South Africa said it would push Wal-Mart to rejig the conditions of its $2.4 billion Massmart deal, as Pretoria looks to wring bigger concessions from the world's top retailer.

The government on Tuesday criticised Wal-Mart's plan to set up a $15 million fund for the development of South African manufacturers as inadequate, and said it was looking for a "package" of changes.

South Africa's anti-trust regulator in May approved Wal-Mart's bid for 51 percent of discount retailer Massmart with token conditions, including the creation of the 100 million rand fund to develop local suppliers.

The government has since appealed that ruling.

Legal experts say South Africa has little room to overturn the completed transaction, but could use political pressure to renegotiate the conditions.

"We are looking for a package of measures, one of which is a supplier development fund," Economic Development Minister Ebrahim Patel told reporters at a briefing.

Patel's department, together with the departments of trade and industry and forestry and fisheries, are behind the appeal, citing concern that Wal-Mart's reliance on imports could lead to job losses at local firms.

"A 100 million rand supplier development fund could pale into insignificance given the likely impact of substantial shift to imports by the merged entity," the departments said in a joint statement on Tuesday.

Patel declined to comment further on what concessions the government was seeking.

Business Report newspaper said last week Pretoria wanted the fund increased to 500 million rand, citing a government source.

REPUTATIONAL DAMAGE

But the effect on South Africa's reputation among international investors could be significant. The continent's largest economy is home to developed capital markets and strong labour unions that influence policy through an alliance with the ruling African National Congress.

"This is not the kind of signal that South Africa needs to send to our investors," said Gary van Staden, a political analyst with NKC Independent Economists.

"The government may be thinking they want to get more out of Wal-Mart, but that is not the way you do business."

Patel, a former trade unionist, and his colleagues are likely under pressure from unions that have opposed the deal from the start, said Paul Theron, chief executive at asset management firm Vestact.

"If you want an industrial policy that is interventionist like that, you must design one, get it approved in parliament and then ram it down everyone's throat," he said.

"It's inappropriate to use a competition hurdle as an opportunity to try to affect industrial policy."

Patel told South Africa's eNews Channel the government was not opposed to foreign investment, but was concerned Wal-Mart's entry into the market would choke local manufacturers when unemployment is already around 25 percent.

"We welcome foreign investment if it supports jobs and South African industrialisation," he said.

"Our doors are open for business."

Wal-Mart and Massmart said they planned to submit a counterstatement to South Africa's competition appeal court, and declined to comment further.

The companies have previously said the appeal will have no impact on their implementation of the transaction.

South Africa has a history of imposing weighty conditions on foreign takeovers.

It recently approved a takeover bid from Kansai Paint for local paint company Freeworld Coatings, but stipulated the Japanese firm had to sell one of Freeworld's businesses, build a factory and not cut jobs for three years.

Shares of Massmart were down 0.7 percent at 145.03 rand by 1116 GMT, broadly in line with the JSE Top-40 blue-chip index.