/ 1 November 1996

Transnet spoils the party

The parastatal and its main union have clashed over rights to a major stake in Johnnic, write Andy Duffy and Max Gebhardt

TRANSNET’S pension fund has emerged as a major player in the Johnnic empowerment deal, fighting with the South African Railway and Harbour Workers’ Union (Sarhwu) for control over a large stake in the group.

The union says the fund gave it a R270- million soft loan to buy 3,55% of Johnnic from Anglo American – making it the second largest new Johnnic shareholder after the National Union of Mineworkers. It says the loan was “a gift” to promote black empowerment.

But the fund claims it made no loan and that it owns the Johnnic stake on behalf of all its members, including thousands of white workers and pensioners. It says the stake is a “long term investment”.

Transnet’s involvement could undermine claims that benefits from the deal, the largest empowerment scheme to date, have been concentrated on the previously disadvantaged.

The parastatal’s pension fund is one of the largest in South Africa, with more than 111 000 members and more than 105 000 pensioners. Its investments include the Victoria & Alfred Waterfront in Cape Town.

Louise Tager, Transnet’s chair, says she did not know the fund was involved. Anglo American was unable to comment. It was due to receive details of deal participants’ funding on Thursday.

The R2,7-billion Johnnic deal, due to be finalised this week, involves black businesses and unions grouped within the National Empowerment Consortium (NEC) buying a 35% stake in Johnnic. Much of the cash has been raised from the unions’ pension and provident funds.

Sarhwu deputy general secretary Tshidiso Moshao says the union originally asked the Transnet fund for R300-million to buy a stake in Johnnic, but settled for R270-million.

“The fund gave us the loan on very favourable conditions,” he says. “I think the whole thing was done in the spirit of black empowerment … It is a generous gift.”

But Transnet pension fund investment committee head Eugene Kruger says the fund does not give loans and bought the stake for itself. The decision to invest followed discussions with management and all Transnet unions.

“It is the pension fund investing in Johnnic, not Sarhwu,” he says. “It is the members’ money and it can only be in Transnet’s name, definitely not Sarhwu’s.”

Fund executive manager Gideon van Zyl says the Johnnic stake was offered at a discount “which was also attractive … all the returns will be for the benefit of the fund and all its members.”

Sarhwu national treasurer Ezron Mabyna has been appointed to the Johnnic board as a representative of Transnet’s pension fund. Moshao is standing by his claim.

Transnet’s involvement in Johnnic follows its efforts to promote black empowerment, on top of its central task of running the transport system.

Finance director Gloria Serobe, who is spearheading the empowerment drive, was involved in the fund’s decision to invest in Johnnic. She says the high-profile and black empowerment nature of the deal were factors in the decision.

But the fund is suffering from a huge deficit. This has forced Transnet to use its earnings to fill the hole -which cost it R1,4-billion in the 1996 financial year. Benefits to members have also been cut. Furthermore, the fund is attempting to boost returns from its investments.

Johnnic’s low returns have proven a major sticking point in attempts by NEC members to raise funds.

Worldwide Africa says it can only service the debt it took on to buy a R263,3-million stake in Johnnic if the group is restructured. Johnnic’s assets include Times Media Limited, and stakes in South African Breweries and Premier.

“All the businesses of Johnnic need to be focused to ensure maximum growth,” Worldwide chairman Wiseman Nkuhlu says.

“How we will restructure is not quite clear yet. Workshops need to be held between now and January to discuss this issue.”

The reconstituted Johnnic board, on which NEC members will hold half the seats, is to be announced on Friday.

Nkuhlu, widely seen to have been outflanked by New Africa Investments Limited in the deal, says retaining the current Johnnic shareholder structure will not be easy.