chequebook
Labour is debating investment schemes and how they can benefit union members.Eddie Koch and Jim Day report
When Neil Aggett, the union activist who died in a John Vorster Square prison cell in early 1982 after being tortured by men from the special branch, was busy mobilising workers into the African Food and Canning Workers’ Union during a period of renaissance for organised labour in the early Seventies, his rank-and-file members often complained that he came to meetings in sandals, faded jeans and a limp T-shirt.
The fears of those workers who worried that their organiser’s dress code would cause company executives not to take the union seriously, may well be soothed by the new sartorial style that is sweeping through organised labour in the late-1990s.
These days one-time militants wake up in the morning, fasten their brightly coloured ties into the Windsor knot and don double- breasted suits before travelling into the headquarters of the country’s most powerful corporations in a bid to buy out the bosses they used to bash in those boardrooms.
But some sectors of the labour movement, along with a group of intellectuals who help shape its strategies, are becoming increasingly concerned that the growing band of silk-and-suit socialists as well as the vehicles they are using to drive into the top echelons of the South African economy – the trade union investment company – are beginning to undermine the values that Aggett and his many compatriots used to galvanise the power of organised labour in the 1970s and 1980s.
The sudden proliferation of companies that have been set up over the last year in order to invest workers’ retirement savings – a huge stash of cash sitting in various pension and provident funds estimated to be worth between R50-billion and R100-billion – in new black empowerment consortia has occurred without attracting much attention within the trade union movement.
There are signals that the quiescence is about to change. The South African Commercial Catering and Allied Workers’ Union (Saccawu), one of the biggest affiliates of the Congress of South African Trade Unions (Cosatu), has called a special congress early next month specifically to air a growing debate about the wisdom of going down the investment company route.
And the South African Labour Bulletin, a journal that has helped shape trade union policy over the last two decades, recently published a critical appraisal of organised labour’s latest fad – and is planning to follow up with more in-depth scrutiny of the way worker savings are being used by labour leaders.
“To put it in a nutshell,” says the secretary general of a union who asked not to be named, “the debate is between those who see investing worker retirement funds in big business as a new way to further the aims of socialism, that is for workers to control the means of production by buying them, and those who see this tactic as a sell-out by people who are looking for a new route to become upwardly mobile.”
The Labour Bulletin article, published late last year and bylined to a “special correspondent”, was the first serious effort to examine the obsession with creating investment companies that now characterises trade union organisation.
The anonymous author criticises the strategy on four grounds: it is shrouded in secrecy and confusion; it places ordinary peoples’ hard-earned savings in high-risk investments; it could enrich a new but small bourgeoise instead of empowering the poor; and it commercialises the ethics of a movement that once relied on solidarity and collective action.
“In no other area of union life is there such conceptual confusion as surrounds these companies. There are currently as many motivations as there a fleas to a dog … Secrecy surrounds many of the union initiatives and in many cases one union- owned company is bound to be competing with another or with the African National Congress investment companies,” the article says.
An impromptu survey conducted by the Mail & Guardian this week reinforced this conclusion. Many unions were reluctant to disclose details about their investment companies’ strategies. Officials who did speak insisted their comments stay strictly off the record.
Rumours also abound that Cosatu has shacked up with a consortium that is bidding to buy the tourism parastatal Aventura, the state’s first effort at selling off one of its assets, while Cosatu’s leadership insists it is opposed to privatisation. Nobody could clarify the issue.
“Whether by design or because of the willy- nilly way in which this strategy is unfolding, workers are losing control of the way in which their funds are being used,” said a senior official in one Cosatu union. “Even more disturbing are signs that the lack of public scrutiny is opening the way for a great deal of insider trading in the way these deal are being set up.”
The Labour Bulletin paper points out that, in straight economic terms, the current strategy involves high-risk investment in long-term ventures that are unlikely to yield tangible benefits to rank-and-file members in the short term. “Through investment companies, unions are becoming intimately tied up with companies and management. It is one thing to make a portfolio investment, and quite another to form a partnership with a particular management group.”
The latter method of investing worker savings involves creation of companies that may only begin paying dividends in 10 years, unlike short-term pension fund investments that generate immediate returns.
