, certainly in terms of South African labour law, you can try and derecognise a union and perhaps if I can just add, Chair. In Massmart’s case, in at least one of the divisions, the unions don’t actually have sufficient 10membership to be recognised in terms of the labour law, but yet we recognise them anyway. So, I think that statement does incrementally affect our commitment, because what we are essentially saying there is despite only perhaps having 25% representation in a division such as Massbuild, we wouldn’t challenge their right to represent the bargaining unit. So, I think there are some incremental... ADV KENNEDY: Yes, that undertaking is not apparent to us in the wording that is here, but we are interested in it. Are you prepared to give an undertaking that recognition already granted to unions, despite the fact that they may not already be sufficiently 20representative in terms of the thresholds laid down by the legislation, that that recognition will continue despite the merger? MR PATTISON: Well, what I would say is in addition to what we’ve stated, there are obviously ... that would be part of a negotiation and I would certainly be happy to engage the relevant unions who represent

that division on that basis, but it would have to be conversation, correct. ADV KENNEDY: But you are not prepared to make the undertaking I’ve just put to you. MR PATTISON: Not at this session, no. ADV KENNEDY: Why not? MR PATTISON: Relationships are quite complicated. So, I think a high level commitment is sufficient, but the recognition agreement is quite complicated and I certainly would have to respect the processes 10involved in negotiating a recognition agreement and do it under the appropriate process in consultation with the unions and not their counsel and going through the exact clauses of the recognition agreement and making sure they were adjusted accordingly. So, I would certainly commit to a process by which we could achieve that, but we would have to do that in the appropriate detail and process. ADV KENNEDY: Do you appreciate our client’s concerns, the various unions which we represent, as well as COSATU, the Union Federation that while you may have had relative harmony to an extent in the past when it was just Massmart, now that Wal-Mart is on the 20horizon some danger bells are ringing. As the Competition Commission has pointed out, as they put it rather coyly, there is a legacy. We would perhaps put it stronger, that there is a reputation, if not a notoriety on the part of Wal-Mart; that part of their business model is not to promote union representation, not so?

MR PATTISON: No, I wouldn’t agree with your assertion at all with the Wal-Mart Group and certainly all discussions I had with them certainly indicate that they’ve got no intention of challenging those agreements and certainly from Massmart’s side we’ve got no intention of challenging them, but I would say I do understand and recognise that if your assertions are correct, then one might have some uncertainty and that’s why I say I would be happy to discuss that with the union and give them that assurance. ADV KENNEDY: But not give them that assurance on the record 10here now? MR PATTISON: No. ADV KENNEDY: Wal-Mart has no unions recognised in any of its operations in the United States, not so? MR PATTISON: I can’t answer on behalf of Wal-Mart. I think you should reserve that question, Chair, with your permission, to Mr Andy Bond. ADV KENNEDY: Well, their own documents reflect that. MR PATTISON: Yes, I’m just saying I’m not... ADV KENNEDY: If you are to assume for purposes of my question, 20without conceding the factual correctness of it and you leave that to Wal-Mart, would you not agree that if it is the case that there are no unions recognised in the United States, that sends some shivers, justifiably, down the backs of the union members and their officials here, not so?

MR PATTISON: Well, I think it’s a bit of a leap of logic. I think you would have to judge the whole group’s performance. Certainly what I have done, I would say in those countries where unionisation being recognised is the norm, then as far as I understand, and again I can’t speak as an expert on this basis, that Wal-Mart does recognise the unions. Again, I’m not an American and I don’t work for Wal-Mart, but from what I understand, it is not common in the US for companies to recognise unions and therefore certainly in the judgement I have made, again without all the detail, is that that seems to be more of a 10norm than it is in South Africa and so to draw the logic link that because Wal-Mart behaves in one way in the US means they are going to behave that way in South Africa, I disagree with completely. ADV KENNEDY: Well, are you not aware of Wal-Mart toolkits? MR PATTISON: I am familiar with the word “Wal-Mart toolkits”, correct. ADV KENNEDY: Yes. MR PATTISON: If I may finish, I’m not at all au fait with all of them. In fact, I’ve seen the minority of them and perhaps one or two. ADV KENNEDY: But you’re aware that if the merger were to take 20place, the Massmart operation would be expected to follow the general model of Wal-Mart and the various toolkits that are specifically prepared for use by acquired firms, not so? MR PATTISON: No, that’s not my understanding. All my discussions with Wal-Mart have been on the following basis. Wal-

Mart have some intellectual property, which are available to us. They have shared with us some toolkits. If we wished to, if management wished to make themselves available to those toolkits, we can choose to and if we don’t, we don’t have to. There has been no talk or commitment of compulsory implementation, other than if I can say obviously around some legal issues such as Sarbean Oxley and the Foreign Corruption Protection Act and some things around financial disclosure. ADV KENNEDY: If we can complete our reference to this 10document, we are going to return to some of the points you’ve just made a little later, but if we can carry on at page 2503, we can look at the remaining two paragraphs (iii) and (v). The one undertaking is to create jobs and (v) is to increase job security for all current and future employees. ADV GAUNTLETT: Chair, I’m sorry to interrupt my learned friend, but there is an aspect of confusion, which can get worse. What he is putting as undertakings made in respect of this matter, is you will see on the record, not so, what he is reading from at page 2503 of the record, which is just a bear page now put into the bundle, of 20Massmart and Wal-Mart to undertake, preceded by a letter from the Commission saying “would you” and what it is followed by is the response at 2504, which is the wording you will find faithfully replicated in the Commission report at page 5.

In certain instances there are matters of paraphrase and we need just to be very clear that the actual undertakings made by Massmart and Wal-Mart are those correctly reflected by the Commission at page 5 of its report and at the record at page 2504. ADV KENNEDY: Thank you Mr Chair. Well, can I just ask the witness in any event? Is it in fact an undertaking on the part of Massmart to create jobs if the merger were to go ahead? MR PATTISON: Yes, it is. You know, the Massmart in itself has an aggressive expansion strategy, which is disclosed in the papers, it’s 10disclosed on our website and we talk about it quite openly and publicly. We intend to increase the number of stores, increase the number therefore of jobs in the company. Wal-Mart’s ownership of Massmart would certainly, in our expectations, speed that up and we would open stores perhaps quicker than we would have otherwise. So, with some level of confidence, although again Chair, if I may note, it is difficult to predict world economics and I’m sure none of us round the table would be bold enough to say that we can see perfectly into the future. If nothing else changes, Massmart will create a significant amount of jobs over the next 3 to 10 years. 20ADV KENNEDY: At page 5 of the Competition Commission report the undertaking formulated as accepted by Massmart is that Massmart will create jobs as the proposed transaction will enable the merged entity to implement Massmart’s pre-existing expansion plans with

more confidence and on an expedited basis. You stand that by, do you? MR PATTISON: Well, I think that’s consistent with my last statement. ADV KENNEDY: Yes. Now Mr Pattison is it not correct though that while your plan is to expand, particularly if the merger were to go ahead, that you’re also wanting to increase market share and while you may increase possibly, the number of jobs in your own operations, this could be at the expense of other retailers, not so? 10MR PATTISON: I mean certainly I can’t speak to that as an expert. ADV KENNEDY: Yes. MR PATTISON: It certainly as a CEO of a business, it is my job to gain market share. I think you’re right to identify that. Certainly in Massmart one of our core values is that we strive to compete fairly and so I think that will be correct to say that we will be aggressive competitors. And to the extent that perhaps some of our competitors don’t run their businesses as well as we do, I suppose there is the possibility that they will decrease the jobs. It’s certainly not my expectation. The South African market were fortunate through its 20current management is growing and our forecasts of GDP growth being between somewhere between 3 and 5%, do lead me to believe that it is possible that we can all grow without necessarily anyone having to reduce their number of employees. ADV KENNEDY: There’s no guarantee of that though is there?

MR PATTISON: Guarantee of what? ADV KENNEDY: Of all of you growing the number of jobs. MR PATTISON: Well it’s certainly behind Massmart’s control what our competitors do and how well they run their businesses. And perhaps if I can also add Chair, you know, it’s a complicated world we live in, economically, and the market is moving fast. And so I certainly would like to point out there are things that can happen in the South African economy and the world economy, which might lead to all of us having to reduce jobs as consumers health improves 10or declines over time. ADV KENNEDY: Well let’s look at the assurance or undertaking that Massmart will grow jobs within its operations and will improve, enhance job security of existing and future employees. One of our problems with the proposed merger is that based particularly on the economists’ input that will be dealt with at a later stage of this hearing, there is a concern on the part of Unions that both within the merged operations and beyond, in the rest of the retail operations in South Africa of your competitors, there will not be a nett growth in employment at all, but in fact a reduction, particularly because Wal- 20Mart in fact has shown the way over some decades in changing their way of operations from the traditional type of retailer to something far more modern, but often at the expense of employees. Now what we want to know is that particularly in relation to Massmart while you cannot speak for your competitors, in relation to

Massmart, is there anything concrete or anything that is possible to enforce by way of an undertaking that you will grow jobs not reduce jobs, you will increase rather than reduce job security? MR PATTISON: You know, I think perhaps I would need a greater understanding of your word undertaking. I mean I think an undertaking to me implies an intent, but perhaps preserves some flexibility for extraneous factors that we have no control over. I wouldn’t want to give you the wrong impression that if South African economy shrank in the following year that we wouldn’t respond to 10that. The undertaking you see in 5 is to increase job security for all and current and future employees, that puts a responsibility on me as the chief executive to make sure Massmart is run for the long-term, remains competitive and remains viable. So you know, I think I’m more than comfortable as we already have, to give undertakings. I think to the extent that those need to be expanded any further, I think that remains for the findings of this Commission, this Tribunal. ADV KENNEDY: Do you understand our concern? I mean, we understand your concern that market conditions may change, the 20economy may change and so forth, so you’re reluctant to give anything more concrete than what’s been given. Our problem is and this will obviously form the focus of much of our argument in due course, is that if the merger were to go ahead and if conditions were to be considered to impose on the merging parties to try and preserve

job security, there doesn’t seem to us to be anything really reliable or enforceable that is being offered by the merging parties. Now you say it will obviously depend on the findings of the Tribunal and ultimately that must be so, but you’ve got to equip the Tribunal with proposals to try and give, not just simply a word or letter of comfort, but something that is concrete and enforceable. MR PATTISON: Yes, I think the difficulty I have in giving you a clearer response is it’s not our intent to reduce the number of jobs. We have communicated that we intend to open a number of stores. I 10can certainly commit to some of those stores, because once we’ve signed the lease, I can tell you we can open it. If I tell you in four year’s time I’m going to open 10 stores, that’s somewhat dependent on me being able to sign the lease and find the site. So to some extent I can be firm and say when we’ve signed the lease we’re definitely going to open the store, but it’s difficult to promise … to do something that you don’t intend not to do. It’s our intention to grow. We’ve stated that on the record, we’re happy to be judged going forward on that basis, but it’s difficult for me to respond to something that I don’t intend to do. 20ADV KENNEDY: In fact your forecast is 20% growth over three years, not so? MR PATTISON: Are you referring to turnover or space, I’m not sure where you’re quoting now?

ADV KENNEDY: Well your own strategic plan refers to a 20% growth, as I understand it’s in turnover isn’t it? Yes, turnover. MR PATTISON: I’m just asking if that’s … I’m not sure what document you’re referring to me. It sounds about right. ADV KENNEDY: Could you tell us what it is? What is your strategic growth forecast, sorry your growth forecast in turnover for the next three years. MR PATTISON: Not in turnover, I mean I haven’t got that at the top of my head. What I can tell you is in this current year we intend to 10expand space by 8%, just over 8%, it’s in the record. If in the following year it’s another 8% and then another 5% and I suppose that adds up somewhat to your 20%. ADV KENNEDY: Something like 20%. MR PATTISON: Correct. ADV KENNEDY: Well in fact your 20%. MR PATTISON: So that’s in space, not in turnover. Turnover should be an advance of that. ADV KENNEDY: In advance of that, higher than 20%? MR PATTISON: Higher than 20%. 20ADV KENNEDY: But do you… CHAIRPERSON: Sorry, does the growth in turnover equate itself in your mind with the growth in jobs necessarily? MR PATTISON: No, not at all. I think the best proxy Chair for growth in employees would be growth in space. So it is absolutely

true that if we add 20% more space, we would add more staff, it will be slightly less than 20, because the head office numbers will remain fixed, but certainly 20% per space may be 15% more jobs, correct. And then again if I may add Chair, just … those are three year targets. I would say the first year target is absolutely done, you know, we don’t put something in a one year plan unless we’re building the store. Two years out it’s probably 75% guaranteed, three years out it’s probably 50% guaranteed. Let me also note that there is a risk that we open space at a greater rate than that as well and it could be 10higher. ADV KENNEDY: Thank you. Mr Pattison is it correct that growth on the part of Massmart would largely be through acquisition of independent retailers? MR PATTISON: No, that’s would be incorrect. What is true is that perhaps over the last few years some percentage, I would hazard a guess, 50% has been through acquisition. The Tribunal will be aware or the Commission will be aware, we are currently requesting permission to acquire a company called Rhino Cash and Carry. Beyond that it’s difficult to see many more acquisition targets and I 20think it would be safe to say that we will in the majority be opening new space in that 20% expansion space and the minority will be acquisitions. ADV KENNEDY: But even to the extent that you don’t take over independent retailers, there will be a measure if your plans come

together if the Wal-Mart model is implemented and you get all the benefits that are quite apparent from your own documents, that some of your growth will be at the expense of independent retailers, not necessarily through taking them over, but by acquiring their businesses, but by taking over some of their customers, not so? MR PATTISON: Well certainly part of our strategy up to date has been taking over the independents and certainly the case we’ve made to the Commission is that that is a way of protecting independent retailers. And certainly Massmart’s strategy has been to serve 10independent retailers over many years. So by being part of the group, they have a chance of competing against the real threat, which is expansion of the formal national retailers who are our competitors, whom I’m sure are familiar to … we are actually in many instances, we believe coming to their defence and helping them save those jobs. In addition when our experience is that when we take over an independent retailers, we improve the quality of the job substantially. Independent retailers tend to pay below us, they tend to sometimes not enforce all labour law as well as we do, and I think the stats bear that out, and so we think we’re improving the quality of jobs. I will 20concede however, that a poor independent retailer and let me just expand that what we mean by independent retailers also includes hawkers and spaza shops and informal trade. I do concede that there has been a long-term trend, perhaps lasting as long as 10 and 15 years which has seen a shift away from

that type of distribution model to a more formal retail model. I would say that a large amount of that move has already changed and I conceded there is a little bit more coming. ADV KENNEDY: A fair bid not so? MR PATTISON: No, I would think the stats don’t support a fair bid. The market is probably 65% already with national retailers. Elsewhere in the world, again these are my best guesses, I’m not an expert in this, informal markets should occupy between 20 and 25% of the market. So there’s currently maybe 10 or 15% of the market in 10the formal retailers and certainly that will decline though, but I would say the majority of it has already happened. ADV KENNEDY: Would you agree that labour costs are the greatest component of overheads of retailers? MR PATTISON: I turn hopefully looking to CFO. ADV KENNEDY: No, I’m afraid you’re on your own here. MR PATTISON: Okay. He’s usually somewhere around, excuse me for that. I think actually rental costs are our largest cost and then I think following that, labour costs. ADV KENNEDY: But it’s very substantial, is it not? 20MR PATTISON: It is substantial. I think the number is 30%, around about, but please I apologise if that number is slightly wrong, but it’s my best guess.

ADV KENNEDY: And will you agree that typically wages in retailers, which are unionised are generally higher than those who are in non-unionised operations? MR PATTISON: I have not seen that. ADV KENNEDY: Does it not stand to reason? MR PATTISON: I don’t know. I’m not sure I agree it stands to reason. ADV KENNEDY: Well doesn’t it stand to reason because unions organise their members and are prepared to take their members out on 10strike specifically to increase wages and other benefits of course? MR PATTISON: Again, I agree they take their members out on strike and that they bargain, I don’t necessarily think they get a higher increase than perhaps staff not represented by a union, but represented by their own collective would perhaps achieve by themselves. ADV KENNEDY: Well I put it to you that it stands to reason that in fact unionised operations do typically have higher wages. You’re prepared even to make that concession? MR PATTISON: No, if that’s a fact then I would accept it. I haven’t 20seen it as a fact though, but you know, if it is then I accept it. ADV KENNEDY: Does it concern you that Wal-Mart has this reputation of not encouraging unions, in fact discouraging what they call third-party representation?

MR PATTISON: Well again, if you’re talking about the Wal-Mart group, which includes Wal-Mart International, certainly I have interrogated them and they have assured me that they do not have a global policy of discouraging union membership. What they have, to the best of my understanding, is they have a policy that says they will adopt the norms of the market in which they operate. And so the sort of assurances I sought, because this was obviously going to be an issue raised, is in a market perhaps as the UK and Mr Bond is going to be better prepared to answer these questions, has a good and solid 10relationship with the union. That’s not to say that they don’t have disagreements from time-to-time, but I think that’s the nature of unionism. And so no, I’m actually assured that Wal-Mart can be held to their word and that in markets where unionisation is the norm, they will work with the union. ADV KENNEDY: In Canada where there is a norm for recognition there is no recognition by Wal-Mart. MR PATTISON: I’m sorry Canada is not one of the markets that I’m familiar with. I am familiar with the UK market. 20ADV KENNEDY: Alright, well perhaps we’ll deal with that with another witness. Now I’d like to turn to the relationship with the unions, particularly SACCAWU and its member in recent times. Now in your documents Massmart contends that the retrenchments that

took place some months ago were quite unrelated to the Wal-Mart merger. Do you stand by that proposition? MR PATTISON: I do, they were completely unrelated. ADV KENNEDY: Quite unrelated? MR PATTISON: Completely unrelated. ADV KENNEDY: And you’re not willing to try and resolve the concerns of the workers who have lost their jobs through some form of reinstatement or transfer to other divisions within the Massmart group? 10MR PATTISON: Yes, if I can add Chair, the resultant 503 employees who lost their jobs at Mass Discounters weighs heavily on me. And so I think the record will show that during that process of that re- engineering that resulted in the retrenchments, we certainly reached out on several occasions and in great earnest to SACCAWU to come to an arrangement by where that retrenchment would actually be avoided, which required some giving in terms of … by SACCAWU to us in terms of labour flexibility and mobility. ADV KENNEDY: So do you blame the retrenchments on SACCAWU? 20MR PATTISON: Not at all. Management takes responsibility for the re-engineering and I have to live with the consequence, my conscious of having to retrench those 503 employees. But in answer to question, because you said aren’t you prepared to, the absolute answer is yes,

we are prepared to. We were prepared to at the time to try and avoid those retrenchments. Post those retrenchments I would be more than prepared to try and find a way of accommodating those staff and certainly by general policy, I would be encouraging Mass Discounters and any of our divisions as they open up new stores and should one of those employees who lost their jobs apply for that, we would certainly give greater weighting to them being able to be appointed than anyone else. I absolutely commit myself to doing our best to help those 10employees. They were, just again Chair perhaps for the record, they were offered opportunities in other parts of the Mass Discounters division, but unfortunately did not apply for those. ADV KENNEDY: Can I just have a moment Chair? I don’t have immediately to hand a reference to the passage in the documents, which indicate that “there was concern on the part of Massmart to transfer the workers elsewhere within the group, thereby avoiding retrenchment, because this would have consequences for collective bargaining and other risks for Massmart.” Are you familiar with that? 20MR PATTISON: I’m familiar with the general concept. I wasn’t involved in detail, but perhaps it might be helpful for you to know that in terms of our recognition agreements and all these retrenchments, the full processes of the CCMA and the Labour Courts were used. All efforts of mediation and conciliation were applied. I

would actually say that all parties tried their best to accommodate all those employees and unfortunately the processes have been concluded. And if I can reinforce again, certainly having nothing to do with the Wal-Mart acquisition whatsoever and I mean to the extent that SACCAWU think there’s more to be done, we’d be happy to talk with them. And to the extent that they think somehow that we’ve breached labour law or due process or our recognition agreements, I know the CCMA and the courts are available for them to approach us on that basis. 10ADV KENNEDY: The difficulty is that while of course the unions have their rights to pursue remedies in the courts and the CCMA, in fact would be the labour court because it’s retrenchments, the reality is that these people have lost jobs and they’ve not been accommodated thus far. Now it’s encouraging, to be frank with you Mr Pattison, to hear that there seems to a glimmer of hope on the part of Massmart executive represented by you today. Would you be willing to give an undertaking, an enforceable undertaking in these proceedings that these hundreds of retrenched workers will in fact be found jobs or will it simply be left again on the basis, well it’s 20something we can talk about? MR PATTISON: Yes, I mean given that in my firm belief it has nothing to do with the Wal-Mart acquisition, I’m not sure why that sort of undertaking would need to be turned into a harder undertaking at all, but even given that, again if one looks at the details, it’s quite a

complicated thing and much detail has to be discussed. I’d be more than happy to engage with SACCAWU on it. But individuals may not wish to be re-employed, they may now be wishing … may be working somewhere else and so I can’t commit to have them employed in Massmart. Also they might not want the job that we offer them and so we can only really deal with this on an individual- by-individual basis and I know that the Mass Discounters team would be prepared to continue to consider those 503 employees for any future job that get creates, that that retrenched employee would like 10going forward. ADV KENNEDY: In the bundle that’s in front of you, the core bundle, if I could ask you please to turn to page 1148. MR PATTISON: Sorry 11? ADV KENNEDY: 48, it’s a minute of a board meeting. If I can just identify that, 1148 is the front page of the first page of the minutes of a board meeting on the 2nd of February 2010, which you Chaired, not so? MR PATTISON: Yes I am recorded as Chairman of the meeting. ADV KENNEDY: And then if I could ask you to turn to page 1149 20about just past halfway down, in fact about a third of the way down there’s a person called L S, now I understand this minute is in fact confidential, so I’m not going to read everything out, I’d just like you to have a read through it quietly to yourself. Do you see the letters L S with the words starting ‘what if the union’? Do you see that?

MR PATTISON: Correct, I do see that. ADV KENNEDY: And there’s reference specifically to the possibility of redeployment and then one, two, three, four, five paragraphs down, “G H are you going to speak to the other divisions?” do you see that, “are you going to speak to the other divisions.” MR PATTISON: Yes. ADV KENNEDY: And then the reply for R R, who according to the table is Mr Ramia? 10MR PATTISON: Ja. ADV KENNEDY: Do you see the response? MR PATTISON: Correct. ADV KENNEDY: And there’s a reference to huge risk due to group or centralised negotiations. MR PATTISON: Correct. ADV KENNEDY: There seems to have been a serious problem at the time of the retrenchments, we’re talking about February 2010 when this problem was … when this issue of retrenchments was reaching its climax, that there was a difficulty with in fact offering relocation 20or transfer of potential retrenchees to other operations? MR PATTISON: Correct there is. ADV KENNEDY: Can that be resolved now or is it simply going to be left on the basis, well we’re prepared to talk to SACCAWU?

MR PATTISON: Well you see these items as envisaged, as far as I understand in terms of the Labour Relations Act, are a basis of negotiations. So without wanting to bore the Chair with too much detail here, and I look for your guidance Chair if I do, if one wants to transfer an employee from one division to another, we effectively have two separate recognition agreements and therefore two different conditions of employment. And therefore we would be more than happy to transfer an employee from one division to another, if they were prepared to sign a new condition of employment. 10 And that’s why it is not something I can undertake here, because it would involve that individual being prepared to accept new terms and conditions of employment. ADV KENNEDY: Are you prepared to give an offer to undertake that offers will be made, whether employees accept those offers, or former employees, is up to them. If they’ve found a job up the road at Pick and Pay, as you say, they might not want to take it, but we’re not asking you to reach agreement with the employees here and now. We’re asking are you at least to try and delay some of the union’s fears, prepared to undertake that offers will be made to all the 20retrenched workers? MR PATTISON: Again, no I’m not. What we are prepared to do is on the basis … let me perhaps remind you and just check with you, are we still talking about the 503 retrenched employees? ADV KENNEDY: Yes.

MR PATTISON: That… ADV KENNEDY: Are there any other retrenchees? MR PATTISON: No, I’m trying to ask you if you’re now referring to should all employees of Mass Discounters have the ability to be transferred to somewhere else or are we just referring to the ones no longer employed by Mass Discounters? As I say, we would be prepared and again, I’m more than happy to discuss this with SACCAWU if they’re interested, is on the basis that that employee signs a new terms and conditions of employment, we would be happy 10for them to apply for any of the new jobs created going forward. ADV KENNEDY: Is there any reason why that hasn’t been discussed with SACCAWU already? MR PATTISON: It has already. ADV KENNEDY: It has already, when was that Mr Pattison? MR PATTISON: In various discussions that we’ve had with me. ADV KENNEDY: But not resolved? MR PATTISON: The offer was certainly made, but not accepted. ADV KENNEDY: Let’s look now at these retrenchments and you’ve indicated that they were quite unrelated to the merger. Do you accept 20though that from our client’s perception, in our client’s perception again there’s a bit of an alarm bell, because in 2010, just about the time that the possibility of the merger is gaining momentum, you’re retrenching 500 staff members and putting out of work 500 staff members and their households.

MR PATTISON: Yes, perhaps … no, I’m not sure I do completely understand by the way, I mean of course there’s a great many facts here given this unrelated to the merger that perhaps you’re not aware of. I think the first is that Massmart started on this process of investing in systems and supply chain in 1995, when we first installed the SAP. We then proposed an regional distribution structure in Mass Discounters in 2002. We started building this distribution centre which resulted in this problem in 2008, probably late 2008, consultations started at the beginning of 2010, once this thing was 10starting to be built. The process of building regional distribution centres and re- engineering has been going on for lots of time… ADV KENNEDY: For a lengthy period. MR PATTISON: For a lengthy period, thank you. Also on top of that, I think in your assertion is that somehow the possibility of a merger was gaining momentum in the beginning of 2010, which is also incorrect. I don’t think that’s true at all. ADV KENNEDY: When did it pick up momentum Mr Pattison? MR PATTISON: It picked up momentum in late September when 20Wal-Mart contacted me and said they wish to enter into discussions, potential discussions about an acquisition of Massmart and there referring to September 2010. ADV KENNEDY: September 2010 you had this call suggesting discussions about a possible merger?

MR PATTISON: Correct, and that resulted in a meeting, I think off the top of my head without consulting my notes, I’m looking into the back, someone will tell me if I’m wrong on the 24th of September. ADV KENNEDY: 2010 and are you saying that this was the beginning of the talks about a possible acquisition of Massmart by Wal-Mart in September 2010? MR PATTISON: That was the first time that Wal-Mart spoke specifically of a potential acquisition, let it be noted, that was initiations of a discussions, not an offer. Prior to that any discussion 10with Wal-Mart had merely been that they were interested in the African content, were performing a market analysis and would like to discuss with us and with others, our competitors and suppliers, the conditions of the market. ADV KENNEDY: Well let’s go through and I’m going to deal with this as quickly as we can, whether that in fact is correct. Because it seems to us quite relevant because not only does it affect the specific job losses that we’ve raised, we’ve done so not only because we’re concerned about those 500, but far more importantly perhaps in the interest of workers generally and to test how reliable your assertions 20are that jobs will increase and that job security will increase. Where just as recently as about a year ago 500 lost their employment. And it’s relevant to us also as to whether in fact those 500 retrenchments were not part of manoeuvring on the part of Massmart to make yourself look more attractive as a potential bride for Wal-

Mart. So let’s examine that. If I can ask you please just to remind us when Massmart was identified as a target by Wal-Mart as far as you’re aware? MR PATTISON: As far as I am aware it would have been in the weeks before the 24th of September, but again I would have to ask you to ask a Wal-Mart witness Andy Bond that question. They have not disclosed to me exactly when they identified a Massmart, but certainly in answer to your question that is my impression about when we identified. If I can also perhaps Chair be clear, as the target and 10perhaps and a target is a different question. Perhaps I can just get clarity, which one are you referring to? ADV KENNEDY: Well as the preferred target? MR PATTISON: As the preferred target? ADV KENNEDY: Yes, there is reference in Wal-Mart’s own documents that it became the preferred target as long back as August 2009. MR PATTISON: Certainly that was not ever discussed with me. ADV KENNEDY: If I can take you to the same bundle, page 2647 this is confidential. 20MR PATTISON: Mine is mostly black. ADV KENNEDY: Yes, it is but at least there is something that is left open for us and that is the bit that I would like you please to look at. Do you see the date of the document September 2009? MR PATTISON: I don’t.

ADV KENNEDY: At the foot of the page. MR PATTISON: Oh yes at the bottom yes, I have got it. ADV KENNEDY: And you read the portion that is, don’t read it into the record. MR PATTISON: Sure. ADV KENNEDY: But paragraph 3 “South Africa”. MR PATTISON: Yes. ADV KENNEDY: And you see there is reference to Massmart. MR PATTISON: No, I can’t see that. 10ADV KENNEDY: In the middle of the page? MR PATTISON: No, mine is black. Sorry, my apologies, I have seen it, yes. ADV KENNEDY: Yes. MR PATTISON: I have seen it there in the box, yes. ADV KENNEDY: Do you accept that Massmart identified as a priority target Massmart … sorry Wal-Mart identified Massmart as a priority target as far back as September 2009? MR PATTISON: I don’t know. Again are you saying the target, I can’t see what is written in the other two lines. 20CHAIRPERSON: Yes, I think you have got to be careful about that. I mean mine is edited out as well, but it would seem as if there are three names put down here, we just see Massmart name not the other names.

ADV KENNEDY: Well, we are happy to move on from that and not leave it simply at that. I accept that that is so, Mr Chair. In fact you had various visits overseas did you not? MR PATTISON: For which time period I mean I go overseas from... ADV KENNEDY: From 2009, where there were some discussions about Wal-Mart’s interest. MR PATTISON: Again are you referring to overseas trips? ADV KENNEDY: Yes. MR PATTISON: To where, if I may ask? 10ADV KENNEDY: If I can take you to page 1715, 1715 is an extract of Massmart’s board meeting pack for the 25th of November 2009. It is confidential, but I would like you to please look at the last six lines. There is reference already there to talks between Wal-Mart with South African Retailers and that included yourselves, not so? MR PATTISON: Yes correct. As far as I can remember we were first requested if we would meet with Wal-Mart in the beginning of 2009. I think we got that request via their advisors in December 2008. That was the beginning of us, the first time we understood that Africa had seriously come on to Wal-Mart as a potential expansion of 20the market. ADV KENNEDY: If I can ask you to please look at 1599 board meeting minute for the 26th of August 2009, which you attended, not so? Do you see that Mr Pattison 1599? MR PATTISON: Yes, I am just...

ADV KENNEDY: Look at the people present at the top of the page, your name is about halfway down. MR PATTISON: I am recorded as attended yes. ADV KENNEDY: And if I can ask you to please turn to page 1600, the next page, at the foot of the page there is a reference to the chief executive officer’s report and there is reference to GP those are your initials not so? MR PATTISON: Correct. ADV KENNEDY: And then if I can ask you, there is a reference to 10trips to the United States and on the top of the next page that is 1601 about a trip that the Massmart team went on to Wal-Mart, not so? MR PATTISON: Yes, I think you are getting a bit confused. One can visit a Wal-Mart store. ADV KENNEDY: Yes. MR PATTISON: But not necessarily be visiting with Wal-Mart. And on that occasion Wal-Mart had opened a new store in Chicago. It is quite common by the way for retailers when travelling abroad to introduce themselves to other retailers, let them know we are around. We sometimes host global retailers here in South Africa and 20sometimes they host us, certainly it is unconnected with … necessarily with talks on some other basis. Perhaps Chair it might be useful to know I visited almost every single global retailer over the last three and four years and visited with their management in all their stores.

ADV KENNEDY: But aren’t you being a bit coy about the discussions with Wal-Mart? Isn’t it so that in fact there were some serious discussion about the potential acquisition, certainly not a firm offer, we are not suggesting as early as 2009, but serious talks about possible acquisition, not so? MR PATTISON: No, there were definitely not serious talks about a possible acquisition. Perhaps if I just share with you the learning as a retailer that Wal-Mart is intending to come to your market there is certainly something you should take great interest in as a retailer and 10certainly we did. I think it would also be fair to say that we wanted to make sure that Wal-Mart knew who we were, were familiar with our business and in the same light as any other non shareholder of Massmart, maybe an institution, maybe a person, an individual would like to become a shareholder in Massmart, it is our job, it is our fiduciary responsibility as a saleable company to make sure that any potential new shareholder is familiar with the group, understands our public accounts and certainly any interaction we had with Wal-Mart over that period was on that basis. And again Chair perhaps you might it useful that discussions 20with other global retailers into Massmart’s business have taken place. It is difficult to draw a line between a discussion of interest and serious talks. And that is why I would disagree with your assertion that there were serious talks.

ADV KENNEDY: Is it correct to say that your greater emphasis on food as one of the product items that your operations retail has been at least in part inspired by making the Massmart Group more attractive to acquisition by potential investors from overseas? MR PATTISON: I would agree with you that Massmart’s entry into retail food probably does make Massmart more attractive to Wal- Mart, perhaps more so a company like Tesco or Karafuu by the way who are more focused, apologies to Wal-Mart, more focused on the food retail market only. But I don’t think, in fact it is completely 10false to assume that we took that strategy in response to that. In fact perhaps the greater dynamic that may be useful and I certainly know the Competition Commission is aware of, is Massmart’s food business is fundamentally a wholesale business. Like wholesale business requires supplying the independents we talked of them earlier, they have been under threat from the National Retailers for some time, and so it has been a very important strategy to diversify out of wholesale retail into food retail, merely to protect Massmart’s competitive business and that is the primary reason that we adopted a food retail strategy. 20ADV KENNEDY: If I can take you please to 1618 this is an extract from the CEOs report to the board that is your own report in November 2009 if you looked at the typed... MR PATTISON: Correct.

ADV KENNEDY: Could I ask you please to look at the very last bullet point right at the end, the last two lines of, well in fact just to give you the context, there is a reference to the food retail strategy, you see paragraph 6 “vision 2012” do you see that? MR PATTISON: Yes. ADV KENNEDY: The heading. MR PATTISON: Yes, I do see it. ADV KENNEDY: Then two paragraphs down starting with “perhaps” there is reference to expansion of food retail operations. 10MR PATTISON: Correct. ADV KENNEDY: And then just above the bullets there is a set of reasons as to why we are looking into this. And if I could ask you please to look at the very foot of the page, the last bullet point. MR PATTISON: Correct. ADV KENNEDY: That refers to major global retailers. MR PATTISON: Correct. ADV KENNEDY: Having the potential to enter Africa with an emphasis on food retail, not so? MR PATTISON: Correct. 20ADV KENNEDY: And if I can ask you then to go back a bit in the same bundle to page 1508. I don’t have it … I don’t think you have 1508 in your bundle. MR PATTISON: No, I do. ADV KENNEDY: Oh do you?

MR PATTISON: Yes. ADV KENNEDY: Okay it has been omitted here, paragraph 16 in the table. MR PATTISON: Correct. ADV KENNEDY: If you look at the third column this is part of the risk register for the Massmart operation, not so? It is confidential so I am not going to read out the words, but paragraph 16 refers to “the possibility of an entrance of major international competitor into the South African market as a risk going up from the previous 17 to 16.” 10And if you look at the response, the third column you see it starts with the words “through excellent strategic” do you see that? MR PATTISON: Yes. ADV KENNEDY: And then just read to the end of that sentence. MR PATTISON: I am familiar with it. ADV KENNEDY: Yes, would it be fair to say having to this document that part of the response to this risk was to ensure that Massmart is a more attractive South African retailer for acquisition? MR PATTISON: I think that’s not entirely incorrect. I think it would be better described as Massmart must be prepared and I think our 20strategic documents will confirm this, Massmart must be prepared to compete against a global retailer, should they enter South Africa. And that all our strategies are based around that. I would go further to say that not only is that a good strategy, but I would say that for a

senior management team as ourselves, not to have considered that a risk would have been irresponsible. ADV KENNEDY: Well I am debating whether it was a responsible attitude on the part of management. I am just suggesting to you Mr Pattison that the strategy of Massmart at this time, going back particularly around 2009 was to manoeuvre your business into a situation which would be good for the business in your view overall, but one of the factors that you were alive to and influenced by was the potential acquisition by Wal-Mart. 10MR PATTISON: I would say that I think this is a 2009 document, is it? ADV KENNEDY: Yes. MR PATTISON: I mean assuming it is. ADV KENNEDY: It is. MR PATTISON: I would draw your attention to the fact it is probably back as 1999/2000 that Massmart first identified the evolution of global retailer to include the expansion of big global retailers and they are identified as Karafuu, Tesco, Metro, Kingfisher and Wal-Mart. And that we should be responsibly positioning our 20business to compete with them, should they arrive in South Africa. So it is actually goes back a lot further than that. ADV KENNEDY: Just to complete the picture as far as Wal-Mart’s perspective is concerned. As you have said we can cross-examine their witness and we may well do that, but I would like your comment

because it is a good counter balance to your own version as to when things were really hotting up as far as the serious talks about possible acquisition by Wal-Mart were gaining momentum. If I can ask you please to look in the same bundle at page 1600, in fact sorry we have dealt with that already sorry. I have given you the wrong reference, I beg your pardon, and it is page 2629. This is a document again confidential produced by Wal-Mart and if you would look at the second line in the portion that has not been scored out. There is a reference to Wal-Mart’s intentions as to finding a strategic partner, 10do you see that? MR PATTISON: I have got it. ADV KENNEDY: And then at page 2636 24th September again a document from Wal-Mart referring to a country visit in which there was a meeting with Massmart in August, do you see that? MR PATTISON: Yes, I do. ADV KENNEDY: We are talking about August 2009. MR PATTISON: Correct. ADV KENNEDY: And then we have … yes. I put it to you that we are not here simply to come and look at general market conditions in 20South Africa; it was part of the merger acquisition project or idea, not so? MR PATTISON: Yes, perhaps I can help and give it context. ADV KENNEDY: Yes.

MR PATTISON: You know in evaluating this risk of Wal-Mart’s entry, which as I say, sorry, of any global retailer’s entry, which started as early as 2000, we have always understood that there are really three strategies that we should have in response to it, one is that we could be bought by that global retailer, who would enter the market. Secondly, one of our competitors could be bought or thirdly they could start up a Greenfield operations, under each of those scenarios we were planning what we would intend to do and one of, certainly and I think I would be happy to concede that one of our 10strategies would be that should any of the global retailers want to come to South Africa they should know us. And they should realise that management would consider a transaction, because we place the order of our preference to being firstly the global retailer didn’t come that is our preference. The second would be that if they come they would come as our partner and so we would not have to compete against them. And then thirdly should they come with either Greenfield’s or with one of our competitors we would aggressively compete with them and I think therefore you would see the same perception in Wal-Mart that you 20might see in one of the other global retailers that certainly we communicated over many years that should they want to come to Africa, please would they give us a call. ADV KENNEDY: If you could just continue 2660 is the document we looked at a moment ago the priority targets with Massmart

identified with two others as the Chair pointed out taken out or obliterated then we have 2660. MR PATTISON: I have that in front of me. ADV KENNEDY: That refers at the bottom to “13 active projects” and one of those listed; the only one that we can see in the Memphis version is Massmart, where there is a specific reference to a project name, not so? MR PATTISON: There is. ADV KENNEDY: Yes, which refers specifically to the acquisition 10of Massmart as the object of the project not so? MR PATTISON: Is your question does the word “Memphis” refer to Massmart? ADV KENNEDY: Yes. MR PATTISON: I mean it looks like that, but I can’t guarantee that. ADV KENNEDY: And that refers to a status update in the last column, where it refers to “M&A meeting in late February, executive trip in March” that likewise was with regard to Massmart being targeted as what had already been described as a priority target. MR PATTISON: Well the question I would ask is what were on the 20other 12 lines, because as far as I understand and again I think you would get more clarity out of Mr Bond for this, is that … and this makes sense to me by the way is that when deciding to enter a market you should identify all targets available to you and you should be

comparing one against the other, including your own Greenfield operation, but I can’t speak to what the other 12 lines talk about. ADV KENNEDY: Well if you can turn please to page 2653, this also comes from Wal-Mart, but again refers to Massmart and here too we have got three different entities that are referred to involving meetings in August, do you see that? MR PATTISON: Yes. ADV KENNEDY: Only one that we can see identified is Massmart. What is interesting is that while the other two simply refer to a 10meeting in August, the meeting in August where there is as notation to that effect against the name Massmart is coupled with the further point that Massmart is now regarded as the preferred partner and that dates back as far as November 2009, any comment about that? MR PATTISON: No, you would have to again speak to Wal-Mart about that. ADV KENNEDY: Yes, just a few months before the retrenchments, actually the retrenchment process happened, not so? MR PATTISON: What date is this document? ADV KENNEDY: November 2009, you can’t see it in the copy 20there, but it is extracted from another document that is November 2009. MR PATTISON: That does happen to be somewhere around the timing that the retrenchment was.

ADV KENNEDY: Yes, in fact a couple of months if not a couple of weeks before the retrenchment process started. MR PATTISON: Yes, I see a correlation but not causality. ADV KENNEDY: Then if I can take you to page 2659 this lists “Wal-Mart priorities for 2010 for international mergers and acquisitions” two thirds of the way down is a reference to the possibility of an acquisition in South Africa as something enjoying their particular attention, not so? MR PATTISON: Are you asking me to confirm what the document... 10ADV KENNEDY: Yes. MR PATTISON: I see it yes. I can’t see the other lines, so I don’t have the context. ADV KENNEDY: Yes. MR PATTISON: But if you are asking me there is that line that says that, yes. ADV KENNEDY: And then page 2666 is a reference again to the project by its name. MR PATTISON: Correct. ADV KENNEDY: Involving Massmart and it refers to CEO and 20CFO of Massmart visiting Bentonville in the UK in May. MR PATTISON: It does refer to that, yes. ADV KENNEDY: And what was the nature of those discussions in May 2010 was that not discussing specifically the possibility of an acquisition by Wal-Mart by Massmart?

MR PATTISON: Yes, those visits you are talking about correlate with the fact that Massmart visited international shareholders. As you may note Massmart is somewhere around 70% owned by foreign shareholders. We make a trip to New York and Boston and London and Edinburgh every year and we tacked on visits at the time, given that we had shown around Wal-Mart, around our stores as they asked and as I have earlier positioned in the same way we would show them around any future potential shareholder and all those were returned cordial visits, absolutely no discussion was had in either of those 10meetings specifically about Massmart being the preferred target. We were certainly not made aware of that, nor were there any discussions at all around an acquisition. They were the meeting as far as I recollect and Bentonville must have listed 45 minutes and was held in the offices of Wal-Mart International and the meeting in the UK was a very interesting visit, where we were shown some stores and some operations of ASDA. ADV KENNEDY: You were party to both those visits were you? MR PATTISON: Correct. ADV KENNEDY: Was there any discussion about a potential 20acquisition by Wal-Mart and what Massmart’s attitude might be to that? MR PATTISON: In those meeting I don’t recall that being a topic. I think by that stage Wal-Mart must have been aware that should they select Massmart as their point of entry into Africa we would be happy

to discuss it with them. In those meetings there were not specific discussions about that and certainly … as I say perhaps Chair, if I can point out, the thing, the dynamic that needs to be made aware of here, and again Mr Bond can speak to this better than I can, but from my perspective what Wal-Mart was doing was making sure that we were always under the impression that they were talking to us and a number of other players and were trying to keep us guessing as to whether or not we were the target. As well, by the way, is they were trying to keep us guessing whether they decided to come or not. 10ADV KENNEDY: You say you don’t recall that there was discussion about the possible acquisition, but if I can ask you to turn in the same document to page 2668 again a Wal-Mart document and again a reference to the project Memphis and the fourth bullet point, the second last bullet point there is again a reference to the visit, both to Bentonville and the UK in May and there is specific reference to “there being strong interest being re-confirmed in a sale to Wal- Mart”. MR PATTISON: Correct I think it would be correct and consistent with what I have said to you is we were clear with Wal-Mart that 20should they want to discuss an acquisition with Massmart, we were open to that discussion I think it is completely consistent with the point. ADV KENNEDY: Well this suggests a bit more than open to that discussion does it not Mr Pattison?

MR PATTISON: No, it doesn’t. And perhaps just a reminder and maybe this also might be useful. Massmart is a listed company and so we are permanently for sale, it is our job, my job to make sure that current shareholders shares they hold are saleable and in that respect, it is my specific duty to make sure that Massmart is available to sale to any future potential shareholder. And I do that job regularly and with a lot more companies and organisations than this one. ADV KENNEDY: And you put it as high as this to everybody you visit “we re-confirm our strong interest in being acquired by you”? 10MR PATTISON: I think that would be correct. I mean... ADV KENNEDY: That is strange Mr Pattison. MR PATTISON: Understand that the majority of my visits are to global institutions and investors, so I am talking mostly to emerging markets and global equity funds. They are in the business of buying Massmart. ADV KENNEDY: And you are up for all comers? MR PATTISON: We are a public company we cannot control who owns our shares. It is my job to make sure that they are saleable. ADV KENNEDY: If I can ask you to turn to the next page 2669, it is 20again a reference to Massmart only, no other potential targets. And then if you look at the very last bullet point “next steps” it refers to “Massmart now is an exclusive target and valuation to be finalised” not to be started, but finalised “and a non binding offer to be put”. Is it seriously your case Mr Pattison that even by this stage of May 2010

that you were simply going on trips around the world talking to all sorts of potential parties for a possible acquisition, but not Wal-Mart specifically and that you didn’t know that Wal-Mart specifically regarded you as their preferred and later their exclusive target? MR PATTISON: In fact I will tell you the opposite. I thought that Wal-Mart at this point, because there was almost no communication around this time with Wal-Mart that Wal-Mart had in fact decided not to come to South Africa or that they had selected another partner. I think the drawing of a connection between what Wal-Mart as the 10acquirer is doing and saying in its own internal documents and what they … what they are communicating to me, I think is a tenuous connection. CHAIRPERSON: Let’s take the tea adjournment now. ADV KENNEDY: Yes. CHAIRPERSON: Back in 15 minutes.