Two recent developments substantiate the warning. The Thebe Investment Corporation this week announced it was withdrawing from the African Mining Consortium, which has just bought JCI. Thebe apparently based its decision on fears that it would not have sufficient power on the board of the gold mining house to safeguard the interests of its members.
The National Empowerment Consortium (NEC), a major association of trade union investment companies and big black-owned businesses, is reportedly also under pressure to unlock value from its stake in Johnnic if it is to retain control of its 35% holding in the company.
The complex financing arrangements to fund the R2,7-billion black empowerment deal means institutional loans could convert to equity if it failed to achieve sufficient growth. Thus, in the long run, the NEC runs the risk of losing some of its stake in Johnnic and its plans to use ownership of the corporation as a vehicle for black empowerment.
The author of the Labour Bulletin article points out there is a key difference between New African Investments Limited (Nail), the emblem of black economic empowerment in South Africa, and the way in which Afrikaner nationalists used white workers’ money to create Sanlam and buy their way into an economy dominated at the time by English capital.
“It’s useful to compare Nail with two models for Afrikaner economic empowerment – Sanlam and Rembrandt. Sanlam and its sister companies empowered Afrikaners through widespread ownership and a shared vision. In the case of Rembrandt, the Rupert and Hertzog families attracted the savings of their people on a `trust’ basis,” says the author.
`Both companies acquired enormous wealth. But Sanlam is still a mutual company which is owned by its policy holders, while the Rupert and Hertzog families have used a pyramid structure to retain control and have amassed vast personal wealth. Sanlam invests mainly in South Africa, while Rembrandt’s main focus today is overseas.”
There are disturbing signs that the control structure at Nail follows the Rembrandt model. The company has a seven-layered pyramid structure that ultimately invests ownership with a company called Corporate Africa that has just four shareholders: Nthato Motlana, Dikgang Moseneke, Cyril Ramaphosa and Jonty Sandler.
A recent newspaper article estimates that these four men, who have effective control over the black empowerment giant, are together worth a staggering R150-million (see graphic).
Patrick Bond, senior partner at the National Institute for Economic Policy, agrees that current investment patterns in the unions involve a high degree of risk.
He points out that the Afrikaner nationalist strategy worked at an economic level, even though it may have weakened the power and influence of white trade unions, because it took place at a time when share prices on the Johannesburg Stock Exchange were at an all-time low, interest rates were rock bottom and the economy was emerging from a period of depression into a period of sustained and vibrant growth.
“Everything except the rhetorical environment is working against them. They are buying shares of companies whose stock market prices are so overinflated compared to historical norms, and to do so they are borrowing at the highest real interest rates in modern history. They are buying into the system when the economy is stagnant, with no prospects for dramatic expansion,” says Bond.
“Compare these to the conditions for accumulation by Afrikaners half-a-century ago, when every one of these factors was reversed, and it is easy to be pessimistic about the depth and reach of black economic empowerment.”
The rest of the debate is more familiar. Union leaders, the sceptics say, are being bought off by corporate and commercial values. The brain-drain that began when the cream of organised labour’s leadership went into parliament is escalating as a new road opens up for unionists to move out of their low-paid jobs and dingy offices. Massive conflicts of interest will arise when workers engage in collective action to resolve labour disputes in industries in which where their unions own a major share.
Says the Labour Bulletin article: “The approach could inflict lasting damage on the union movement in another way: it introduces commercial values into a social movement. Unionism is not about making money. It is about social issues, about using worker solidarity at plant, industry and national level to improve living and working conditions. This has no commercial rationale. Yet involvement in investment companies inserts commercial values which tend to squeeze out union values.”
The critics are not advocating a return to the heady days when badly dressed men and women sacrificed their livelihoods and their lives, sometimes literally, to build such collective values.
They believe there are alternative ways to invest worker savings that have a chance to bring real benefits to rank-and-file members, while at the same time strengthening their movement.
But they fear that, because far too little is being done to plan and strategise how best do this, the future of this country’s economy will be shaped by the the rhetoric of worker empowerment rather than its reality.