A d j o u r n m e n t On resumption: ADV KENNEDY: Thank you Chair. Mr Pattison, we were discussing 20the background events and the chronology and your indication to the Tribunal that your only manifestations of a serious interest by Wal- Mart in acquiring Massmart at a fairly advantaged stage in 2010, can I take you please to page 2799? Are you familiar with this document, Mr Pattison?

MR PATTISON: No. ADV KENNEDY: If I can take you to page 2792, it is the starting page. MR PATTISON: No, I’ve now found the cover. So, I would revise my answer to yes. ADV KENNEDY: So, can you now refresh your memory? It’s a letter that was sent to the directors of Massmart by Wal-Mart and that refers to Wal-Mart now being in a position to proceed with the formal process, which may culminate in an offer being made by Wal-Mart. Is 10it correct that this was preceded in September 2010 by an informal process of discussions? MR PATTISON: If you would just excuse me. I’m trying to get the date of this. ADV KENNEDY: You will see on page 2802 it’s the 26th of September and it is countersigned by Massmart. The letter itself doesn’t appear to bear a date. MR PATTISON: Yes, so this is the letter, to the best of my recollection, this is the letter we received I think on Sunday morning, which I think is the 26th of September, concluding as a result of our 20meeting on the Friday and Saturday preceding it in London. ADV KENNEDY: Yes, can you answer my question? Prior to this letter there was an informal process of discussion as to the possible acquisition. MR PATTISON: No, there wasn’t.

ADV KENNEDY: Not at all? MR PATTISON: None at all. ADV KENNEDY: If I can take you to page 2799, do you want to revise that? MR PATTISON: No, if I can make a clarification, other than the discussions on Friday and Saturday, which obviously preceded this latter. ADV KENNEDY: Yes, and certainly not the May discussions that are referred to elsewhere in the document. 10MR PATTISON: Certainly not the May discussions, correct. ADV KENNEDY: And page 2799 refers in Wal-Mart’s letter to the fact that on the 2nd of February 2009 Wal-Mart and Massmart entered into a reciprocal confidentiality agreement. MR PATTISON: Correct. ADV KENNEDY: And that continues to apply in relation to this acquisition offer. MR PATTISON: Correct. ADV KENNEDY: Not so? MR PATTISON: Would you like me to explain it? 20ADV KENNEDY: Yes, if you would. MR PATTISON: Yes, as a public company it is of course our responsibility to make sure that there is no information that could be considered to be price sensitive and therefore when Wal-Mart first, through their advisors, requested to meet with us in the beginning

of ... in February 2009, we demanded that before they meet with us, that both parties sign a confidentiality, which would restrict the parties from even disclosing that there was a meeting, because that meeting, as is now well proven, could be construed incorrectly as some sort of formal process or discussions of acquisitions, which it wasn’t. ADV KENNEDY: Now, at what stage did you notify the union, SACCAWU, about the acquisition? MR PATTISON: We started communications generally to all 10stakeholders on, I think it’s Sunday the 26th, that Sunday, the evening of that Sunday. So, the order of events was meeting, a phone call for meeting in London, meeting in London on Friday... ADV KENNEDY: With whom? MR PATTISON: With Wal-Mart. ADV KENNEDY: Yes? MR PATTISON: The 24th, 25th, a receipt of this letter on Sunday morning, the non-binding offer, which is essentially the start of the negotiations. If I may again Chair, with your permission, say that the formal process of negotiation started on these dates in September. 20There was no agreed acquisition of Massmart on these dates and therefore given that that was the first time we knew that Wal-Mart wishes to acquire us, we communicated Sunday night and Monday morning to as many stakeholders as we could reach, which included SACCAWU and COSATU and various government departments.

ADV KENNEDY: Then if I can take you to page 2607, this is a company statement. Do you have that? MR PATTISON: I have it. ADV KENNEDY: That’s dated the 28th of September. So, if my calculation is right, this presumably would be the Tuesday. MR PATTISON: I think it’s a Tuesday, yes. ADV KENNEDY: Yes. Then it refers to Massmart endorsing employee union rights and it says “Massmart notes the comments that have been made regarding perceptions of Wal-Mart’s union 10relationships”. Am I correct in assuming that this was because the press had already started ventilating some views as to the possible effects of Wal-Mart coming into South Africa on union affairs, union relationships? MR PATTISON: Yes, I can’t remember exactly, but I assume this is a response to media coverage on that Monday and that Monday night. ADV KENNEDY: Yes. MR PATTISON: I disagree with you that it was the press ventilating. It was the union ventilating, commented on by the press. ADV KENNEDY: Yes, well whoever it came from, this was your 20response to the controversy that was now being ventilated. MR PATTISON: To the best of my recollection, yes. ADV KENNEDY: Yes. Then paragraph 2, the second paragraph says “we are committed to the principles of freedom of association for our employees and regard union membership as an important indicator

of this commitment. In the spirit of this, the Massmart chairman and the CEO”, and that’s yourself, not so? MR PATTISON: Correct. ADV KENNEDY: “Contacted key Congress of South African Trade Union and SACCAWU leaders early on Monday morning as the Wal- Mart announcement was released”. MR PATTISON: Correct. ADV KENNEDY: Now, I’m told that that communication came in the form of an SMS. 10MR PATTISON: Well no, that form of communication came in many forms, which included attempting fax, attempting phone calls and if I can share you with you an experience, it’s quite difficult to be in communication with senior members of unions. So, it was also accompanies by an SMS. So, it was a phone call, an attempted fax and a final resort to an SMS, because I couldn’t get hold of anyone. ADV KENNEDY: You did actually speak to them? MR PATTISON: In that respect, in fact, to this date I’ve never had a conversation with the general secretary of COSATU, despite giving him many occasions to speak to me. He has never spoken to me. 20ADV KENNEDY: We are asking about this. This press release attributes to you the allegation that you contacted COSATU. MR PATTISON: I did. ADV KENNEDY: And SACCAWU early on Monday morning.

MR PATTISON: Yes, so I’m trying to answer your question. So, we attempted to contact the general secretary. We couldn’t. I did have a conversation that morning. I did manage to get through to Sudo Dhlamini. I’m under correction, but I think he is the president or deputy president of COSATU. Again I didn’t manage to get through directly to all members of SACCAWU. My memory is not exactly. I thought I got through to one member, but that maybe is not correct, and then resorted to SMS’ to place on record that we had contacted them. Just again Chair, you may find this useful. In those 10communications and that SMS was an open invitation to meet and to talk to the unions, some of which, in fact, most of which were ignored. I do recognise though that the general secretary of SACCAWU did respond to us and we did meet with SACCAWU. ADV KENNEDY: You see, the impression that we suggest to you that this media statement was trying to convey was that there was a meaningful process of discussion with both the Union Federation, COSATU and SACCAWU leaders early on Monday morning. MR PATTISON: I disagree with that. It says we contacted them, which we did. 20ADV KENNEDY: Well, you didn’t have a discussion, did you? MR PATTISON: With Sudo Dhlamini I did have a discussion. With the other communications we invited a discussion, which could have taken place any time during that day. They didn’t respond to us.

ADV KENNEDY: Are you saying that the union was remiss, the union movement was remiss in responding to messages and calls and engaging in communication? MR PATTISON: I wouldn’t say that they were remiss. They either didn’t receive the communication or chose not to, but that is within their right. ADV KENNEDY: One of the documents is not in the core bundle that you’ve been given, Mr Pattison, but it’s a document that comes from Massmart, produced at the request of the Tribunal. This is a 10document headed “potential offer by Walter, transaction toolkit” and it’s dated 15 December 2009. The very first passage under the heading “introduction” “In preparing for a potential offer by Wal- Mart, Massmart has requested Deutsche Bank to give consideration to the possible form of Walter’s offer investment strategy, offer mechanics and key execution considerations from a structural, legal and regulatory perspective”. This document contains details relating to this very issue. Are you seriously standing by your evidence earlier that in 2009 there weren’t serious discussions between Wal-Mart and Massmart with 20regard to the acquisition by Wal-Mart, which is referred to here as Walter, not so? MR PATTISON: I absolutely stand by that and perhaps I can help you with your confusion. I think you are getting confused between our preparations for a potential entry of Wal-Mart into Africa, which

again I would be remiss in not appointing advisors to prepare me for that and necessarily me having discussions with Wal-Mart. It was clear because of announcements in the press that Wal-Mart was now considering a target. It was very important for me to have the information at my hands about how that might happen, both with me and the other potential targets and to get advice on Wal-Mart’s history on acquiring other companies in other countries. So, we did. We appointed, I can’t remember the exact date, but somewhere in 2009 I think we appointed our advisors, Deutsche, to consider any 10potential implications and later we appointed our advisors called Saks to prepare us, as the document says, for a potential offer. ADV KENNEDY: Yes, it seems quite significant to us that on your side you were looking and preparing for an acquisition by Wal-Mart. On their side they were also pretty advanced during 2009. We are talking of you as a primary target and a preferred partner, etc, preferred target. MR PATTISON: Sorry, I don’t think that’s correct. I mean, I think you try to establish in these other documents that we were the preferred target. I think by the blanking out, I think it’s more accurate 20to say that they had three preferred targets. ADV KENNEDY: Well, in fact, I’ve taken you to one where specifically three meetings were held with three different potential targets. MR PATTISON: Correct.

ADV KENNEDY: You are the only that is referred to as the preferred target. MR PATTISON: Again, I was not aware of that. In fact, I was aware to the contrary, as I’ve already testified. ADV KENNEDY: But isn’t it stretching it a bit credulity wise to suggest that in 2009 there wasn’t actually a very close contact between the two organisations, Wal-Mart and Massmart, with a view to acquisition and that in fact you were hiding this from the union. MR PATTISON: No, that’s absolutely false and, in fact, I think, and 10perhaps this can be covered in further testimony, you will find the contact, as far as I’m aware, between us and all the other targets to be identical, if not very similar and therefore I think you are confusing Wal-Mart having three targets with Wal-Mart having one target. It was clear in my best judgement that Wal-Mart was having a three- target strategy in South Africa. ADV KENNEDY: Can I take you now please to page 3578 of the record? That’s in the core bundle. Is it not in the bundle? I beg your pardon. It’s 3578 of the record. Is it in the other core bundle? Just to identify the document, this is a letter that was sent by Massmart in 20October 2010 addressed to the director general of the Economic Development Department. If I can refer you to the fourth line, I believe, on page 3577, Massmart is already ... in fact, that portion I’m told is claimed to be confidential. If I could ask you just to please read quietly to yourself under the heading “current position”, after the

question that is posed in 2(a). So, please read the question, 2(a) and then your response under “current position”. It’s 3577. Are you on 3578 or 3577? MR PATTISON: 3577. ADV KENNEDY: Yes, thank you. MR PATTISON: I have read it. ADV KENNEDY: Right, thank you. I put it to you that in fact this in fact shows that the strategy and actions of Massmart at that stage were specifically following international practices by continuing and 10using the relationship with Wal-Mart. In fact, there is specific reference there to a re-engineering process, which resulted in a reduction through the 500 retrenchments. MR PATTISON: Sorry, I don’t get your question. ADV KENNEDY: Well, I put it to you that the 500 retrenchments that took place early last year were not unconnected with Wal-Mart at all. Firstly, they were part of a process of restructuring within your organisation, specifically to pursue the relationship with Wal-Mart with a view to being acquired by it. MR PATTISON: Yes, I’m not sure how you get from this statement 20to that, but perhaps if I can try and explain this statement, as I explained earlier, Massmart has relationships with many global players and we share experiences across the industry and this is referring to the fact that it is Massmart’s desire to be globally competitive that drives us to visit our international or global retailers,

learn from them and implement what they are doing in South Africa where we see fit. ADV KENNEDY: Isn’t the truth and the reality, Mr Pattison, that you knew that Wal-Mart had a particularly rigorous approach to cost structures, particularly labour costs and it was precisely to make yourself more attractive as a potential target that you undertook the retrenchments of these 500 people, and that conveniently would be prior to applying to this Tribunal for approval. MR PATTISON: No, again if I can repeat myself, no that’s 10absolutely not the case. I think if you perhaps again expand this discussion to include our competitors, you will find our competitors have been doing and are doing exactly the same things we are. So, Shoprite is implementing DCs. They have been doing it for 3 or 4 years, as well as Pick ‘n Pay, as well as all the other retailers. I think what you are identifying is a global industry direction and change and trying to ascribe it retrospectively somehow to Massmart and Wal- Mart, which is completely incorrect. ADV KENNEDY: But as you told the Economic Development Department in October last year that your restructuring took into 20account the Wal-Mart approach to such issues, such operational issues, not so? MR PATTISON: Yes, I think it is self-evident that any Mass merchant will look to the global leaders as the global leader and make sure that everything they are doing we understand to the best of our

abilities and are doing ourselves, particularly if you would like a bit more context, particularly when you are hearing they may soon be one of your competitors, which I remind you at this phase even, and if I can perhaps Chair help you, this document was actually written in response to Minister Patel’s formation of a ministerial panel. It was actually a meeting held before the final offer came in and although I would also like to point out I had an agreement with them that the document would not be used in any formal legal process. So, I see that’s been broken, but because it was done under the good faith that 10no offer had yet been made and so I had difficulty responding to the questions, but nevertheless, it is common practice... ADV BHANA: Mr Chair, may I just place on record that that document forms part of Mr Pattison’s witness statement insofar as it is suggested that Government has broken any agreement. MR PATTISON: Actually I withdraw that comment. You are correct. I did submit it as part of my agreement. Thank you for pointing that out. I would suggest to you that any company not following the best practices of the market leader is not running a good business. MS CARRIM: Can I just ask on that issue? Is Masscash also 20following a similar model? MR PATTISON: Masscash, the Cash and Carry Wholesaler, it follows the best practices of a company called Metro AG, which is the global leader in wholesale, large bulk format and so we benchmark that division very heavily against Metro AG, which owns

the brands of Metro and Makro in parts of the world. So, it is following global trends, but different global trends to Wal-Mart’s global trends or Wal-Mart led global trends. Sorry, perhaps I haven’t fully answered your question. So no, it’s slightly different, but yet still there are global trends that we are following. ADV KENNEDY: Sorry Mr Chair. Can I ask you please if we can move to discuss Nelspruit? Now, is it correct that there was an agreement reached between Massmart and its workers in Nelspruit, which bypassed the union? 10MR PATTISON: Yes, it is. ADV KENNEDY: Can you explain and justify that? MR PATTISON: Well, it’s difficult. Firstly, let me say had I been aware of the discussions beforehand, I would have not supported them. So, I was not aware of them but when asking the people involved in those discussions, they were under the impression, which I think with hindsight is mistaken, because they were dealing with local store representation, including I’m told the shop steward, I stand under correction, that that was a formal union negotiation. In hindsight, if one looks at it, it was not in complete accordance with 20the recognition agreement and I think once we identified that, we have stepped back from that decision and withdrew that agreement. ADV KENNEDY: Well, in fact, not only would it violate the recognition in agreement. In fact, it would violate the undertaking that you have made that we discussed at the outset of your cross-

examination, that you would not only comply with all your agreements, but you would recognise unions and the status of the unions and their role is representing members. It completely undermines that, not so? MR PATTISON: No, I disagree with that. I agree it undermined the processes and for that we acknowledge and recognise it, but it was still in discussions with the union representative or what we at least thought was the union representative of that store. So, the mistake we made was thinking we could conclude a store level agreement where 10in fact we should have reverted back to ... a union agreement, where in fact we should have reverted to the bargaining unit, the national co- ordinating bargaining unit, I think it is called. We made that error, correct, but it’s certainly no signal that we somehow ... in fact, the correct signal that we would have made if we didn’t recognise union and workers’ rights to collectively bargain, was not to come to an agreement at all and just implement. So, I think this is rather a demonstration that we do actually respect our employees’ collective right to bargain, because we were bargaining with them. 20ADV KENNEDY: Is it not the revealing incident? What strikes us, Mr Pattison, is that you say it was contrary to your own approach to recognise and not undermine unions in Massmart. It is contrary to what you say you are going to do in terms of the undertaking that you have put on record here, but what strikes us as remarkable is that it

seems to have a rather strange remarkably coincidental reflection of Wal-Mart’s own approach. Wal-Mart’s approach is let’s not encourage third party representation. We are against it, as the toolkit shows. We would rather want to deal with workers as so-called associates through our open door and let’s deal with people locally rather than at the bargaining level with the union. It’s a remarkable coincidence, isn’t it? MR PATTISON: I disagree with almost everything you said and there are a few points you made. So, I disagree with the assertion that Wal- 10Mart is anti-union, to summarise your comments. I’m not sure exactly what expression you used. Also, as I say, I think it reinforces that we do recognise the right to collectively bargain. We made an error in bargaining at the wrong level. Just perhaps it might be useful Chair, to know that there are many things that do get sorted out at store level. There is union representation and we have things in the store called shop stewards and the store manager is dealing regularly with issues, small issues that need to be resolved at store level that never get raised to bargaining unit level. In fact, I would propose that the 20process worked perfectly. The union has a recognition agreement with us and when we stepped out of line, they brought us into line and we didn’t challenge them on that. They would have had plenty of protection in terms of the labour courts and the CCMA to pull us into line. So, I think it’s rather

proof that even if we do from time-to-time make a mistake, the current protections are adequate and actually we didn’t ... once the error was pointed out to us, we didn’t challenge it at all. ADV KENNEDY: If I can take you to page 2132, perhaps start at 2130, which is the first page. These are minutes of the Massmart board where Mr Lamberti chaired the meeting, but you were present. Do you see that? MR PATTISON: Correct. ADV KENNEDY: Then on page 2132, halfway down the page, you 10refer with three bullet points to retrenchments and the background to that and then the following page, just read it to yourself please “in total approximately 1 500 people may be retrenched” and then the following paragraph 2 you highlighted to the board and there is a reference to an agreement having been reached with the Nelspruit staff directly rather than with the union. This is an attempt by you to blame the union for being intransigent and difficult and, in fact, overriding the decision of the staff, that resulting in management having been left with no option but to retrench. This certainly doesn’t reflect any acknowledgement 20that management stepped out of line in Nelspruit and that the union was the victim. In fact, you seem to be blaming the union and being quite happy with the fact that an agreement was reached with staff directly.

MR PATTISON: No, again I think you are reading too much into it. So, I was informing the board of a few things. First of all, that our staff do seem to be willing to accept what is referred to as the 40-hour rolling work week. However, that SACCAWU is not and given that SACCAWU and given that our proposal to SACCAWU was that if they accepted the principle of the 40-hour rolling work week, we would be able to have zero retrenchments. However, we were unable to come to an agreement with the union on that principle and therefore we were left with no choice to retrench. There is no blame 10in that and I’m again enormously disappointed that we couldn’t come to an agreement, but I think both parties in good faith tried to come to agreement and failed to do so. ADV KENNEDY: But your situation wasn’t helped by the fact that the management there bypassed the union. MR PATTISON: Yes, again on reflection the management there made an error and probably annoyed the union. So yes, I would agree it didn’t help, but in subsequent discussions it seems to be clear that the principle of when a retrenchment needs to be done, of us coming to an agreement with SACCAWU on more flexible labour conditions, 20is not possible. So, not only was this rejected at store level, but it has been rejected at divisional level and more recently it’s been rejected at group level. ADV KENNEDY: And then likewise, if I can take you to page 2146, that’s a report by you as chief executive to your board.

MR PATTISON: I don’t seem to have 2146. ADV KENNEDY: Okay, well then you will find, I think, 2148, do you? MR PATTISON: I have 2148. ADV KENNEDY: In fact, the reference to where this comes from you will find in the inscription in the bottom left hand corner. It’s your report to your board in August 2010 and then in paragraph 5, this is your own report, you make serious allegations concerning labour relations that there was a failure by unions to consult their 10employees, but you don’t seem to take account of the fact that your own management has not consulted the union, where in fact the law and the recognition agreement required you to do so? MR PATTISON: I am not sure what your question is. ADV KENNEDY: Well, you don’t seem to acknowledge that management actually has a role too and a responsibility to be consulting with the union as the first port of call, not the last port of call. MR PATTISON: Sorry, I am not sure where you come to that conclusion from? What reference do you come to that conclusion 20from? ADV KENNEDY: Well you disagree with me I think let’s leave it right there. Now Mr Pattison we know from the documents that have been distributed including various witness statements that there is a relatively centralised management structure in Wal-Mart, not so?

MR PATTISON: No, I don’t understand that to be the case. ADV KENNEDY: Well in fact part of the business model seems to be that there is a considerable measure of centralised management control. MR PATTISON: I am not part of Wal-Mart, I can’t speak as an expert to that, but from my perception the opposite is true. ADV KENNEDY: The opposite, it is all decentralised and devolved? MR PATTISON: If you are talking about … we would have to just check that we are talking about the same thing. From what I 10understand in every country, the country is run or the region is run quite independently. If you are talking about within each country perhaps some of those countries may run centralised, but some of them it also seems to run decentralised, so I would need to understand a bit... ADV KENNEDY: Well even if they are in your view decentralised, there is still a common policy and practices that are followed globally not so? MR PATTISON: Again I can’t answer that as an expert, because I am not part of Wal-Mart. 20ADV KENNEDY: I am not asking you as an expert. I am asking you as the chief executive officer of the target group. Are you seriously saying you don’t know, you can’t answer? MR PATTISON: No, before you interrupted me, I was prefacing that I don’t work for Wal-Mart so I can’t speak to all their policies, but

again it is my perception actually that there are many areas in which there are not global policies. ADV KENNEDY: But some where there are? MR PATTISON: Well, yes, for instance if I can talk to one I know about. They have a global policy of following a trading formula called EDLP. ADV KENNEDY: Yes, well let’s not go into the trading formula. What about the way in which workers are dealt with? MR PATTISON: No, as far as I can tell there is no global policy on 10that at all. ADV KENNEDY: And what are their recommendations in the toolkits for example? MR PATTISON: In the toolkits that have been presented in Massmart there have been no recommendations on that dimension. ADV KENNEDY: So why were you given those toolkits? MR PATTISON: Well you are not given those toolkits. We requested the toolkits. The toolkits are... ADV KENNEDY: And they were given, were they? MR PATTISON: They were given. 20ADV KENNEDY: They were given? MR PATTISON: Yes. ADV KENNEDY: So they were given? MR PATTISON: We requested them and they were given. ADV KENNEDY: Right.

MR PATTISON: Those toolkits contain intellectual property; you know know-how of how things work, processes, things that Wal-Mart have learnt of a retail nature and certainly as far as I can tell there are certainly none as far as I can recall I should say there is none that referred to union relationships if that is what you are after. They don’t seem to be policy based, they are intellectual property sharing. ADV KENNEDY: Sorry, what do you mean by that? MR PATTISON: Well I mean that they say first of all they are not compulsory to implement I have noted that there are some that are, so 10legal stuff is compulsory and financial stuff is compulsory. ADV KENNEDY: Yes. MR PATTISON: The rest of it seems voluntary. For example there may be a direct to farm program, toolkit, which says if you would like to work with small community based farmers, and this is the type of approach that we have found works in China and India and Mexico and in South America. If you would like to adopt our direct to farm program here is how you would do it. ADV KENNEDY: But let’s talk about labour, because that is what we are particularly interested in, my clients, our clients. 20MR PATTISON: There is no toolkit on union relationships. ADV KENNEDY: Well can I take you to page 995? I am told that this document is in fact a transcription, because the photocopy was bad that was included as part of the record. This is a toolkit which specifically deals with unions, look for example at page 998.

MR PATTISON: I am familiar with the document. ADV KENNEDY: In fact perhaps start at 997. You are familiar with this? MR PATTISON: Yes. ADV KENNEDY: Is this not a toolkit that you may not, as a matter of compulsion have to follow, but it was made available to you, you could access it and apply it? MR PATTISON: I think maybe you are confused. This is not a Wal- Mart International toolkit. 10ADV KENNEDY: What is it then? MR PATTISON: No, I actually don’t know, but I think, again you would have to ask Wal-Mart that question, I think it is a Wal-Mart USA toolkit. ADV KENNEDY: As I understand that is the case, but it is accessible to you. MR PATTISON: Well I have never seen it before other than it has been presented to me by the unions, but it is not a Wal-Mart document that has been sent to us and we have been told to implement anywhere in South Africa. 20ADV KENNEDY: Are you … but you are familiar with it, you said? MR PATTISON: I am familiar with it in that SACCAWU shared it with me. ADV KENNEDY: For example page 997 refers to management being the first line of defence against unionisation?

MR PATTISON: Again I think we have to, Chair, this is quite difficult to deal with, because this is a Wal-Mart USA document. ADV KENNEDY: Yes. MR PATTISON: So I am not part of Wal-Mart USA and I have never seen … been given this document by Wal-Mart. ADV KENNEDY: Do you not recognise the relevance or usability of this document in the Massmart operations? MR PATTISON: No, again let me just share and perhaps for the Chair the discussions with Wal-Mart. I understand that Wal-Mart 10operates different operating procedures in different parts of the world, depending on their local market conditions. I mean again you are going to have to ask Wal-Mart this. ADV KENNEDY: Yes. MR PATTISON: As far as I understand this is a document you know, again, I don’t know if there is an 8 on it, but this is a document that may or may not apply to Wal-Mart USA. It has not been shared with me. There is no agreement that this document will be used or these processes will be used in Africa. ADV KENNEDY: Isn’t it the expectation though, because... 20MR PATTISON: No. ADV KENNEDY: Isn’t the Wal-Mart model that has made it such a success globally in part at least achieved through reducing rather than enhancing and promoting the role of unions?

MR PATTISON: In my discussions with Wal-Mart and to the effect that I followed up and checked on this that seems not to be the case. ADV KENNEDY: And Wal-Mart would of course have control, sole control of Massmart? MR PATTISON: It will own 51% of the shares and be able to control... ADV KENNEDY: Yes. MR PATTISON: In accordance with the JSE rules. ADV KENNEDY: Yes. 10MR PATTISON: Correct. ADV KENNEDY: So it will... MR PATTISON: And the Companies Act. ADV KENNEDY: It will be the guiding mind as far as policies and practices within the Massmart operation. MR PATTISON: Correct. ADV KENNEDY: If the merger goes ahead not so? MR PATTISON: Correct. ADV KENNEDY: And the board... MR PATTISON: Not Wal-Mart USA Wal-Mart Global. 20ADV KENNEDY: Wal-Mart Global sure. MR PATTISON: Wal-Mart USA is a subsidiary of Wal-Mart Global. ADV KENNEDY: Yes and of course the board of directors will reflect exactly that, not so?

MR PATTISON: The board of directors will reflect three Wal-Mart directors, two executive directors and four independent directors led, it is proposed at the moment by independent chairperson. ADV KENNEDY: And the Wal-Mart model as far as procurement and so forth will generally be followed in South Africa, not so? MR PATTISON: Well again it is a fallacy to believe that Wal-Mart has a global procurement policy okay and I have not seen this. I think you will find that Wal-Mart’s global policies are more about how to be a retailer, how to position yourself in the market. They are 10not around about how to buy for instance. There is no everyone in Wal-Mart buys the same way. I think you have got to understand Wal-Mart will operate for instance Chile and Mexico and China and India and each one of those markets are very different and you need a different operating model, depending on your different market share. ADV KENNEDY: Well I put it to you that and we will certainly deal with this, with other witnesses in due course as will some of the other teams no doubt as well, but I put it to you that in fact you are being a little coy to put it mildly in relation to the Wal-Mart model, both in relation to procurement and labour. In fact the clear expectation will 20be if the merger goes ahead that there will be an application of the general policy and approach of Wal-Mart, which is in fact anti union, suppressing union rights, suppressing workers’ right, minimising benefits, etc?

MR PATTISON: No, I think again if you looked into the way, into the sample of Wal-Mart operations greater than one country you will find that that is completely false. And again if you look at how they operate in different markets around the world they work with unions, they work with union recognition agreements. Wal-Mart’s main global policy I can see is local management for local markets, for local customers thereby implying that operating models will differ necessarily, not just because they want to but necessarily for competitive survival will differ by markets. And I think that point 10cannot be under emphasised Chair. You will not be able to take Wal- Mart USA bring it to some other country around the world exactly the same and expect it to work, it won’t work. You have to adopt it for local market conditions. ADV KENNEDY: But while I accept your or understand your qualification that there has to be an adaptation it is an adaptation to suit local legal requirements and local conditions. It is an adaptation of the Wal-Mart approach is it not? It is not as if you are going to carry on just as you always were Mr Pattison with your own independently produced policy and so forth? 20MR PATTISON: No, I would agree with you a lot is going to change. We are going to become aggressive competitors I have no doubt. And no doubt as the management team of Massmart looks across the world, we are going to identify great practices that Wal- Mart have that we are going to apply.

ADV KENNEDY: You already have started applying them for some time, I mean even in the letter we looked at addressed to the Director General of Economic Development Department you referred to restructuring in Nelspruit and elsewhere as being following the example that you get from Wal-Mart, not so? MR PATTISON: No, that is absolutely false. I have never said that at all and we certainly haven’t been applying any Wal-Mart policy to date. To the extent that you may see parallels between our policies and Wal-Mart’s policies it is because we are in the same business and 10we are therefore likely, in some instances, to be doing the same things. ADV KENNEDY: And doing more rather than less in the future if the merger goes ahead. Previously in your version you would do what everybody is doing and Wal-Mart may be a leader in the retail sector internationally. MR PATTISON: Correct. ADV KENNEDY: But now it is not just a coincidence you happen to be following somebody’s good example, but you are actually controlled by them. 20MR PATTISON: Yes. ADV KENNEDY: Is it reasonable to assume that in fact the policies and practices are going to be followed far more than ever before? MR PATTISON: Yes, I think it is true that we will copy practices of … good practices of the Wal-Mart group around the world. And so

we may copy the good practices of a country in Wal-Mart that follows union membership, has union recognition and they may help us improve our relations with our unions. I think your assertion is correct that we may learn from that. ADV KENNEDY: But that will help you to improve? MR PATTISON: Improve. ADV KENNEDY: Relations. MR PATTISON: I mean Wal-Mart has good relations, well you know, union relationships naturally have some tension to them, but 10you know a good relationship includes that and you know we might actually learn something. ADV KENNEDY: Certainly not from their American experience, because they don’t have unions. MR PATTISON: Yes correct. So we would rather go to countries where they have union relationships and learn from those teams. ADV KENNEDY: I would like to go back to a point on which we pretty much started and that is undertakings and the applicability of legal requirements, agreements and statutes and so forth. What seems to be suggested in this case is that even if there may be some effects 20on labour that may be regarded potentially as being prejudicial, firstly the Tribunal shouldn’t worry about that, because that is not a realistic fear? And secondly if that fear does materialise then workers have their rights under our very advanced labour laws and that should be the end of those concerns. What I would like to put to you is this Mr

Pattison that in fact the law can only regulate just so much that it doesn’t preclude management from adopting particular policies and strategies, such as Wal-Mart US has done, which may in fact reduce the scope for union involvement, legitimate union involvement and activities. The mere content of a recognition agreement does not preclude management from acting in a particular way in future provided they don’t breach it. Now let me take you immediately to the issue of wages. You pay, as we understand the documents and particularly the input from the various economic experts, you pay not 10always the absolute bare minimum that you have to as a minimum legally, you pay in many cases a bit more than that, not so? MR PATTISON: I think that is probably true. I don’t know it to be true but I would accept that, yes. Are you saying do we … let me rather be firmer? We definitely do pay above the minimum. ADV KENNEDY: Yes. MR PATTISON: Prescribed. ADV KENNEDY: There is a bargaining council and sectoral determination not so, made by the Minister? MR PATTISON: Again I am not an expert in the legal matters. I 20don’t think there is a bargaining council, but I do know there is this thing call sectoral determination. ADV KENNEDY: Sectoral determination. MR PATTISON: Correct as part of Nedlac.

ADV KENNEDY: That is correct. And you pay more than that, you pay more than the minimum prescribed in the sectoral determination that’s what your own papers show? MR PATTISON: Okay, well then we do. ADV KENNEDY: Yes. MR PATTISON: Are you talking about on average or to each person? I would imagine some people are probably paid the minimum and some people are paid above the minimum and on average we pay above the minimum? 10ADV KENNEDY: Yes. MR PATTISON: Correct. ADV KENNEDY: You are certainly not one of those employers who pay the absolute bare minimum that you can get away with. Now what I put it to you is that the takeover by Wal-Mart of Massmart inevitably, given their international practice and legacy as was put to the Competition Commission representative today that shows that Wal-Mart, part of its very model for business operations is to minimise labour costs to an absolute bare minimum. And I put it to you there would be nothing that you would do if you would simply 20follow that approach, you would not be breaking a law if you pay according to the sectoral determination, but it inevitably is going to have the effect of suppressing growth in wages for your workers.

MR PATTISON: Well to answer that in part, I can’t agree with your first assertion because I don’t know that to be true, in fact, I would be surprised if it was true. ADV KENNEDY: Yes. MR PATTISON: But if what you are referring to let me just check is because we pay above the minimum there is room to move down to minimum. ADV KENNEDY: Yes. MR PATTISON: I mean that would be about the most un- 10commercial thing you could possibly do. Regardless of the structure of your relationship with your employees if you try and reduce your wages you are likely to have poor employees. Part of our strategy as you can see is to be the number one employer in retail, so we can attract the best people so that we can compete against our competitors. It is for that reason that we pay good money for good people, so I don’t know if that answers your question. But that certainly will explain why we pay above minimum. ADV KENNEDY: Of course we all know the harsh reality of the massive scale of unemployment in this country. And if you were to 20in future years, once Wal-Mart takes over control of Massmart adopt a stance that well now you are going to pay strictly according to sectoral determination minimum and not anything higher, it would be very easy to replace those workers. You may have a measure of morale problems with existing staff, but of course if they leave you

can easily replace them can’t you, because there are a 100 people queuing up every day for every vacancy. MR PATTISON: No again that’s really not true. It may be the perception. It is quite a skilled job working inside a retailer and so you need people with good education, good qualifications and good training and certainly to adopt a strategy whilst I must concede is possible, you know, if that is what you are asking me, to adopt a strategy that says we are going to only employ people at minimum wage. You are going to end up with minimum wage employees and a 10poor quality business that will likely lose market share and put more people out of business. So if you are trying to say to me that is a possible … possibility of a different management team, sure. But is it a commercial reality no, and can you get, with the protection employees have being represented by unions, I think it is also an impractical scenario you are trying to describe, because there is the right of collective bargaining in South Africa. And there is nothing we can do about that and in fact just perhaps Chair also for the record, Massmart appreciates collective bargaining. We actually work happily and in partnership with the unions around collective 20bargaining because it is a way of resolving the natural tension around wage increases. And what better way than to sit down with your staff and negotiate with them.

ADV KENNEDY: Of course typically unions don’t represent workers provided by labour brokers and casual and temporary workers, not so? MR PATTISON: Well I think the union is able to represent anyone that can get to sign up as a member. ADV KENNEDY: Typically in practice? MR PATTISON: I think typically in practice that is probably right. ADV KENNEDY: Isn’t so? MR PATTISON: I think typically in practice that’s right. 10ADV KENNEDY: And while there are suggestions of some changes in the law that still has to see whether it actually is going to be realised. Part of our client’s concern based on the international experience in relation to Wal-Mart that has been documented in these papers before the Tribunal is that Wal-Mart has shown a pattern internationally and in the United States of having quite a high preponderous of temporary employees and casual workers often provided by labour brokers. And typically they will be paid less than permanent employees and typically they will not be unionised. MR PATTISON: Again you may have access to information I don’t. 20The difficulty I have had when looking at this, by the way, just researching for Massmart, is the definition of all these working classes are very different in country to country, so I am not sure that you can identify temporary workers and casuals. But if what you are talking about is fixed time permanent employees versus variable time,

flexi time as we call them in South Africa, I am not … I am certainly not aware that Wal-Mart does that more or less than us. So I am perhaps not answering your question, but I don’t know them to use casual labour, to use your word, more or less than we do. ADV KENNEDY: Yes. MR PATTISON: I am not aware of those stats. ADV KENNEDY: I put it to you that in fact if you are genuinely committed to collective bargaining and solving problems through that mechanism you would want to enhance rather than lessen the strength 10of the unions in your organisation? MR PATTISON: Again I think that is maybe, in laymen’s terms seem an obvious thing to do, but it is by no means an advantage not to have a union at all. You know it depends in each country how they work. In South Africa our employees want to be unionised. We want to have a relationship with our employees that they are comfortable and happy with and therefore to try and impose a non unionised structure in South Africa would result, would be a disaster. ADV KENNEDY: Would you be willing to entertain some undertaking which hopefully would be enforceable in some or other 20manner to ensure continued recognition of the union, despite going down in levels and possibly even a closed shop agreement? MR PATTISON: You know we have had discussions with the unions about that and whilst those discussions were off the record and I was very disappointed just for the record that we weren’t able to reach

final conclusions. We have made several offers to the unions to try and address their concerns. I must and for the record Chair, I respect those concerns and I wish to address them because, not because I wish to argue with them, because I really don’t believe them to be true. So you know would be more than happy to sit down with the union and address their concerns, as I already have done, we just have not managed to reach conclusion, which is a pity. ADV KENNEDY: Are you prepared to make any undertaking, such an agreement to a closed shop arrangement on the record here before 10the Tribunal? If you are we would like to hear it and if you are not, we would like to know why you are not prepared to make that, rather than just saying well, I have had some talks and I might have some talks in the future. MR PATTISON: Well again you know it would be impossible and impractical if I were to now say yes, I agree to closed shop. And perhaps Chair if I can explain why from our perspective realising that there are more qualified people around the table on this subject than me, is there are a number of other things that have to be agreed to, a very long list of other things that have to be agreed to, to reach a 20closed shop agreement or an agency shop agreement. And therefore a single point commitment in this forum is just the inappropriate forum. Am I committed to permanently negotiating with unions for whatever they want? If we manage to reach agreement we can reach agreement. It is not a closed book, but it is a negotiation and I think

that’s where the Labour Relations Act was set up for it to be a negotiation otherwise the Labour Relations Act would make it compulsory. ADV KENNEDY: Mr Chairperson we end our cross-examination at this stage. May we just indicate for the record that we are concerned about the very limited time that is made available to the various parties we have, I think taken up a full two hours now. We are mindful of the fact that Mr McNally may be wanting to ask some questions. We have had to make allowance for that and then Mr 10Bhana as well and we may have to borrow a bit of time from a later witness, but if we can just place on record that we are concerned that we haven’t had the fullest opportunity that we would have hoped for in relation to this witness and no doubt we are going to have the same problem in relation to other witnesses. At that stage we would close our cross-examination of Mr Pattison thank you. CHAIRPERSON: Can I just respond to it. The times that have been given or suggested, we have given a total time and you can use more or less for witnesses as the case may be, but this procedure has been known for some time. I haven’t heard an objection to it. 20ADV KENNEDY: Mr Chair, we understand that it is a global time. The problem is that the global time still has to be divided up between various teams and various witnesses, so we have to be realistic and realise that we can’t realistically carry on to go into further aspects with this witness, without doing serious damage to our opportunity to

cross-examine other witnesses, but we have simply noted our concerns and that is all we propose to do, thank you Mr Chair. CHAIRPERSON: Mr McNally any questions from … Mr Bhana perhaps? ADV BHANA: Chair, on the last issue we would also like to just put our concerns on the table. At the stage we came into the proceedings the timetable was already there, it has been tweaked. In our view it doesn’t facilitate a full ventilation of the disputes even if one were to take the view that it is total time, which can be appropriated between 10witnesses. We do not want it to be seen that by following what the direction is that we acquiesce in that or that we waive any of our client’s rights in any way. We do believe that the timetable as it stands doesn’t allow for a full ventilation of the disputes. Having said that Chair, may we just deal with a quick housekeeping matter, the union handed up their core bundle and do you wish to give that an exhibit, because we intend to hand up a witness bundle, a cross- examination bundle as well? CHAIRPERSON: I don’t think it is necessary I mean it is just a summary of documents in the record. 20ADV BHANA: We have produced a core bundle, which has been, I think in the tea adjournment placed behind you. There are three volumes there and I will be referring to documents from those bundles, similarly those documents either come from the record or they come from the discovery, so they may not all be in the record,

but they aren’t any new documents. We have also handed copies out to each of the other teams. If there is anybody that hasn’t received a bundle if they could just indicate. CHAIRPERSON: Just before you carry on. Are you comfortable sort of sitting in the same … or do you want to swap chairs? ADV BHANA: It is not ideal, but we will work with it for now. CHAIRPERSON: Okay. Perhaps do it for now and after lunch you can swap if necessary. ADV BHANA: Thanks. 10CHAIRPERSON: Carry on Mr Bhana, we have got the files. ADV BHANA: Mr Pattison, I have asked my team to remind me if I stray into putting matters to you that are protected by confidentiality, but if I do forget just correct me if you believe information or a document is confidential. I think it would be a matter of public record that you probably own a considerable number of shares in Massmart, is that correct? MR PATTISON: That is correct, considerable is maybe an adjective reply to it, but yes, I own, I think the public record shows about 2 million Massmart shares and options. 20ADV BHANA: Yes, so if the merger were to go through you would stand to benefit 2 million times R148.00 a share, is that correct? MR PATTISON: It is not quite correct, but still a large sum of money if that is what the point you are making is.

ADV BHANA: You describe it as an adjective, but in anybody’s terms a huge sum of money. MR PATTISON: It is a huge sum of money. ADV BHANA: Quite apart from that correct me if I am wrong, you would be one of the key executives identified by Wal-Mart to obtain further shares post merger. Is that correct? MR PATTISON: That would be a decision made by the remuneration committee, but not to be argumentative, probably true. ADV BHANA: There again, correct me on the detail, but broadly 10there are about 20 people at top management identified to achieve additional equity consideration? MR PATTISON: No, that has not been finalised, that remains subject to should the deal be approved, subject the new board’s decision and the new executive … new remuneration committee’s decision. But you’re correct in identifying that there are 2 groups of people we would want to retain, those currently on the Massmart executive share scheme, which is far more than 20, maybe it’s 200 hundred people and then a group of people who would be specifically identified for retention, remembering that the acquisition takes away half of the 20retentive value of the current scheme. ADV BHANA: Yes, what I’m referring to is what has been described in some of the documents as additional equity consideration and it’s a multiple of what has been called the total cash compensation. We need not go into the detail, but certainly potentially you would be one

of the prime candidates to be a beneficiary of those additional share allocations? MR PATTISON: That’s correct, because all of the … any issue made in terms of the rule of our executive share scheme would be a multiple of salary, is the chief executive in most years, not in all years, I’m the highest paid person and therefore I would receive more shares than anyone else, but only by the formula. ADV BHANA: Yes. So you have, it would be fair to say, a personal interest in the merger going through? 10MR PATTISON: I think that’s true. I mean based on what you’re applying is that somehow I make more money if the merger goes through than doesn’t go through and that isn’t correct, because I own those shares regardless of the offer from Wal-Mart. ADV BHANA: Well let’s test that very briefly, you certainly own the shares, but currently there’s a premium being offered on those shares? MR PATTISON: There is a premium, it’s quite a small one as noted in the documents. The price before the day the shares were offered was R134.00 and the offer price is R140.00 and so you would take half that number, because it’s half those shares and that would be the 20premium offered to the market price at that time. ADV BHANA: I might be confusing some of the detail because in the documentation it appears that the price is R148.00. MR PATTISON: Yes, so what I’m referring to is the… ADV BHANA: And not R140.00.

MR PATTISON: Sorry let me repeat those numbers just to be clear, the day before the offer was made, I think that share price was R134.00, the offer price is R148.00, but it’s for half the shares. ADV BHANA: Yes. MR PATTISON: Correct, and that is the premium. ADV BHANA: And what is the price of the share today? MR PATTISON: I’m not aware, but I guess it’s round about R142.00, I’m looking for nodding faces. ADV BHANA: And apart from basing the premium on the share 10price on the day immediately preceding the offer, in terms of the valuations put by Wal-Mart on those shares, they indicated that after their extensive due diligence, the shares have their value of about R120.00 a share? MR PATTISON: I haven’t seen that document. ADV BHANA: We’ll go to the document in due course, but if that were the case then the premium would be in the order based on their assessment of the value of the share of more in the order of 25%. MR PATTISON: I can’t confirm that because I don’t know where the R120.00 comes from. 20ADV BHANA: Assume the R120.00 to be correct, that that’s the value they place after their due diligence on the value of the share. MR PATTISON: Sorry, it makes little sense to me so I can’t agree to it.

ADV BHANA: Alright, we’ll have to come back to then. That apart, certainly post merger in terms of the additional equity consideration we’ve spoken about, those would be additional shares you would get which you wouldn’t, if there wasn’t to be a merger, correct? MR PATTISON: No it’s not quite true. The Massmart remuneration policy would allow me to get shares in terms of the rules at any point and you know, according to the rules. So you can get an annual allocation and certainly its within the ambit of the shareholders and the Massmart board to give me more shares if they feel necessary. So 10it’s not necessarily linked, but again I accept your point that Wal- Mart would be likely to try and retain me, although at that moment there’s no agreed retention in place. ADV BHANA: Yes, you fudging the issue, the simple point is that as a result of the merger in order to retain your services, you would receive a sizeable lump of additional shares, quite apart from what your ordinarily would have achieved under the share incentive schemes or by virtue of being the CEO, correct or not? MR PATTISON: Not correct, because I don’t agree with your sizeable. So let me try and help you with the numbers, let’s say I 20currently earn 2 million shares on options and after the deal I would earn 1 million shares on options and perhaps they might give me 2 or 300 000 shares options. So again, I don’t want to be argumentative, in anyone’s definition it was a sizeable amount. In a relative amount it’s not that significant. And remembering that the only way you make

money out of shares and options given to you is for the share price to rise. And given that I mostly take loans against them, I also have the same risk of losing money. ADV BHANA: 2 or 300 000 shares at a price of roughly 150, R450 000.00, not a lot of money in your … sorry R4.5 million rand not a lot of money in your terms? MR PATTISON: No, again I think that’s just a misunderstanding. On the day they’re given to me at R148.00, they’re worth nothing, because I get issued them at the current price. And if the share price 10dropped, as you would ascertain to R120.00, I would lose R2 million. ADV BHANA: No, no I didn’t suggest the share price was going to drop, but let me put the point to you, you have a personal interest in presenting the facts here to ensure that the merger goes through, correct or not? MR PATTISON: I must say Chair, I’m not quite sure how to answer that, because as it goes through the back of the mind, it seems to… ADV BHANA: How about frankly instead of trying to think about what you should be saying. MR PATTISON: You know, so I don’t agree with you, no. 20ADV BHANA: Now I’m going to put to you several points of your examine that in fact you fudge the real facts and having regard to what I will seek to establish, I want to ask you this question plainly, post merger is Massmart going to take advantage of Wal-Mart’s global sourcing by increasing direct or indirect imports?

MR PATTISON: If I could respond to the first part of your question, which is I strongly deny fudging any facts. In terms of the second part of your question, it is true that Massmart will take advantage of Wal- Mart’s intellectual property in procurement, including global procurement. Just as a reminder, Massmart is already a global procurer and we buy goods from all over the world. I’m absolutely certain Wal-Mart knows some things that we don’t and we will certainly take advantage of that on either products already imported directly or indirectly. 10ADV BHANA: Well what is the nature of those IP tools you’re going to take advantage of? MR PATTISON: Well I’m not familiar with all of them by the way, but Wal-Mart has given all the countries it operates in many products that are not for sale in South Africa and certainly we don’t list. And so one of the tool kits I’m sure is to identify products sold by Wal- Mart in other countries and other formats that we may consider and so that’s one of the tool kits. Another one may be that Wal-Mart has particular understanding and knowledge of say how the health and beauty category is shopped by consumers and ranged and 20merchandised and we would have access to how Wal-Mart would do that, and their merchandising and ranging skills. And then I’m sure Wal-Mart has … in fact I know Wal-Mart have some house brands that I’m sure will be useful to us. So there’s a house brand tool kit and I think of the like, I don’t want to take up too much of your time.

ADV BHANA: No, no please take up as much time as you need on this question. Yes, what are the other tool kits you intend to use in the IP benefits in relation to sourcing? MR PATTISON: I think it’s also clear that we have the option of using the Wal-Mart agency. So we have our own agencies and Wal- Mart has got agreement that they would have to charge us for use of their agencies, but it’s a voluntary thing. So we would have access to source of a merchandise that perhaps we don’t have access now, but I think most importantly Wal-Mart has a very comprehensive 10partnership process where they structure the forecasting collaboration relationship better than we do with their suppliers and we would have access to that sort of know how. ADV BHANA: Why were you reluctant to initially disclose the agency relationship, you tried to get away from it by suggesting you don’t want to take up too much time, and your answer stopped short of taking advantage of Wal-Mart’s agencies relationships, is there any reason for that? MR PATTISON: I’m sorry, I’m not quite sure what you’re talking about. 20ADV BHANA: When I asked you the question you identified two or three aspects, you then said you don’t want to take up too much time and you stopped short of identifying taking advantage of Wal-Mart’s agency relationships, why was that?

MR PATTISON: Sorry, I thought I concluded the point that we would take advantage of Wal-Mart’s agencies. ADV BHANA: After I pushed you to come back to the point, that’s what you did. Why did you initially withhold that point? MR PATTISON: I just wanted to check with you whether you wanted a long answer or a short answer. ADV BHANA: Oh okay, so all of these tools, as I understand, put simply is a way to obtain product principally manufactured in foreign countries, correct? 10MR PATTISON: Not correct. ADV BHANA: Why not? MR PATTISON: Well as I described to you, merchandising, ranging and collaborative planning relationships will apply in fact in the majority to local suppliers. They will also apply to … and just point out, almost all of Massmart supplies are local, 95% of our product is purchased from South African companies. In terms of the 5% we import, yes, in that respect it will benefit those purchases. ADV BHANA: Yes, we’ll come back to that, it’s something else you’re playing down with direct imports, but let’s just deal with this 20aspect. What does Wal-Mart source in South Africa at the moment? MR PATTISON: I understand they purchase through IPL and I’m not familiar with the quantity, fruits and vegetables to export globally.

ADV BHANA: And there hasn’t been any suggestion in anything I’ve read that they source anything other than fresh fruit and vegetable in South Africa, is that correct? MR PATTISON: No it’s not correct, I think recently they’ve announced that they also intend to extend that into wine. ADV BHANA: Yes. MR PATTISON: And just last week, the head of Wal-Mart global procurement was here talking to suppliers about anything else that they’re expanding the operations of the IPL. Again, Mr Bond will be 10able to talk to this point more than I do, but IPL’s relationship with the Wal-Mart group has expanded and as I understand, it’s their intent to expand the categories which IPL purchase locally and export and have already begun doing so. ADV BHANA: As we sit here the only actual procurement is in relation to fresh fruit and vegetable? MR PATTISON: I think today that’s correct, I don’t know how far they’ve progressed with wine. ADV BHANA: Now tell us a little more about the second tool, the house brand that you mentioned? 20MR PATTISON: Yes, well Wal-Mart has some quite nice brands that are private brands, that means that they own them rather than they’re owned by an independent supplier. And some of those brands may fill in gaps that we have in South Africa. We’ve come to no agreement

about whether or not they will be implemented, but certainly it’s something that we will consider. ADV BHANA: What are they? What are the brands? MR PATTISON: I don’t have them on the top of my head, I’m sorry. ADV BHANA: The George label? MR PATTISON: George is a good one, thank you for identifying that, correct. ADV BHANA: Any others? MR PATTISON: I don’t have them on the top of my mind, sorry. 10ADV BHANA: Okay and having regard to your … just perhaps for the Tribunal’s clarification and mine, the George label applies to clothing? MR PATTISON: It’s a clothing brand of ASDA in the UK, but I understand that the George brand is now used globally. ADV BHANA: Alright, and Wal-Mart doesn’t procure clothing in South Africa, correct? MR PATTISON: No it doesn’t. ADV BHANA: So it would be fair to assume that the procurement of the George label would be entirely foreign? 20MR PATTISON: No, that would be incorrect. ADV BHANA: Why? MR PATTISON: Well because South Africa has quite a robust, although under pressure, clothing manufacturing. As far as I understand 50% of all clothing sold in South Africa is manufactured

here, but we’ve got experts who may tell me that that’s wrong, and therefore it’s fairly certain that some of any clothing we make, whether under the George brand or otherwise, would be manufactured locally. ADV BHANA: It certainly hasn’t been the case until now, notwithstanding that the textile industry here has been in pressure, Wal-Mart notwithstanding that fact has not procured any manufacture in South Africa of its George brand, correct? MR PATTISON: Not that I’m aware, no. 10ADV BHANA: Why is that going to change post merger? Why is South Africa going to suddenly become more attractive to this global sourcing giant for the manufacture of clothing? MR PATTISON: I wouldn’t suggest, but again you would have to ask Mr Bond, that South African manufacturers are necessarily well positioned to export clothing that is made here, but if Massmart were to increase its participation in the clothing market in South Africa by selling more clothing through the Massmart business, and again Chair just so you know, Massmart is a very, very small clothing, less than 1% of market share we currently sell, but if we did increase that, then 20local clothing manufacturers do have an advantage in that they’re able to supply us with smaller, because Massmart is very small, smaller amounts of clothing, batches of clothing and certainly their closeness to the sale and the ability to adapt to local market conditions, I think would give them some advantage.

I would concede though on basic items that are sold all around the world, that the South African clothing manufacturers would probably struggle to me … to be competitive in that respect. But again, please if I can say, Massmart is not a big clothing player, so I’m not an expert in the clothing market. CHAIRPERSON: Sorry, we need to take the lunch adjournment. Is it convenient to take it now? ADV BHANA: That’s fine. CHAIRPERSON: Okay let’s come back at 14h00. 10 A d j o u r n m e n t On resumption: CHAIRPERSON: Thanks Mr Bhana. ADV BHANA: Mr Pattison just to deal with some of the answers you gave before lunch. I think as a factor indicating that in relation to clothing apparel Massmart was unlikely to import, you suggested as a reason the fact that Massmart’s clothing sales are fairly low and therefore the quantities of those products are fairly low and wouldn’t justify imports, you didn’t use the word “wouldn’t justify imports” 20but that is the gist of what you were saying, is that correct? MR PATTISON: No, it isn’t. ADV BHANA: What were you saying? MR PATTISON: I was saying that because we are small in clothing, we don’t today have much effect on the clothing industry that is the

only point I was trying to make. I think a small retailer, I think all retailers generally don’t have a view about whether they should import or shouldn’t manufacture locally, I think they use economic considerations to make the decision, including reliability of supply, quality, ability to deliver in a short time, much more complicated than merely just going off to, you know, to one particular element. ADV BHANA: But certainly it is one of the areas, which is identified for growth, is that correct? MR PATTISON: I think it is one of them. I don’t think, I think we 10would be growing, faster in food retail and perhaps faster in, we would be putting more emphasis on perhaps OTC pharmaceuticals, but it is one of them yes, I don’t imagine it to be huge though, no. ADV BHANA: It is one of the areas that Wal-Mart thought they would derive considerable benefit from, for example, making available the George label. MR PATTISON: I think the … making available the George label through our current formats will add benefit yes. ADV BHANA: And quite apart from the consideration of small quantities, everything else being equal if you could get a supplier that 20was reliable and you could deal with all of those other aspects at the end of the day, particularly in relation to clothing price is either king or certainly one of the most important aspects, which a consumer considers?

MR PATTISON: Yes, sorry, you are talking about our price. The price sold through us? ADV BHANA: Yes. MR PATTISON: Yes, it is an important consideration but maybe it would also be useful just to say price is more than what is on the invoice, because you know there is quality, wastage, amount of stock we have to hold, ability to replenish quickly and if one includes total cost of supply, then you are correct it is a very important determinator. 10ADV BHANA: Now I want to also deal with an aspect of your answer arising from the exposure to the agency relationship that Wal- Mart has and can you elaborate on that? MR PATTISON: Yes certainly Massmart, I think the Competition Commission quite well, quite accurately described that there is a segment of our suppliers who effectively act as agents. I think you would have to further divide those agents into two, being those agents who own the brands and those agents who don’t own the brands. Now if you own the brand as an agent in South Africa well there is nothing I can do about it, I can’t import the same product and put the 20name on it, the same name on it. I have to import the product, if we are going to put a different name on it. So it is quite a small portion of our suppliers, but as identified they exist. And there we would be able to, going forward, have the choice between using a local or foreign agent and let me just note that some of the agents are not

domiciled in South Africa. Or we would be able to use the Wal-Mart agents; they are set up with, as we have, with many agents. ADV BHANA: Right and apart from that instance where there are already existing imports, so to speak, the other is the exposure to Wal-Mart’s agency relationships for products that you don’t, you as Massmart don’t currently bring in. MR PATTISON: That is correct, so, yes. If what you are saying do I think that Wal-Mart agents may have products that we don’t currently sell I would say yes, if that is the question. 10ADV BHANA: Well it goes further than that. They have vast ranges of products that you don’t currently and I think I said import, either directly or indirectly, vast ranges of such products and they are also able to get those products at very attractive prices, because of the size and global network. MR PATTISON: I don’t know if it is fast by the way. I mean Massmart sells a lot of product. I think we are talking about filling in small gaps here. I would assume that everything Wal-Mart buys is at a good price. ADV BHANA: Why do you assume it is only filling in small gaps? 20MR PATTISON: Well because you know the world, the global supply chain is available to anyone. The current regulations, rules, policies, I mean everything in South Africa allows us and our suppliers to import. It is going to be a surprise if there is a vast array of goods that aren’t already being imported. I would be quite

surprised at that. Do I think there is going to be interesting products identified from time to time, I do, certainly there will be, but I think we must understand that South African law and regulations allow anyone to import anything as long as they comply with the rules. ADV BHANA: But you know that is really another example of you fudging the issues, because for example there are restrictions put on everybody or anybody importing, because you have got to be able to import sufficient quantities to justify direct imports, correct? MR PATTISON: Yes the quantities are not large, so you typically 10only have to fill a container and you can import, which is quite a small thing it is about 40 foot long. ADV BHANA: Okay, so you say that is not a factor which gives Wal-Mart any real advantage globally in procurement. The fact that it orders such large amounts that it is able to order a vast quantity and then divide it up between all of the different Wal-Mart operations worldwide you don’t … you say that is not an advantage that Wal- Mart has? MR PATTISON: No, I think I have acknowledged already it is an advantage that Wal-Mart had on items that participate in the global 20trade and that we are currently importing anyway, either us or one of our suppliers. ADV BHANA: And it would equally apply to products that you are not importing for example because you may not need a whole container of those products.

MR PATTISON: No that is also not through. You know the South African; this whole import thing is not new. South Africa has been an open economy for some time now and I think the fundamental shifts of local to global production have already changed and will continue to change according to global economics, but most of the product manufactured in South Africa is manufactured in South Africa, because it is economically viable and efficient to manufacture in South Africa. ADV BHANA: So when... 10MR PATTISON: And we would continue to purchase that product from South Africa. ADV BHANA: Let me put this differently, so when Wal-Mart boasts that it brings for example to parties that it either partners with or parties such as yourselves that it would be acquiring a substantial stake and that it brings a huge benefit in terms of its global sourcing you say that it is an empty boast? MR PATTISON: I think there will be some benefit from global sourcing, I think quite marginal and I think the greater benefit will come from making Massmart supply chain more efficient. So I am 20acknowledging we will get some benefit from global procurement, making Massmart supply chain more efficient and thus therefore being able to sell goods at a lower cost. ADV BHANA: What is your basis for taking the view that it will be a marginal benefit, what do you base that one?

MR PATTISON: It is probably impacted by the fact that, first of all you know South Africa has some very big global companies as suppliers already Nestle is a global company, Cadbury’s is a global company, Coke is a global company and these companies have massive skills and vast resources at their disposal. And I would imagine that you know the South African economy, the South African suppliers have largely already identified for themselves what should be imported and what shouldn’t. That is certainly not a decision we are part of. 10ADV BHANA: Yes. MR PATTISON: In terms of goods we don’t import directly. I reckon quite highly and I can’t imagine why Wal-Mart’s suddenly going to completely change the landscape. I accept that they will marginally change the landscape, but I can’t accept that they will completely change it. ADV BHANA: As with a lot of your testimony you play this aspect down and unfortunately we don’t have time for me to take you to task on all of what you say, but the examples that you choose are all international brands, which really play in a different space for 20example buckets that may be brought in from China, Nestle Chocolates or Nestle drinks versus buckets from China, there are different imperatives that operate. MR PATTISON: I am sorry I don’t understand your point.

ADV BHANA: In relation to the examples you have given they all deal with well known international branded products and well known international companies Nestle, Coke those are the companies you are citing. And one can understand that you say that these companies are already bringing their product into South Africa at a level or let’s accept for the moment that you say that they can bring them in at a level that Wal-Mart won’t be able to better that was what you were really suggesting. MR PATTISON: The big global branded companies. 10ADV BHANA: But your choice of example is what fudges the issue, because apart from those well known international brands there are many other lines of products which for example plastic buckets, where you don’t have a large international branding, a large company operating in South Africa that brings that product in, so your example falls to be distinguished by the fact that you rely on very well known international brands and where there are large players operating in South Africa already. MR PATTISON: I mean I don’t rely, I rely on those because the vast majority of products we sell are branded and supplied to us by large 20international suppliers that is the majority. I fully accept that there are products of categories that are just made around the world and imported from the cheapest place. I mean I don’t want to, again, be argumentative buckets isn’t one of those. It is far cheaper to export the raw material and have a local manufacturer do the injection

moulding, but I mean that is an example in buckets. I accept that there are some goods that are just traded around the world that will be bought from wherever is cheapest and that may be China today and may be India tomorrow and it may be South America the next day and hopefully one day in the future it will also be South Africa. ADV BHANA: Not yet though? Not yet South Africa? MR PATTISON: At the moment our labour costs are very high and so it is quite, you know, we have as I think as a country acknowledged that we have got competitive issues to be able to 10produce relative to other countries in many categories. ADV BHANA: And the second challenge to the answer that you put up is that in this regard I take it when I say “in this regard” where you are talking about the Nestlé’s and the Coke’s etc South Africa is not different to any or most of the other countries in which Wal-Mart operates, there would all be countries in which there are these large international brands and international or multi nationals that bring these brands into the country, so there is nothing special about South Africa in that regard that is what I am putting to you. MR PATTISON: I think that, I mean, nothing absolutely special I 20would distinguish countries far away from the source of production as slightly different. South Africa, although it is not commonly talked about, South Africa has a local manufacturing competitive advantage, because we are far away from anywhere and so you know the

transport cost of manufacturing something in China and bringing it here is actually quite large. We are different in that aspect. ADV BHANA: It is another aspect we don’t agree with you, but we will have to leave that to another witness to deal with that. But certainly as you have accepted there is nothing special about these well known brands and large players bringing those brands in, so for example apart from the exceptions and perhaps tell us which are the exceptions you say, the countries that are far away that wouldn’t fall into the general... 10MR PATTISON: Well South America, I am just trying to think through the map seems far away from everywhere. ADV BHANA: Chile? MR PATTISON: It is in South America yes. ADV BHANA: Yes that is far away, so that could fall within the exception that you put up as countries not having these well known international brands and large multi national... MR PATTISON: Sorry, it sounds like you have misunderstood me. I think all countries have these large multi nationals operating in them that I am aware of. You know I don’t think that there is any country 20where Wal-Mart operates where you don’t have the multi... ADV BHANA: Perhaps I did misunderstand you. MR PATTISON: Sorry. ADV BHANA: I understood you to say that there are some remote countries where it wouldn’t apply?

MR PATTISON: I am saying there are some remote countries, which will also like South Africa have an advantage, because local manufacture in some instances, in some product categories, buckets happens to be one of them where the transport costs of the bucket is too high, so it is cheaper to manufacture locally. ADV BHANA: Now let’s deal with the toolkits you spoke about. Am I right in saying that a company such as Massmart pays good money for access to these Wal-Mart toolkits as they have been called? You conclude formal agreements and you pay a fairly 10significant percentage, based probably on the value of the goods for use of these toolkits, not so? MR PATTISON: The structure is reasonably complicated and I am happy to go into it in more detail if it helps. There are three charges, four charges in all that we will get from Wal-Mart. Three of which are at cost plus, so it depends how much we use them. If we don’t use them we don’t pay for them, if we do. Then there is an intellectual property charge which is quite … you know as I say its calculation is quite complex, but essentially I think would fall into the category you are talking about that if we receive intellectual benefits 20… if we receive intellectual property benefits from Wal-Mart there is a way of them being rewarded for that. ADV BHANA: And the sourcing toolkits where would that fall into? MR PATTISON: No, the toolkits in themselves you don’t have to pay for, once you are part of the Wal-Mart Group, you have access to

the skills and resources of the Wal-Mart International Integration Division, so there is no specific charge for those. ADV BHANA: I just want to check something. I will find it now, we will deal with it, and we will come back to that. Perhaps you can just help us by telling us which are the formal agreements that … which formal agreements are envisaged will be concluded with Wal- Mart to gain access to the global sourcing and IP benefits? MR PATTISON: As I said there are four separate agreements, one, you would call an intellectual property agreement and there are three 10others, let me try and remember them, I don’t have any notes of these. I think there is one which relates to the buying agency, so if we buy through the agency completely voluntarily at our discretion we would have to pay a fee. If we have systems provided, I think we have to pay a fee, I have trouble remembering the other one, and maybe the other one is if we have EXPATs we have to pay for them or something like that. ADV BHANA: It is that second one I think you mentioned if you use their global buying you have to pay a fee that is the one that I am interested in. What is that fee as a percentage? 20MR PATTISON: I think it falls into the confidential nature of that. I am happy to... [Talking simultaneously]

ADV BHANA: I have a percentage in mind and it is in the document, which will identify, but as a percentage of your net margins it is not an insignificant percentage is that correct? MR PATTISON: Yes it would be incorrect to compare it on that basis. The best way would be to compare it against the agency fee we currently pay. And in that respect in some instances it is higher than the current agency fee and in some instances it is lower. ADV BHANA: Right, now what are you getting for paying in those instances where it is a higher agency fee, what are you getting in 10return for that? MR PATTISON: Access to product. So in the same way that say an agent based in Cape Town it arrives by our doorstep and says I have got these products for sale at these prices and then we pay that agent an agency fee, which is essentially an agreed mark-up for its role as a wholesaler and Wal-Mart would operate on exactly the same basis. ADV BHANA: Essentially access to foreign product? MR PATTISON: I would imagine that the stuff that is going through the Wal-Mart agency will all be access to foreign product. ADV BHANA: Yes. 20MR PATTISON: Correct. ADV BHANA: And apart from that insofar as you say in some instances it is higher in some instances it is lower, let’s assume for the moment that on average it is equal to what you pay your current agents make that assumption.

MR PATTISON: Okay. ADV BHANA: The fact that you replace your current agents with Wal-Mart, given that assumption will not result in any real cost saving will there? MR PATTISON: No, because the product that Wal-Mart may have sourced may be at a lower cost than the current agent who is importing it. So the fee may be the same, but Wal-Mart may get a better price out of the factory, this buying power that you are referring to. 10ADV BHANA: Yes, so we are back to Wal-Mart’s global buying power that is where you get the cost advantage from. MR PATTISON: In those items that are imported already yes. ADV BHANA: Alright and in relation to lines, which you don’t already import, but which you may well bring in, you also benefit from the global leverage if one can call it that that Wal-Mart has in terms of pricing? MR PATTISON: Correct, because we would then be selling goods that are not sold in South Africa yet, correct. ADV BHANA: Now perhaps just let’s deal with the toolkit issue, 20because as I understood and correct me if I am wrong, I might have misunderstood you. As I understood your answer before lunch was that you didn’t see a significant impact or effect, because the toolkits deal also with procuring from local suppliers, is that correct? MR PATTISON: No, then...

ADV BHANA: Please set me right? MR PATTISON: Well let me just, I don’t understand which point you are referring to. ADV BHANA: You had made a point before lunch on this issue that, and I think it was in the context of saying that insofar as procurement through Wal-Mart goes, it would also apply to local suppliers and the sourcing … the global sourcing would equally apply to getting product from local suppliers, is that correct? MR PATTISON: So what I am saying is when you are just talking 10about what benefit Wal-Mart will, I think, will bring in terms of global procurement those products manufactured and supplied in South Africa just by buying power make no effect, because Wal-Mart don’t have any procurement in this country so the procurement Massmart has from those suppliers will be exactly the same afterwards. ADV BHANA: From your local suppliers? MR PATTISON: From the local suppliers. ADV BHANA: Yes. MR PATTISON: But I still think you know where we will and let me 20give you an example, Wal-Mart is a global leader in forecasting sales. They have got intellectual property that we don’t have access to. In forecasting better with suppliers they will manufacture the right amount and we will buy the right amount. There will be less wastage there will be less storage cost, less inventory costs and so by just

working together with the supplier and saying let’s make sure you are manufacturing the right amounts, you are supplying us the right amounts, we will actually save significant costs and therefore the Wal-Mart’s intellectual property the know-how of how to do that will help us and our suppliers save costs and so we will therefore be able to pass those costs onto consumers and that is the fundamental retailing IP. ADV BHANA: I understand, but when one talks about the global sourcing toolkits, one is not there dealing with sourcing from local 10suppliers, correct? MR PATTISON: Well no by its nature global sourcing toolkit does not apply to local suppliers. ADV BHANA: And even if you don’t take … leave out the label “global” when you deal with the Wal-Mart sourcing toolkit you are talking about sourcing, which is not from local suppliers, correct? MR PATTISON: Well there … I am sorry it is difficult because there isn’t a toolkit called Wal-Mart procurement toolkit. ADV BHANA: Okay there is a toolkit called sourcing globally toolkit. 20MR PATTISON: There is a global sourcing toolkit correct, but that is only for those products that would be sourced globally, which are products already imported. ADV BHANA: They are not for products supplied locally? MR PATTISON: In the majority no.

ADV BHANA: Well not even in the majority. Turn to the document in our Volume 1 it would be probably be one of these three blue Deneys Reitz files, page 406 in Volume 1 that is the toolkit you refer to, correct? CHAIRPERSON: 406. ADV BHANA: Volume 1, page 406. CHAIRPERSON: It is headed “sourcing globally toolkit overview”. ADV BHANA: Right, we have got the same document and for identification purposes this is the toolkit we were talking about. 10MR PATTISON: Okay. ADV BHANA: Is that correct? MR PATTISON: I have not read this document nor have I previously read the globally sourcing toolkit overview, but it looks like it is headed the same document. ADV BHANA: What we do know is that Wal-Mart global sourcing was punted as one of the advantages of doing the deal with Wal-Mart to shareholders for example? MR PATTISON: Correct. ADV BHANA: And that being the case this toolkit would fit 20squarely into that advantage where global sourcing was punted as an advantage, correct? MR PATTISON: I would assume so yes. ADV BHANA: Right and this is the toolkit which says, it says a lot of things, but just for the moment in relation to your point...

ADV KENNEDY: Chair, our colleague will recall that this is confidential so perhaps he can walk around it as best he can without clearing the room. ADV BHANA: Alright give me a moment just to see how I do that. I don’t think this aspect can be confidential the toolkit says “it is to ensure that the market pays the lowest price available for merchandise by leveraging Wal-Mart Stores Inc global relationship with suppliers” you see that in the first paragraph under the heading “introduction”? 10MR PATTISON: Yes, I see it. ADV BHANA: And you accept that is where the global sourcing benefit comes from, it comes from Wal-Mart’s global relationship with suppliers which enables it to get the lowest price available, correct? MR PATTISON: Those suppliers that are global yes. ADV BHANA: Right. MR PATTISON: No, in fact that is not correct. Those suppliers whose product is sourced globally, I mean there are global suppliers whose products just supports locally. 20ADV BHANA: Sorry just tell us that again? MR PATTISON: It will relate to those products … those products that are sourced globally. There are products sourced locally, which this wouldn’t apply to. ADV BHANA: Yes.

MR PATTISON: Even though they are part of global suppliers. ADV BHANA: Yes, okay in fact I think that is what you said in the next paragraph under “scope” and emphasis is placed on “importing new or existing items from outside the country at lower cost or higher quality” so that supports what you say. MR PATTISON: The second paragraph? ADV BHANA: Yes, under the heading “scope” just before the bullet points. MR PATTISON: You are referring to this final sentence. 10ADV BHANA: Yes. MR PATTISON: Okay. ADV BHANA: So the simple point on this document is it doesn’t apply to sourcing from local suppliers. I think you indicated that earlier and this is also the tool, which Wal-Mart is going to use to make sure that the market pays the lowest prices available, correct? MR PATTISON: For globally sourced product? ADV BHANA: Yes. MR PATTISON: Yes. ADV BHANA: And this toolkit would also be implemented in South 20Africa if the merger were to go through? No reason for it not to. MR PATTISON: There is no reason, it hasn’t been decided and I am not sure the extent of which it will be applied, but you are right, there is no reason why it wouldn’t.

ADV BHANA: In fact it is one of the benefits that were highlighted to shareholders, not necessarily with reference to the toolkit, but the global sourcing benefit is what was highlighted to shareholders and analysts as an advantage of the merger with Wal-Mart. MR PATTISON: Correct and I think in my own evidence to this Tribunal. ADV BHANA: Well your own evidence backtracked a little on that, but we will get to that. Then there is a toolkit at page 414 and that is the GP direct import opportunities toolkit overview, you see that? 10MR PATTISON: Correct. ADV BHANA: What does GP stand for is that global procurement or does it stand for something else? MR PATTISON: I don’t actually know. It seems to be logical. ADV BHANA: And this also is the procedure and system and the tool that Wal-Mart intends to implement in its stores that engage in global sourcing correct? MR PATTISON: I would imagine so. ADV BHANA: And there is no reason why this tool and what it contains will not be implemented in South Africa, post merger if the 20merger were to go through? MR PATTISON: There is no reason why not this would be applied to the direct imports that we currently are importing ourselves, because that’s what it says direct imports, which I think in our submissions accounts for about 5% of our purchases.

ADV BHANA: I think you modified the figure a little later to perhaps 3.4%, but we will get to that. Now, surely the issue of procurement and global procurement being at the forefront of the issues to be debated in this merger and also even before the proceedings before the Tribunal, in your interaction with government it was certainly an issue that was at the forefront, correct? MR PATTISON: With the? ADV BHANA: The question of whether Massmart increased its global procurement post merger. 10MR PATTISON: Yes, that was raised first in October by the ministerial panel. ADV BHANA: So, it’s not an issue that you are facing for the first time here in this hearing. It’s one that you have had a period of months to consider and think about. MR PATTISON: Correct. ADV ROGERS: And you’ve also had a considerable amount of time to consider the extent, and I’m not talking for an exact percentage, but the extent to which those global procurements will impact on your South African operation. 20MR PATTISON: No, in fact that hasn’t been at the forefront of my thinking. ADV BHANA: Really? MR PATTISON: No. ADV BHANA: No?

MR PATTISON: No. ADV BHANA: You’re completely oblivious to the extent to which imports are going to affect your local operation. Do you really want us to believe that, Mr Pattison? MR PATTISON: Well, you see, the difference of opinion here is I don’t think that it’s going to impact them much. That’s my opinion. ADV BHANA: That’s a different answer. Have you or have you not thought about the extent to which imports are going to impact on your local operation? 10MR PATTISON: Our local operation or the country’s local operation? ADV BHANA: Massmart. MR PATTISON: I have given it some thought, but it’s not been a material part of my thinking. ADV BHANA: Why has it not been a material part of your thinking? Is it a question that you don’t want to face? MR PATTISON: No, that is not the fundamental reason why Massmart has agreed to participate in this merger. The fundamental reason that we need to participate in this merger is to grow our food 20retail business, to grow into the fresh category and to re-engineer our supply chain and to serve customers. That’s actually ... we as a retailer, and I made this point, if I may Chair, to the ministerial panel in October. The retailer’s role is not to decide whether or not things are imported or not. We buy from local suppliers, who they

fundamentally decide whether to import or not. So, it isn’t a major part of our operations. You will see that there isn’t a lot of documents about it. This is actually something that is quite new to us to participate. ADV BHANA: You are not answering the question, Mr Pattison. It’s a simple question. You say you have ... let me ask this. Have you or have you not thought about the extent to which imports and overseas procurement is going to impact on Massmart’s operations in South Africa? 10MR PATTISON: I have given it some thought. It was not a significant portion of my time. ADV BHANA: And having given it some thought, what have you come up with as in your mind the extent of the impact? MR PATTISON: I think the impact on agents, our current agents, there will be some impact on our current agents. I think it is likely that our level of direct imports would increase in exchange for those agents. I do fundamentally believe it’s not going to make any material impact on our suppliers who manufacture the product locally. ADV BHANA: Now that’s where I lose you. You say your first part 20of your answer is it’s not going to make an impact, because ... and I’m paraphrasing what I understand, you are going to replace one agent with, let’s call it the Wal-Mart agent. MR PATTISON: Correct. ADV BHANA: Right, and the second part of your answer?

MR PATTISON: Is that I don’t think that activity or Wal-Mart’s global procurement capabilities will have much impact on our suppliers who supply us with a locally manufactured product. ADV BHANA: But it’s really continuative, your answer. Why would it not? Here you have a giant, a global giant that has access to all kinds of supplier relationships, all kinds of networks that boasts about being able to procure the best possible prices because of that. Why would you not take every benefit from that and why would it not apply to South Africa? 10MR PATTISON: Because Wal-Mart has no operations... ADV BHANA: It doesn’t seem to me ... sorry, it doesn’t seem to me that that’s how a reasonable retailer like yourself would operate. MR PATTISON: Well, it’s just economics. If Wal-Mart doesn’t procure anything in South Africa today, post the merger it is not going to make any difference to what we procure locally today. So, there should be nil impact and if there is any impact, it will be marginal about the way we deal with our suppliers, but Wal-Mart add nothing to Massmart’s volumes in procurement of locally manufactured products at all, because they don’t buy anything... 20ADV BHANA: No, you are qualifying your answer in a way which is unhelpful. Are imports going to increase as a result of your merger with Wal-Mart or not? MR PATTISON: Our direct imports, Massmart’s direct imports will most likely increase. They will be displacing items already imported

by our agents. So, if the question is will Massmart’s direct imports increase, I would concede that is likely to happen. Do I think it will make any substantial difference on the total imported goods, whether it be indirect plus direct? I would say there is not going to be a material impact. ADV BHANA: To understand your answer, you say it won’t have a direct impact, it won’t have an impact on direct imports, because Massmart is now going to import that through the Wal-Mart agent. Is that what you are saying? 10MR PATTISON: So, I’m saying let’s call the Wal-Mart agent a direct import. So, Massmart currently imports them and just so you know the difference in figures, one is a percentage of sales and one is a percentage of purchases. About 5% of our purchases we import. I’m guessing the figures. Let’s say another 5% of our products are important by agents. So, it will 10% imported. We would maybe shift some percentage of those agent imports to direct imports. That’s what I’m trying to say, but the total combination of direct imports and agent imports will still be 10%. It may be 10.5% afterwards. What I’m saying is it’s not going to be 20 and it’s not going to be 30. 20ADV BHANA: So, you are saying overall, taking direct and indirect imports into account, there will be no increase in the level of imports. MR PATTISON: No, I said our direct imports plus agents’ imports. There are many other imports. That’s another category, which is imports of our suppliers who own their brand. Now, someone like

Tiger Brands sometimes imports things and sometimes manufactures them locally. Those are also indirect imports, but we have no influence over that, because Tiger makes its own decisions. ADV BHANA: So, in indirect imports you are saying indirect imports that are imported by an agent of yours as opposed to a supplier who brings it in and sells to you. MR PATTISON: So, we have direct imports, agent imports and then the balance of indirect imports. ADV BHANA: Supplier imports. 10MR PATTISON: And those are usually branded products, Tastic Rice for instance, whom I think is a local product. It’s actually imported rice. That decision is made by them. So, those are imports, but those decisions aren’t made by us. ADV BHANA: So, leaving aside what I’ve called supplier imports, just to put a label on it, the third category, leaving that aside you are saying overall there is going to be no increase in the level of imports, having regard to your direct imports combined with your imports through agents, your indirect imports through agents. Is that your answer? 20MR PATTISON: That’s my answer, but I’m going to have to preface it. ADV BHANA: And has that always been your position? MR PATTISON: What do you mean always? ADV BHANA: Since September 2010 has that been your position?

MR PATTISON: Yes. That is my position. I must give it one preface, if I may Chair. That’s an all things being equal. If I can just point out, the rand moving from R11.00 to R6.00 – don’t know where it was the other day, has had an effect on that and the rand moving back there will have an effect on that, but all other things being equal. So the impact of this particular merger on that number will be marginal. Will it change over time? It might and it very likely will change, but it will have factors unrelated to Wal-Mart, exchange rate, industrial policy, if the government’s current position works, it should go up, because 10there should be more manufacturing capacity. So, there are factors way out of control, trade policy, finance policy, rand exchange rate that will make that number move anyway. ADV BHANA: All else being equal, as you say, you say the impact will be marginal. MR PATTISON: Correct, that is my view. ADV BHANA: What do you regard as marginal? Does marginal mean insignificant? MR PATTISON: I would call a marginal move from a hypothetical 10% to 12% or 13%, not 15 or 20, just to explain my views of the 20word “marginal”. ADV BHANA: A percent or two, that’s what you regard as marginal. MR PATTISON: A percent or two would be marginal. ADV BHANA: More than that is not marginal. MR PATTISON: No.

ADV BHANA: And I think I put the question to you a little earlier, that has always been your position since September 2010 when you say the merger was first mooted. I think in fairness to you, you said some weeks just before the end of September. MR PATTISON: I’m not sure I understand your question. ADV BHANA: In other words, have you changed since ... let’s put a date on it. Since September 2010 has your position been consistent with what you are now testifying to? MR PATTISON: I would say my position has been reasonably 10consistent since October when the issue was first raised to me. Between September and October we didn’t think this was the material issue that would arise. ADV BHANA: Okay. Now, where does the increased activity in relation to private labels fit into the answer that you have just mentioned? MR PATTISON: Private label is a completely separate thing. Private labels can either be sourced locally or imported. There is no bias either way. In fact, I don’t know the exact number, but I would guess that quite a large majority of our private labels are actually locally 20sourced. So, private label is a separate thing. It’s a competitive strategy. It’s a global trend. It helps us bring products that are generally well established in the market to consumers cheaper, because there is no brand premium, but it has very little to do with

importing or local manufacturing. We tend to go up and tender on these things. Some are locally manufactured and some are imported. ADV BHANA: Now, in relation to private brands has it always been your view that there will not be increased importing of your private brands due to the merger? MR PATTISON: No, I don’t think the merger will have any impact on private labels, but to the extent that private labels are going to grow in Massmart, they are currently sitting in the 8, 9% and they should grow to 15, 16%. To the extent that we import private labels, 10of course, they are going to affect our import program, but as I say, I think they will largely displace products already imported. ADV BHANA: Well, which is it? Does it fall into your answer where you said there will be a marginal or insignificant impact or is that something outside of that answer where you say it will have an impact resulting in greater imports? MR PATTISON: Your question is a good one. The complexity we have around this is what was going to happen anyway without Wal- Mart. So, the fact that Massmart’s private labels are going to go from 8 to 15 or 20 was going to happen anyway. So, there was going to be 20a change in the dynamics of private labels anyway. How it relates to import, I think, is a separate question. ADV BHANA: That’s the one I’m interested in. MR PATTISON: Well, I think I’ve already answered your question saying I don’t think private label in itself has a material impact on

your view on imports, because private labels are both sourced locally and imported. ADV BHANA: Pre-merger did you have a strategy to increase ... let me rephrase that. Merger aside, assuming there wasn’t going to be a merger, was there a strategy to increase your activity in private labels by virtue of greater imports? MR PATTISON: No, there wasn’t. So, that’s because of the two parts to your statement. Yes, there was a strategy to increase private label. No, it wasn’t a strategy just to improve my imports. 10ADV BHANA: In fact, the strategy didn’t envisage any greater increase in imports, did it? MR PATTISON: I don’t think it even mentioned that. I mean, I’m trying to think back to our private label strategy and we certainly don’t have a policy, which favours imports over locally manufactured products in our private label strategy. It’s a separate thing. ADV BHANA: And post-merger, with the benefit of the Wal-Mart procurement? MR PATTISON: Well, the benefit of the Wal-Mart procurement itself I don’t think is going to change the private label, what was 20going to happen anyway. The growth in private label is going to happen anyway. ADV BHANA: No, it’s not what I’m putting to you. I’m not talking about the growth. I’m talking about the import, the extent of importation in relation to your private labels.

MR PATTISON: I think I’ve already answered the question that says I don’t think the increase in private label necessarily amounts to an increase in imports. ADV BHANA: My question to you is that now that you ... let’s assume that you now have the benefit of the merger and the benefit of the access to Wal-Mart’s global sourcing. Is it fair to accept that there is going to be greater overall importing in relation to your private label activity? MR PATTISON: No, it’s not. 10ADV BHANA: Why not? MR PATTISON: Because at least 55% of Massmart’s sales are in food and liquor. Food and liquor will actually have much higher levels of private label than general merchandise and therefore I actually expect the opposite to happen, which is ... and food is, I think with all but a few exceptions, bought locally, produced locally and therefore I would actually see an increase in procurement of local goods through private label. ADV BHANA: And what about the other 45%? That’s not insignificant in relation to that. 20MR PATTISON: I will repeat my previous answer. The private label, the growth in private label of the hard goods I don’t think is going to have a material impact on the level of imports at all into South Africa, because as I say, even in that 45% it will include local procurement.

If the product is produced locally, we tend to procure it. If it’s not produced locally, we import it. We don’t have any choices in this. ADV BHANA: And just so that we are clear, when we are talking private label here, we are talking about, for want of a better description, Massmart’s own private label. In other words, we are not talking about things such as the George label, which is part of the Wal-Mart private label or house brand, correct? MR PATTISON: Correct, but as I say, the plan of Massmart and it’s in all our official documentation, was to increase its private label to 1020% anyway and certainly the Wal-Mart private labels will help us get there. ADV BHANA: So, I think it was before lunch when we dealt with the Wal-Mart house brands, you accept that in relation to those house brands there will be greater importation into South Africa. MR PATTISON: To the ones that it owns, yes correct. Sorry, some of them may be imported. What I don’t agree with is whether or not it’s a product already imported and I think this is the point that you are not getting. If something is imported already and we import it, imported by someone else and then we switch to imports, whether it’s 20private label or not, it doesn’t have any impact on the overall level of... ADV BHANA: Mr Pattison, you are fudging again. You don’t import any Wal-Mart house brands at the moment yourself, do you?

MR PATTISON: No, but again you are missing the point. Someone may be importing it. ADV BHANA: Do you supply any Wal-Mart house brands yourself at the moment? MR PATTISON: No. ADV BHANA: So, why are you giving us an answer that’s taking us off on a different tangent again? MR PATTISON: Because... ADV BHANA: In relation ... let me repeat the question. In relation to 10the Wal-Mart house brands there is going to be an increase in importation by Massmart. Correct? MR PATTISON: No. ADV BHANA: Why not? MR PATTISON: Because those products may be already imported by Massmart. ADV BHANA: But you can’t give us any example of that. MR PATTISON: No, I can. ADV BHANA: It’s purely speculative. MR PATTISON: No, today Massmart owns the Trojan brand. You 20may have one in your house. I hope you do. It is an exercise bicycle. It’s the number one market position of that. It’s all imported from China. Wal-Mart may give us access to their brand of exercise material, exercise equipment and we may now import their private label through them, displacing the Trojan brand.

ADV BHANA: Oh, so that’s your answer. It’s to the extent that it’s going to displace one of your existing brands, there won’t be greater import activity. MR PATTISON: Correct. ADV BHANA: But to the extent that it’s not going to displace your existing brands, there of course will be greater importation. MR PATTISON: Direct imports by Massmart. It may displace an agent or it may displace a supplier importing. ADV BHANA: Now, let’s see how consistent you’ve been in what 10you’ve been telling government and other players. In relation to the procurement and the likely procurement post-merger and the procurement strategy, of course, this is not something that you just dealt with totally on your own. You discussed those issues with Wal- Mart representatives, correct? MR PATTISON: Sorry, what are you asking I discussed with Wal- Mart? ADV BHANA: In relation to how procurement will change post- merger. MR PATTISON: The answer is yes, we have had some discussions. 20ADV BHANA: Who have you had those discussions with? MR PATTISON: I have had discussions with members of the Wal- Mart integration team, headed by a gentleman by the name of Kevin Harper. ADV BHANA: And has Mr Bond been part of those discussions?

MR PATTISON: No. ADV BHANA: Is Mr Bond sitting in the room still? He was here this morning. Is he still here? MR PATTISON: I can see him. He is behind that huge stack of files. ADV BHANA: Okay. So, he sat here throughout your testimony. He was not part of those discussions. MR PATTISON: Not as far as I remember, no. ADV BHANA: Alright. MR PATTISON: I wasn’t in all the discussion, as you can imagine. 10There were discussions with other executives, but I’m not aware of him participating in that detail of a discussion yet, but you can ask him that question. ADV BHANA: Well, in how many discussions did you participate and what is the extent of your knowledge? MR PATTISON: My personal knowledge? ADV BHANA: Yes. MR PATTISON: I have probably had four or five meetings with Kevin Harper, but a number of other meetings have been had in the group. 20ADV BHANA: Certainly when you respond on behalf of Massmart, it would be on the basis of discussions you’ve had with Wal-Mart and let’s not get each other wrong. It may not be the Wal-Mart view, but when you respond, it’s on the basis of discussions and exchanges you’ve had with Wal-Mart already. Correct?

MR PATTISON: It includes discussions with Wal-Mart. It’s based on my own opinion. ADV BHANA: But your opinion... MR PATTISON: Because I’ve had other discussions as well with other people. ADV BHANA: Like who? MR PATTISON: Like suppliers, like the Department of Economic Development, like the Department of Trade and Industry. ADV BHANA: But at least to that extent that you’ve had discussions 10with Wal-Mart, it’s informed by your discussions with Wal-Mart, correct? MR PATTISON: And with my discussions with suppliers. ADV BHANA: Okay. MR PATTISON: If you include them, then it’s correct. ADV BHANA: And by late October 2010 you would have also had a clear idea of the synergies between Massmart and Wal-Mart. Correct? MR PATTISON: No. ADV BHANA: No? How so? MR PATTISON: Well, the job of identifying synergies in an 20acquisition is the acquiring company, not the target company. ADV BHANA: I don’t expect you to know all the detail. MR PATTISON: No, I’m saying I didn’t participate at all.

ADV BHANA: When you took a view whether to recommend this to your shareholders or not, did you have no view on the synergies between Massmart and Wal-Mart? MR PATTISON: I had one view, which was the view as calculated by the independent valuer, which is required in terms of the SRP, I think, or the JSE, who had a Massmart board presented what they thought was the Wal-Mart ... in fact, just a single number, but it was not of my concern as to what a Wal-Mart synergy is of Massmart, no. ADV BHANA: All you were interested in is is the value correct. You 10weren’t interested whether these two companies are a good match for each other. MR PATTISON: No, that’s absolutely incorrect. I absolutely was interested in whether these two companies were a match for each other. As I say, our focus wasn’t as yours is on the level of imports. It was in bringing two retailers together and doing better retailing. ADV BHANA: I see you anticipate where I’m going to. I’m not talking about imports. I’m talking about synergies. MR PATTISON: I apologise. ADV BHANA: Match fit. That’s what one talks about when one talks 20about synergies. So, did you apply your mind to the fit between the two companies and the synergies between the two companies or not? MR PATTISON: I did apply my mind to the fit and it came out positive. Maybe we are just missing each other on the use of synergies. A value created in Massmart I applied my mind to.

Typically synergies are used as the acquirer to justify the price. I was the seller. I didn’t have to justify the price, other than to consider with expert advice whether it was fair. ADV BHANA: And also to consider when you were considering that fit, I say synergy. You use the word “fit”. You use the word “match”. In considering that, you applied your mind as to what Wal-Mart was bringing to Massmart as a result of the transaction. MR PATTISON: I did. I applied my mind to the things which we would want or which we thought Wal-Mart could bring us, yes, but if 10I can again repeat, that wasn’t a discussion prior to the firm offer at any point in time. That is not the nature of a negotiation. ADV BHANA: That’s not what I asked you either. MR PATTISON: I thought it might be useful additional information. ADV BHANA: Please. You would have taken account, not only of what you thought Massmart could benefit from Wal-Mart, but also what Wal-Mart was telling you would be the benefit of the merger. MR PATTISON: Can I ask you? Are you talking prior to firm offer or post firm offer? MR PATTISON: Pick a date. 20MR PATTISON: Prior to firm offer I never discussed it with Wal- Mart. ADV BHANA: Pick a date in relation ... firm offer, remind me, is 25 September?

MR PATTISON: No, it’s October some time, I think, end of October. Remember, the 25th of September is the beginning of the negotiations. ADV BHANA: Right. MR PATTISON: The firm offer is, I think, at the end of October. ADV BHANA: Okay. MR PATTISON: Or early November. And the time that Massmart was ... an agreement with management and the board was reached on the sale of Massmart is the end of October. It started the end of September and it ended the end of October. 10ADV BHANA: But prior to the firm offer, as you put it, at an advantage stage, take it as at the last week of October when you were having your interactions with government, you already must have had a view as to what Wal-Mart could bring to Massmart, in terms of what Massmart thought and also in terms of what Wal-Mart was offering, whether you believed it or not. MR PATTISON: No, in fact, I didn’t and that is indicated in the submission I made to the ministerial panel, which you correctly identified I included in my submission and at the beginning of that submission it clearly states I have had no ... I can’t remember the 20exact wording, but it gives the impression and it’s true that I didn’t have those insights into the transaction at that point, no. ADV BHANA: Did you have no discussion? Let’s perhaps go to the documents.

MR PATTISON: I don’t have my statement in front of me. Perhaps someone could find the wording. ADV BHANA: Yes, we will help you find it. There is a copy in Volume 1 of our bundle. MR PATTISON: I think it was the cover sheet of that submission. ADV BHANA: The Deneys Reitz bundle. MR PATTISON: In fact, may I read from it, Chair? It says... ADV BHANA: I think I will just direct you to what I need to. If it’s not fair, you can go back. Your statement starts at page 81. At page 10115 government writes to you. It’s a letter dated 22 October from Prof Richard Levine. You recall that letter. I’m just putting context. Then there is another letter at 117, also from Prof Levine, dated 25 October and then your responses follow. First is your response to the letter of 22 October, which is at page 120 and the second is your response to the 25 October letter, which is at page 123. So, dealing firstly with your letter at page 120, as at that stage did you have a view as to what you were going to benefit from the transaction? MR PATTISON: Again, I mean, you are confusing me, because you 20are asking me two separate questions. You are asking me did I have a view on how Massmart would benefit. ADV BHANA: Yes. MR PATTISON: And then separately how was Wal-Mart going to benefit.

ADV BHANA: Yes. MR PATTISON: Which one are you asking about? ADV BHANA: No, no, not how was Wal-Mart going to benefit. MR PATTISON: What synergies will Wal-Mart have? ADV BHANA: Your view as to the benefit of Massmart as you believed and also what Wal-Mart was telling you would be the benefit to Massmart. MR PATTISON: Okay, so on the second bit those discussions had not started yet. On the first... 10ADV BHANA: Sorry, the second bit? MR PATTISON: The second bit being Wal-Mart’s view. I didn’t understand that. I had no insight into Wal-Mart’s view. ADV BHANA: Okay. MR PATTISON: We were on opposite sides of the negotiating table. ADV BHANA: Right. But you certainly had views and pretty strong views as to the benefit Massmart was going to get from the merger. MR PATTISON: Correct. ADV BHANA: And that was already as at the date of your letter of 28 October, which is at page ... they are both dated 28 October, your 20first 28 October letter at page 120 as well as... MR PATTISON: Both those letters were submitted together. So, they are the same response. ADV BHANA: Okay.

MR PATTISON: And I did have a view. I clearly had a view about how Massmart would benefit. ADV BHANA: Now, you were asked certain questions very pertinently by government and for the moment I’m going to refer to the letter from Prof Levine dated 25 October. That is his second letter, which we identified at page 117 and that is the letter you responded to at page 123. Correct? MR PATTISON: Correct. ADV BHANA: And you were asked certain pertinent questions and I 10want to deal with your response to some of those. MR PATTISON: Okay. ADV BHANA: In paragraph 3 of the disclaimer you say “we are not in a position to answer on behalf of Wal-Mart and accordingly the responses contained herein are those of Massmart only”. Technically we understand that, but you certainly had the benefit of discussions with Wal-Mart already as at that stage, I take it, from the date of the negotiation. MR PATTISON: There was little or no discussion during the negotiation on the synergies. 20ADV BHANA: On which issue? MR PATTISON: On the synergies at all. The discussion was about price, structure, legalities. It’s complicated process and for a month we discussed the transaction and not the synergies.

ADV BHANA: Okay, because time is against us, let’s press on. At page 124 you were asked by Prof Levine what are the expected efficiencies from this acquisition, how will any cost saving be achieved, indicate relative importance of rationalising jobs, lowering wages, increases capital, intensity increasing productivity and cheaper sourcing? So cheaper sourcing was raised as a direct issue in relation to efficiencies, correct? MR PATTISON: That was in the question, yes. ADV BHANA: Yes and in your answer, and we can forget the 10current position for the moment, in your answer you say absolutely nothing about cheaper sourcing, correct? MR PATTISON: Correct. ADV BHANA: Why is that, why did you duck the issue? MR PATTISON: Because reading from my opening notes and line 1, I said “we have not yet received a firm offer to acquire Wal-Mart. 2, We are still in discussion phase with the transaction and that the details of the transaction are likely still to change. 3, we are not in a position to answer on behalf of Wal-Mart and accordingly the responses contained herein are those of Massmart only. Fourthly, the 20responses herein are provided in good faith with the best information available at the time, but are by their nature subject to change and include a degree of speculation.” So to the extent that I didn’t know the answer to the question, I didn’t answer it.

ADV BHANA: No, that’s not a truthful answer. Your answer wasn’t we have no view on cheaper sourcing at this stage. You remained silent and you chose to deal with only transaction related retrenchments. MR PATTISON: You read too much into the fact that I didn’t address the topic. I didn’t address the topic because I didn’t have a view at that point. ADV BHANA: You see you strike me as quite a careful person and one would have thought your answer would have been, we don’t have 10a view on cheaper sourcing and we don’t know what the impact will be, but that’s not what you say. MR PATTISON: No, that’s not what I say. I didn’t answer the question because I didn’t have a view. ADV BHANA: Okay, did you have a view on retrenchments at that stage? MR PATTISON: Yes I did have a view on retrenchments at that stage and I think I’ve said publically and in these submission elsewhere that we intend to grow the number of employees and therefore we don’t need ... we don’t think we need ... we can’t at this point in time see 20any need for retrenchments. ADV BHANA: How was it that you had a view on retrenchments, but the thought of cheaper sourcing didn’t cross your mind or you took no view on that? This was, as I’m going to say again, this was Wal-Mart,

the biggest retailer coming into South Africa and you had no view on whether you’d benefit from cheaper sourcing. MR PATTISON: I think that’s probably correct. This has been a bigger issue in the minds of the stakeholders than ours. ADV BHANA: I put to you what is probably more correct is you were fudging the issue. MR PATTISON: That’s not correct. ADV BHANA: Okay, then you were asked at page 125, question 7(d) “How is the product range in the various Massmart divisions 10expected to change post acquisition?” And (d) specifically “How is Wal-Mart planning to compete with the incumbents in the retail trade and where is it hoping to gain market share or grow the market, specific customer segments, location, products.?” And when we deal with what is likely to change, obviously that is where Wal-Mart comes in post merger. You say “certainly Wal-Mart will make available additional house brands that may be imported or sourced locally. South African manufacturers could earn the right to be part of global sourcing.” Now I put to you that, well perhaps you can tell us this, which were those house brands that you were referring to in 20your letter? MR PATTISON: This is exactly the same question I think you’ve asked previously and my answer is exactly consistent previously. ADV BHANA: Yes.

MR PATTISON: So I could tell you the Trojan experience again if you would like. ADV BHANA: Did you have in mind the Trojan name? MR PATTISON: I think that’s an example, correct. ADV BHANA: I put to you that doesn’t make any sense here. You’re not talking about displacing one by the other. You say “Wal-Mart will make available additional house brands that may be imported or sourced locally.” MR PATTISON: Correct. 10ADV BHANA: This is in response to a question as to how you are hoping to get market share and that market share cannot be your replacing the Trojan make with whatever Wal-Mart’s label is, this is something new and additional. MR PATTISON: No, that’s absolutely incorrect. By replacing Trojan with a better brand you can take market share. ADV BHANA: So you already had a view as to which brands were going to be replaced, because that’s what you would have needed to take a view whether it was a better brand and whether that was going to win you market share? 20MR PATTISON: At that point I did not have a view on exactly which brand it was going. ADV BHANA: Yes, I put to you, you’re making this up as you’re going along. That was not what you had in mind here. Read your

answer again. You’re not talking about replacing one brand with a better brand. MR PATTISON: How do you know? ADV BHANA: Because I take you at your word. MR PATTISON: Well I didn’t ... I haven’t spoken to that dimension in this answer at all, because that wasn’t the question. ADV BHANA: So you expect people to guess what’s going on in your mind whereas while you respond in writing you say something which could be read in any way you chose it to be read? 10MR PATTISON: I repeat, the responses contained herein are provided in good faith with the best information available at the time, but are by their nature subject to change and include a degree of speculation. ADV BHANA: That’s not going to help you for the moment. What I’m putting to you is that if you had in mind that you were going to replace an existing brand with a better brand, you would have said so and the fact that you don’t say so in this response indicates that is not what you were thinking. MR PATTISON: That’s incorrect. 20ADV BHANA: So you were thinking it, but you didn’t ... you chose not to put it down in writing. Not to convey that to government. MR PATTISON: That’s incorrect.

ADV BHANA: Well did you convey it to government? Did you convey what you just said with replacing one brand with a better brand to government in this response? MR PATTISON: I responded to the questions to the best of my ability at the time and certainly I’ve had no further questions on this from government, who if I remind you got this document on the 20th of October and I’m sure they’ve had plenty of opportunity to come and ask me for clarification if they wanted it. ADV BHANA: That’s not going to help you. Government cannot 10know what’s in your mind when on a reading of this, it certainly doesn’t convey what you now say it conveys. MR PATTISON: But as I say, I said the responses contained herein are provided in good faith the best information at the time, and by their nature are subject to change and include a degree of speculation. ADV BHANA: You see Mr Pattison I’m going to put to you and we’re going to argue that you and Wal-Mart really are trying to pull the wool over the Tribunal’s eyes here. And you were trying to do that even with government at this early stage. MR PATTISON: That is incorrect. 20ADV BHANA: Giving responses that were not complete responses that either fudge the answer or what you now suggest, left it open for you to say well that’s what I had in mind and you didn’t ask for clarification.

MR PATTISON: I remind you that this meeting this submission was made before we had a final offer from Wal-Mart. ADV BHANA: That’s not going to help you for the moment. It doesn’t take it any further. What you certainly would have appreciated even at that stage is that there are no or very few Wal- Mart house brands being made in South Africa. MR PATTISON: Sorry can you repeat the question please? ADV BHANA: What you would have appreciated at the time of this response is an answer that you gave us this morning, but already as at 1028 October you would have known that, that there are very few, if any Wal-Mart house brands that are made in South Africa. MR PATTISON: With exception of fruit and vegetables, I would say ... and I knew at the time, I think that there were no Wal-Mart house brands manufactured in South Africa. ADV BHANA: So when you talk about making available additional house brands, apart from this private reservation that you had of replacing one existing product with the other, it must have at least occurred to you that this means there’s going to be greater importation. 20MR PATTISON: It didn’t. ADV BHANA: Then when you do deal with this issue across the page further, you again fudge the issue of benefiting from global sourcing, because you say “Wal-Mart is a global leader in sourcing and retailing and will bring new skills and technologies to South

Africa.” But you say nothing about cheaper procurement, any reason for that? MR PATTISON: Because that was not up my mind at the time. ADV BHANA: It didn’t occur to you that you were going to benefit from cheaper global procurement by Wal-Mart? MR PATTISON: At that time no, but I do accept we’re going to benefit from cheaper global procurement on the items we already import. I accept that. At the time I wasn’t thinking of it, no. ADV BHANA: But it gets better or worse depending on how you 10want to look at it, because the next question says “what proportion of Massmart product is currently sourced from imports?” and then “how is the overall import mix going to change post acquisition?” And your answer “what is likely to change” you say “it is fair assume that the value of direct imports would most likely increase as private brands are increased and low value added agents are bypassed.” So you give two reasons as to why the value of direct imports would be increased, correct? MR PATTISON: Correct. ADV BHANA: The one is the reason you have testified to earlier and 20that’s replacing an agent with Wal-Mart, correct? MR PATTISON: Correct. ADV BHANA: And independently of that is that part of your answer which says it’s going to increase because private brands are increased, correct?

MR PATTISON: Correct. ADV BHANA: So the testimony that you gave this Tribunal that the increased activity in private brands was not going to increase imports is simply untrue? MR PATTISON: No, because I explained it to you and I said the combination of direct imports and agent imports, which is consistent with this statement. ADV BHANA: So when I put to you that the two are independently of each other and you said yes, somehow you expected again 10government to read this as saying, the overall picture will not change because of the combination of direct imports and agent imports, is that what you were saying? MR PATTISON: I must say, I was not considering these answers... ADV BHANA: Just tell us what... MR PATTISON: I am answering the question. I was not considering these issues in this detail at that time. As I repeat, I had not had a firm offer yet from Wal-Mart. ADV BHANA: Mr Pattison are you going to have us believe that when you asked a direct question, fair and square, how is the overall 20import mix going to change post acquisition? And your answer is not what you’re now suggesting the overall import mix is not going to change. That wasn’t your answer, you answer was a different one. MR PATTISON: This question, you see there’s a ... and perhaps Chair if I can help here, this is a confusing issue and I think it was

raised and discussed at the first day of the Tribunal is the language around what is local procurement and what direct imports, what is... ADV BHANA: Mr Pattison I don’t want to... ADV GAUNTLETT: With respect Chair, the witness must have an opportunity to answer a question. CHAIRPERSON: Let him finish. MR PATTISON: This is a complicated issue, because if I can repeat, there are direct imports, there are agent imports, there are indirect and non-agent imports and at the time ... and since then, subsequent I 10think there’s been a confusion between local procurement, which is procurement from locally registered South African companies and procurement of goods imported. These are two different things and I think from time-to-time we get confused and I say that with respect. ADV BHANA: You know I don’t mean to cut off unfairly, but every time you go off on a long rambling answer that’s no responsive, it eats into the limited time I have to ask you questions, so it’s highly prejudicial. It’s not the kind of case where we can let you give your answer and wait patiently. So please refrain from doing that. The answer that you try to suggest now could never have been a 20justification for what you put down, because you don’t raise at all the difficulty as to what is an indirect import or the definitional difficulties. MR PATTISON: I don’t think that’s correct, I think I do.

ADV BHANA: I’m talking in relation to question 8. Show me where you do that? MR PATTISON: I’m going to have to ... you’re going to have to give me some more of your precious time to find it. We recognise the intent of the question, I’m now referring to page 120, because remember these documents were submitted to me at the same time, at the same meeting. ADV BHANA: I know what you’re going to deal with, but that dealt with a different question. I’m saying in relation to question 8 where 10did you raise the definitional difficulty? MR PATTISON: I raised it in response to the other letter in item 4 on page 120. ADV BHANA: Which had nothing to do to the direct question you were being asked. MR PATTISON: It does. The question was percentage of annual sales from locally procured product for resale per division. And in fact the majority of the meeting that we had with the ministerial panel was me bringing to their attention that confusion and that’s why it’s contained in the letter. 20ADV BHANA: How does that help you with the answer to question 8, please tell me? MR PATTISON: Well you see the answer is what do you mean by import, do you mean direct imports, agency imports or imports done on behalf of us by suppliers? Which one are you referring to?

ADV BHANA: You had no difficulty of that nature when you answered question 8, the question said to you how is the overall import mix going to change? However you view the definition of import, direct, indirect you raise such no difficulty. Your answer was simply that the value of direct imports will most likely increase as private brands are increased and low value added agents are bypassed. So you were dealing with direct imports there. MR PATTISON: Correct. ADV BHANA: You weren’t dealing with the difficulty that arises in 10relation to indirect imports. MR PATTISON: Correct. ADV BHANA: Yes, so what you profit to put up as an explanation for your change in answer is really dishonest. The definitional difficulty you had or you say you had was in relation to indirect imports, here you were dealing with direct imports. That’s what your answer was dealing with. MR PATTISON: My answer was referring to your use of the word of imports, not mine. ADV BHANA: No, I’m dealing with... 20MR PATTISON: My answer now was trying to clear that up for you. ADV BHANA: Mr Pattison I’m dealing with what you wrote in this letter and you were writing about direct imports. So the answer that you now give is a dishonest answer, because definitional difficulties with indirect imports didn’t enter the scene on the basis of the way

you answered this question. You were dealing with direct imports, definitional difficulties with indirect imports had no relevance to your answer. MR PATTISON: Correct in terms of my answer to question 8. ADV BHANA: So you’re just trying to pull the wool over everyone’s eyes here. MR PATTISON: I’m not finished. In response to your response to my question, you then started questioning whether that was going to affect the overall level of imports and therefore I had to bring to your 10attention that there is a definition problem and you needed to be clear about which one. If you are saying to me has your position changed on the effect on direct imports, my answer is no, my answer is exactly the same as this current one, nothing has changed. ADV BHANA: It wasn’t my introduction of overall imports, that’s what Prof Levine asked you. MR PATTISON: Well I didn’t know what Prof Levine was specifically referring to, but my answer is made on the assumption they were direct imports. ADV BHANA: So? 20MR PATTISON: By Massmart. ADV BHANA: Right, I put it to you again, if that was your assumption then once again, the definitional difficulty you tried to suggest could never have been the reason why you answered in this way.

MR PATTISON: I think I’ve answered that question. ADV BHANA: To the extent that you think you have, I’m going to argue that your response will show that you’re an unreliable witness Mr Pattison. You chose, depending on which audience you were talking to, you chose to modify your answer and indeed to fudge the answers you were giving people. MR PATTISON: I would not agree with that. ADV BHANA: So we can accept then, even as you sit here today that the value of direct imports is going to increase? 10MR PATTISON: That is consistent with my statement so far, correct and I do... ADV BHANA: I got a somewhat different impression reading your witness statement, but it’s there for us to read. Now what is more significant is how you tried to deflect attention from the issue. Instead of all of the factors you’ve now testified to what you say, however it’s also likely that the value of Wal-Mart buying office and Massmart exports will increase as Massmart and Wal-Mart expand their export programs. So what you’re saying is yes, we’re going to import more, but on a purely speculative basis, which you say you reserve the right 20to do. You say don’t worry about imports increasing, because we’re going to export more. So your only answer, your only answer to the concern of increased imports was don’t worry, we will be increasing our imports, but we’ll also export more. That was what your answer was?

MR PATTISON: Well I don’t agree it was the only answer, but I do agree with you that we are going to export more. That is not speculative. Every time we build a store outside of South Africa in Africa we export South African manufactured products in Africa. ADV BHANA: But that would be the case even without the merger? MR PATTISON: Correct, but we do expect that, as we say, that Wal- Mart will increase the expansion into Africa through their support. And I think that’s consistent with my statements. ADV BHANA: Chair, I’m not sure if you want to take the tea 10adjournment. I have quite a lot to cover, but I want to just use the few minutes to see if I can... CHAIRPERSON: Okay well if it’s going to expedite matters, let’s take a 10 minute adjournment then for tea.

A d j o u r n m e n t On resumption: CHAIRPERSON: Mr Bhana. ADV BHANA: Thank you Chair. Chair we have got to make a call and I just wanted clarification from the Tribunal. Does it mean that if 20the time that is used … the time that is used exceeds the allocation if we get to certain witnesses and we run out of time we can’t examine those witnesses? CHAIRPERSON: The answer is yes that is why we gave these in advance so that you could plan.

ADV BHANA: Yes, well Chair unfortunately it is difficult to plan that always when one deals with the cross-examination and the witness is going to proffer answers, which is going to lead to further questions, but in the light of that we then constrained to restrict the examination. I am going to deal with one aspect, but I will place on record that now that aspects of Mr Pattison’s witness statement that are not pertinently challenged by us must not be taken as accepted and it should not be argued that we didn’t challenge aspects of the statement, because there are a number of aspects of that statement, 10which will take time to take him through. ADV GAUNTLETT: In that event I need to put on record that our position is that you made a very clear ruling as long ago as 16 March in relation to time apportionment and other procedural rules, none of which were challenged then or thereafter. The parties have implicitly accepted that. It does cause difficulty, but we all realise this is a merger proceeding and not an expropriation trial and for that reason we do not accept that there is any entitlement of the kind that is suggested by our learned friend. He has made a bed and he must lie on it. 20ADV BHANA: Chair, I won’t repeat our position this morning. We have never implicitly accepted this timetable. It is a timetable that we were given and we were forced to deal with and that is why we set our position out, but that can be dealt with at a future date if need be. Mr Pattison, I want to deal with one aspect very quickly and before I

do that, I am going to argue to the Tribunal in due course that fudged and misleading and half answers as they were the position that you conveyed to government in the correspondence we have been dealing with was backtracked from by you in your witness statement when you adopted a position, which was not entirely consistent with that. MR PATTISON: May I respond to that Chair? Can I again bring your attention to item number 4; I won’t read it out again. ADV BHANA: So you say... MR PATTISON: Point number 4 on letter 123. 10ADV BHANA: Which you say entitled you to backtrack from what you told government? MR PATTISON: It disclosed clearly that I was acting in good faith; it was early days, I was not aware of all the details. I answered to try and assist the department as much as I can. I think my answers today have been almost completely consistent and times have changed. ADV BHANA: Well we will argue in due course the kinds of things that you answered in the way that you did was not due to a lack of detail or a lack of unavailability of access to that information, but simply because you sought to convey a certain position, which was 20not wholly accurate in terms of what you are subsequently trying to suggest. MR PATTISON: I don’t agree with your statement. ADV BHANA: Okay. MR PATTISON: Or accept it.

ADV BHANA: Let’s deal then with the further aspect. You were present at a presentation to investors, analysts and the media on the 29th of November last year? MR PATTISON: It sounds about right. ADV BHANA: That was a presentation it appears that Mr Lamberti in the main made on behalf of Massmart, Mr Bond made a presentation on behalf of Wal-Mart and you also answered certain questions, is that correct? MR PATTISON: Correct I think Mr Lamberti would want me to 10point out he made his presentation was on behalf of the Massmart board, not the company itself. ADV BHANA: Okay, do you see a difference between the board and the company in that regard? MR PATTISON: Not necessarily. ADV BHANA: So Mr Lamberti is not a witness here, whatever he has asked you to convey unless it is part of your testimony please keep it to your testimony. You were representing the company I take it? MR PATTISON: Correct. 20ADV BHANA: And a copy of that document is to be found in Bundle 1 at page 352, you familiar with the document? MR PATTISON: Yes, I am. ADV BHANA: I take it you did not disagree with the position that Mr Lamberti was conveying in any way?

MR PATTISON: I don’t see a copy of Mr Lamberti’s part of the presentation here, is there one? ADV BHANA: Turn to page 360. MR PATTISON: Oh there it is. No, I think you could assume we don’t. ADV BHANA: And as you sit here you confirm that what Mr Lamberti was conveying and indeed you were conveying to shareholders and investors’ was correct? MR PATTISON: Would you give me time to re-read it so that I can 10give you a full answer? It looks correct. ADV BHANA: Whilst the presentation by Mr Bond on behalf of Wal-Mart was obviously not a Massmart presentation would you read what he says at page 366 and I take it you had no reason to disagree with that and don’t disagree with that now either. MR PATTISON: I am just scanning it. It seems to be all something I agree with. ADV BHANA: Please take your time if you need more time. I don’t want you to suggest or it to be suggested that you didn’t read the document properly. 20MR PATTISON: It all looks fine. ADV BHANA: Chair, I cannot say that we don’t have further questions we have many questions but I will have to stop because of the timetable. CHAIRPERSON: Mr McNally?

ADV McNALLY: Thank you Chair. I think I have got about minus an hour and a half and we do foresee some difficulties with this program, because frankly I cannot, with the greatest of respect to both the Tribunal and my learned friend see how Mr Bhana could have done the job that he has done in any less time, but if that is to eat into the future witnesses then one foresees difficulties on the horizon. But let me not waste time on that at the moment and I will attempt to get immediately to some of the questions we intend to ask. Mr Pattison you fenced at some length with Mr Bhana about the effect of the 10global procurement strategy that Wal-Mart brings to the table that is a fair summation of what we have just witnessed correct? MR PATTISON: Correct, fenced being answered backwards and forwards? ADV McNALLY: Yes. MR PATTISON: Correct. ADV McNALLY: And in the stance that you present again trying to summarise it as briefly as possible is that there is really no reason, your stance is that there is no reason for anyone to believe that there will be anything more than a marginal increase I think you, is how 20you characterised it in the imports of the merged entity to the detriment of local manufacturers is that correct? ADV GAUNTLETT: Chair, I am sorry for my learned friend but point 6 of your ruling of 16 March notes the following: “Please note that we will not permit duplication of cross-examination on the same

point with the same witness in accordance with our normal practice in mergers, where you have multiple parties represented. You are requested to meet amongst yourselves to elect a chief cross-examiner. If you are unable to do so, we shall ration time accordingly.” My learned friend is cross-examining on the same issue as his opening remarks. ADV McNALLY: Chair I am not. What I am trying to do is set up context for some questions that I want to ask. I can’t simply let... CHAIRPERSON: Go ahead. 10ADV McNALLY: Thank you Chair. It would be quicker I think if I simply did that. Did you recall – I was trying to summarise and you were happy with that summary I take it? MR PATTISON: No and I don’t want to appear difficult but this is just very important. Are you referring to direct imports, imports by agents or imports by suppliers on our behalf? ADV McNALLY: Let me cut through that. What I am referring to are imports that will affect the parties who stand here in opposition to the merger, in other words, they are imports that will displace local manufacture. 20MR PATTISON: Okay, is it alright with you if I refer to them as locally manufactured goods. ADV McNALLY: That is absolutely fine. You are saying then that there will be no displacement of local, only a marginal displacement

of locally manufactured sourcing, sourcing of locally manufactured goods as a result of importation? MR PATTISON: No, in fact I was saying I don’t think there is going to be any. When I referred to marginal I referred to direct imports. ADV McNALLY: None is fine. So no displacement of locally manufactured... MR PATTISON: Not as a result of the merger no. ADV McNALLY: Correct. MR PATTISON: Correct. 10ADV McNALLY: And that really would be cadit quaestio here for the parties opposing the merger because that is fairly fundamental to the position they all take. MR PATTISON: You will have to explain the term to me? ADV McNALLY: Oh sorry. It will be the end of the problem, it would be the end of the problem for the opposing parties, to a large extent let’s not debate that. MR PATTISON: Yes okay. ADV McNALLY: Let me say that that position that you take is one of surprise to me and was clearly one of surprise to my learned friend 20Mr Bhana. And the reason for that is simply that the papers I put to you suggest a different picture, in other words, the papers suggest that there will be an increase of imports that will displace local manufacture. And the only question really is the extent of that displacement.

MR PATTISON: You would have to refer me to the papers that refer to that. ADV McNALLY: So certainly Mr Bond in his statement, you need not go there, I will read it to you to save time. He says in paragraph 91 at page 40 of the papers: “As previously explained one of the benefits of the proposed transaction is that Massmart will have access to Wal-Mart’s global procurement services through Wal- Mart’s global procurement network, which will provide consumers with access to a wider choice and range of products at competitive 10prices” meaning imported products, correct? MR PATTISON: He certainly sounds like he is referring to imported products. ADV McNALLY: And he says: “This does not however mean that there will be a significant change in the existing local procurement practices of Massmart” so from his perspective there will be a change, but it may not be significant. MR PATTISON: It sounds like it. ADV McNALLY: But that is different to your position, because your position is that there will be no change. 20MR PATTISON: No change perhaps that was a slight difference in... ADV McNALLY: That is what you said? MR PATTISON: Yes. ADV McNALLY: Now let’s turn to your statement and see if it would have been fair for us to gain that impression from your

statement. If you turn to page 154, sorry, 155 of your statement I think it was in that bundle. MR PATTISON: Whose core bundle are you referring to this one? ADV McNALLY: Yes, I think it was given to you but it is in the first bundle there your statement, it is page 155. MR PATTISON: You are referring to 155 … 81 thank you. ADV McNALLY: Well it is going to be difficult it is internal page 22 of your statement paragraph 7. MR PATTISON: Paragraph 7 okay. 10ADV McNALLY: You say in paragraph 7.1 “As appears from paragraph 5 hereof Wal-Mart’s acquisition of control over Massmart will not have the effect on local suppliers that has been alleged in various submissions filed with the Tribunal in this matter” not “none” but not the extent that was alleged by various submissions. You go on to say: “In particular Wal-Mart will not bring about a massive change to the manner in which Massmart procures products. In the first instance” then you go on to explain that. Now again, what you are talking about here is the extent not none, you are talking about the extent that is fair to say? 20MR PATTISON: I think I used the word “extent” in the procurement practices yes. ADV McNALLY: No, we are talking about … we can fence as well if you wish, but you are talking about, the problem, we are talking

about the effect on local suppliers. Now the effect on local suppliers is the effect of the global procurement policy. MR PATTISON: Can I just read it? ADV McNALLY: Please do. MR PATTISON: “In particular Wal-Mart will not bring about a massive change to the manner in which Massmart procures products”. ADV McNALLY: Yes. MR PATTISON: That is what I meant. 10ADV McNALLY: Yes, but you are referring to it in the context of the effect that it will have on local suppliers. MR PATTISON: Correct. ADV McNALLY: Presumably the effect of the global procurement strategy that Wal-Mart brings to the table, correct? MR PATTISON: No, Wal-Mart doesn’t bring a global procurement strategy to the table. ADV McNALLY: Yes, it does certainly Wal-Mart thinks it does. MR PATTISON: Okay, sorry, I get your point that toolkit global procurement. 20ADV McNALLY: No, I am not talking toolkits. I am talking about one of the benefits that this merger has on the future of the merged entity is that Wal-Mart has a well recognised global procurement strategy. MR PATTISON: Correct.

ADV McNALLY: And that is something, which they bring to the table. MR PATTISON: Correct. ADV McNALLY: And the point is that you are saying look that among other things won’t have a massive change, a massive effect on the local... MR PATTISON: On the effect of our procurement of locally manufactured products. ADV McNALLY: Correct, which is a different position I put to you 10than saying it will have no effect. It will have an effect, but we are debating the extent of the effect, correct? MR PATTISON: I still believe and I don’t think that is inconsistent with my statement that the fact that they are not going to bring massive change to our practices will end up having no effect on the procurement of locally manufactured product. ADV McNALLY: I suggest to you that you are avoiding this question as you have done with Mr Bhana. The reason for it is that it is fundamental to the position that particularly the union that I represent which is SACTWU takes. It is in the clothing and textile 20industry as you know and you will accept, I think fairly that that industry is one which is beset by I think you referred to them as competitive difficulties at the moment, basically because the cost of labour is relatively high, correct? MR PATTISON: Amongst other problems yes.

ADV McNALLY: It is your own concession and therefore that insofar as the merged entity moves into the apparel sector as I think it seems to be called in the retail sector that may well have a serious impact on the extent to which locally manufactured goods are sourced or are procured by the merged entity, correct? MR PATTISON: To the extent that you are right, we do expand into the clothing sector. There is a both a possibility it could put it under pressure and it could assist it. ADV McNALLY: How would it assist it by exports? 10MR PATTISON: No, if we procured … remember the fundamental position we have is we procure products. ADV McNALLY: Yes. MR PATTISON: It is because of economic... ADV McNALLY: Yes, so if you procured locally? MR PATTISON: If we procured locally. ADV McNALLY: But we are on a premise that the local production or manufacture of apparel goods is relatively non competitive? MR PATTISON: No, I don’t think that is correct either unless you... ADV McNALLY: It is your statement and that is what I am 20proceeding from. MR PATTISON: Yes, but it is still 50% and I think recently I have seen in the press announced that you know the manufacturing costs in China are going up because of labour costs and there may actually be

a swing back. I would say we would probably procure on the same basis as other retailers. ADV McNALLY: Yes. [Talking simultaneously] ADV McNALLY: Frankly you are now … let’s just be straight. The fact of the matter is that as Wal-Mart … if it is Wal-Mart’s policy to move, let’s take for example into the apparel sector in a bigger way that Massmart is in it. MR PATTISON: Okay. 10ADV McNALLY: And that is its intention is it not? It is its stated intention? MR PATTISON: It is a potential we haven’t decided yet. ADV McNALLY: No, but... MR PATTISON: It is stated as a potential correct. ADV McNALLY: It is stated as its intention. MR PATTISON: No, I don’t think so. ADV McNALLY: I am relying on an interview that was given by, it is reported on in the City Press. I am sorry I didn’t realise this would be a problem. This is a discussion between City Press and Mr Kevin 20Harper. “He said in a recent interview that he thought that Massmart’s apparel and fresh produce divisions could be strengthened” so that is certainly what... MR PATTISON: Yes, correct I have accepted that it is a possibility. It hasn’t yet been formally decided, but it is a strong possibility.

ADV McNALLY: It is likely? MR PATTISON: Perhaps even likely yes. ADV McNALLY: And if that happens and there is an extensive, inroads are made into the existing market then one would expect on a probability basis, one would expect that those products would be sourced from outside the country. MR PATTISON: I can’t accept that, I think they will be both imported and manufactured locally. ADV McNALLY: Alright. 10MR PATTISON: Depending on the relative competitiveness of the... ADV McNALLY: Alright, so some will be imported and some might be manufactured. MR PATTISON: I think that is fair to say. ADV McNALLY: So there will be an effect and the question is how much is the effect. MR PATTISON: And whether it will be a positive or negative effect. ADV McNALLY: Yes and you are, let’s assume for a moment that we can ultimately demonstrate that the effect is likely to be negative, alright. 20MR PATTISON: Okay. ADV McNALLY: It is your position certainly and we will talk to Mr Bond and see what the Wal-Mart position is, but it is your position certainly that you would be satisfied if there was no change in the proportion of locally sourced, locally procured product?

MR PATTISON: I am going to have to repeat there, all things remaining equal. ADV McNALLY: Yes. MR PATTISON: It is going to change anyway. It is going to change because of Chinese labour costs, exchange rates. ADV McNALLY: Is it going to get better or worse. MR PATTISON: I don’t know. ADV McNALLY: No, that is the problem. MR PATTISON: It could be both. No, it couldn’t be both. It could 10go both ways, so you know if the unions and the clothing manufacturing industry remain at loggerheads as we commonly know they are today, it may get smaller and I can’t do anything about that if factories continue to be shut down then I am not going to be able to buy from them. So it can get worse and it is going to have nothing to do with us. It could be the exchange rate, it could be China, it can be trade policy, it can be industrial policy, and I don’t have control over those things. So it may go up it may go down, I don’t think that Massmart’s entry to it will have a material effect on it relative to all those other factors. 20ADV McNALLY: You mean Wal-Mart’s? MR PATTISON: No, the trade policy, union relations, investments, financing, trade policy... ADV McNALLY: But it can be and again we appear to be fighting in an area where frankly the papers don’t reflect there to be anything

between us and that is that when Wal-Mart imposes its control on the merged entity, one of the things that will happen is that the global procurement strategy will be brought to bear. MR PATTISON: Correct. ADV McNALLY: And that that will have some effect on the procurement, a negative effect on the procurement levels of locally manufactured clothing. MR PATTISON: It is your effect that it could be negative; I think perhaps you could be right. I just note the possibility though that 10Wal-Mart’s global procurement also includes it buying from South African manufacturers. So to the extent that they are competitive it will buy from them and to the extent that they are not, it won’t. I probably would agree with you and I am not an expert on this that the South African manufacturing, clothing manufacturing is struggling to be competitive. ADV McNALLY: Certainly … certainly you have conceded that before, but you are now going back on that. MR PATTISON: No, I am not. I agreeing with you that it is likely that the pressure will be on the local manufacturing sector to the 20negative. ADV McNALLY: Correct. MR PATTISON: From all dimensions. ADV McNALLY: Correct and you would be satisfied, as I understand it and in fact you are prepared to give an undertaking that

the levels of procurement of locally manufactured suppliers will be kept constant going into the future. I know the time hasn’t been agreed and so on, but you were prepared to give an undertaking to that effect. MR PATTISON: That is not correct. ADV McNALLY: That is how I understood the Commission’s position. If I can just refer you to that very briefly you would have read the submission by the Commission, where the following is stated at internal page 26 of 50 of the Commission’s statement you 10again need not turn it up, just listen carefully: “It is clear that the global procurement strategy is a key component of Wal-Mart’s business model and is likely to be implemented post merger” we have been through that, you accept that? “As a result of this possible custom of foreclosure for local suppliers relying on Massmart as a key customer, concerns arise from the proposed transaction” fair enough? MR PATTISON: Sorry this is our statement or the Commission’s statement? ADV McNALLY: No, this is the Competition Commission’s 20statement. MR PATTISON: Alright. ADV McNALLY: And then further at page 32 they say the following: “On face value the concerns raised by stakeholders in the market would seem to be valid as utilising Wal-Mart’s global

procurement strategy and turning away from local suppliers would enable the merged entity to foreclose a significant percentage of local suppliers’ sales turnover. This may in turn have the knock-on effect of a loss of local manufacturing capacity and employment losses” and then they talk about particular firms they were referring to, so that is their general concern and then they say this at page 33. “Given the global procurement strategy employed by Wal-Mart and the possible incentives that Wal-Mart may have to foreclose local manufacturers such as firm D and E, the Commission acknowledges 10a potential concern in terms of the impact that the transaction may have on local manufacturing employment should any foreclosure occur post merger. However, the extent of the foreclosure may be limited by a number of factors as discussed above. In addition, given the merging parties’ commitments that local procurement is not likely to significantly change the volume and value of purchases from local suppliers post merger, the Commission is of the view that the extent of foreclosure will be even lower than suggested”. In other words, the Commission satisfies itself that this problem can be dealt with on the basis of the merging parties’ commitments that local 20procurement is not likely to significantly change the volume and value of purchases from local suppliers post merger, correct? MR PATTISON: Does it use the word “commitments”? ADV McNALLY: Yes. MR PATTISON: I would have to be referred to where we made that

commitment. ADV McNALLY: Well you will have to be referred to by the Commission, because I am relying on their reporting accurately. Are you prepared to make such a commitment or are you not prepared? MR PATTISON: I am prepared to make a statement that it is our intent not to do that. ADV McNALLY: Alright and if you are prepared to make that intent and presumably you regard the risk as extremely low you would also be prepared to make it into a commitment provided it could be given 10reasonable and certain content, correct? MR PATTISON: Well again the problem I would have with the commitment and obviously we have debated this at length with your clients is that there are many other factors that are going to affect the competitiveness of any manufacturer that has got nothing to do with us. ADV McNALLY: And how does that make … how is that better when you are giving a statement of intent? MR PATTISON: Well... ADV McNALLY: If your statement of intent is similarly worthless 20on your view? MR PATTISON: Well I would agree that any commitment is probably worthless, because it is going to have to be subject to the exchange rate remaining constant, subject to the industrial policy not changing, subject to trade policy not changing. It is going to have so

many subjects to it, it probably won’t work at all and generally I think if I can express my view that it is impractical to adopt that approach. It is our intent certainly not to displace our current local procurement in clothing, specific to your client, to importers. I would imagine that by value and that is I think what … or volume, I am not sure what the Commission was referring to. It is likely to increase. ADV McNALLY: Yes, I am satisfied. MR PATTISON: It doesn’t mean that we are not going to import things. 10ADV McNALLY: So if we can work out with the economists a basis for such a commitment that would satisfy you? MR PATTISON: Let me just state for the record I don’t feel it is necessary. ADV McNALLY: Yes, I understand you personally can’t think of one, but if we could work out one which took into account the variables, but at least held set the activities of the parties, the activities of the parties post merger, and then you will be satisfied with that, because it doesn’t affect you, because it coincides with your intent. 20MR PATTISON: I think as long as things remain under our control, so we are asked to commit to things in our control. ADV McNALLY: Yes, what is under your control you would be happy to... MR PATTISON: If I could finish?

ADV McNALLY: Sorry. MR PATTISON: Things that are not anti competitive, things that are practical under our control and not anti competitive we would certainly be open to discussions. ADV McNALLY: Well you see this is dying the death of a thousand qualifications. MR PATTISON: That was my point. ADV McNALLY: No, you are qualifying even your control. We had got to a stage where you were happy that those matters under your 10control you would be happy to make a commitment about. MR PATTISON: I certainly hadn’t got to that stage, no. ADV McNALLY: That can be the only possible manner in which you satisfied the Commission in relation to that paragraph I read you. ADV GAUNTLETT: Once again we must object because this is the second time it has happened today. Our learned friend is astute not to read the actual terms of the Massmart undertakings contained at page 5 of the document in front of him. He reads the paraphrase in the word “commitment” is inserted in paraphrase by the Commission at page 34. And the witness does not have that contrast between … it is 20misleading. ADV McNALLY: It is not at all misleading Chair. With respect I am putting to, I am perfectly entitled to do it under cross-examination I am putting to him what the Commission says about the commitments that were made, the witness can deal with that if he

feels they are not commitments and I submit we have... CHAIRPERSON: Carry on. ADV McNALLY: Thank you Chair. Now just one further point Mr Pattison, you would accept that insofar as these future variables could be taken into account by, for example, a mechanism by which one could approach the Tribunal and say this and this and this factor have caused a change in circumstances that would be a mechanism by which to take into account the current imponderables not so. MR PATTISON: I just believe no mechanism exists. 10ADV McNALLY: Yes. MR PATTISON: I am afraid. ADV McNALLY: I understand that is your position. MR PATTISON: Okay. ADV McNALLY: You have made that clear, but let’s get back then to your commitment, to the commitment that you are prepared to make and I think it can be best summed up by you and that is where you say at paragraph 7.1 that you would be prepared to commit “if it could be limited to matters within your control, you would be prepared to commit to a condition that ensured that”... 20MR PATTISON: What page are you referring to sorry? ADV McNALLY: Page 22 internal page 22 of your statement. MR PATTISON: And item number perhaps that would... ADV McNALLY: 7.1 MR PATTISON: 7.1.

ADV McNALLY: This is your statement. You would be prepared to commit to a condition that protected the extent of procurement from local suppliers, because in your view it’s not likely to have an effect... MR PATTISON: You have to point it. I can’t find that commitment, so you’d have to point me to it. ADV McNALLY: 7.1. MR PATTISON: No, but which line are you referring to? ADV McNALLY: I’m reading the first paragraph, first sentence. MR PATTISON: I’m afraid you’re reading into my sentence things 10that I can’t find. ADV McNALLY: Yes I am, I’m reading ... what your sentence is and please Mr Pattison I thought we had been through this. What your sentence says is that you don’t believe that Wal-Mart will bring about any massive change to the manner in which Massmart procures products, such that it would have any significant effect on local suppliers. I’m putting the two together, correct? MR PATTISON: Correct. ADV McNALLY: And you would be prepared to submit to that sort of commitment provided that it’s held... 20MR PATTISON: You mean suppliers of locally manufactured product, not local suppliers? ADV McNALLY: Correct. MR PATTISON: Sorry. ADV McNALLY: And you would be prepared to commit to such a

condition provided that the matters outside your control could be held... MR PATTISON: I thought we had covered this before and I said I wasn’t prepared to commit, because I can’t come up and we’ve spent hours discussing this, I haven’t yet heard a structure which would take into account the fast changing world global market dynamics. ADV McNALLY: No, a structure that would take into account what you know to be about to happen and that is that local suppliers are going to be foreclosed to a large extent because what Wal-Mart 10brings to the party is an ability to source product or supplies for the merged entities from offshore, correct? MR PATTISON: It’s difficult for me to agree with you on something I don’t think is going to happen. So I don’t think that’s going to happen, so it’s very difficult for me to come up with a commitment. ADV McNALLY: Thank you Chair, I have no further questions. CHAIRPERSON: I think let’s adjourn for the day and deal with re- examination tomorrow. Our case manager will just let everybody know what their times, you can just meet.

20 A D J O U R N M E N T

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