unionists
Union investment has achieved success beyond Cosatu’s expectations, writes Ferial Haffajee
Faced with the growth of a generation of trade union millionaires, the Congress of South African Trade Unions (Cosatu) has moved to rein in its investment companies.
Last week Cosatu called the heads of investment companies and union leaders to its Johannesburg head office where general secretary Mbhazima Shilowa laid out plans to merge them into a single company – a move read as an attempt to assert control over an area of union activity which has grown beyond expectations.
Already Cosatu’s companies have made investments worth billions of rands. They partly own a bank, an insurance company, transport concerns, a slew of information technology companies and a television station, and are major shareholders in Yfm, South Africa’s most successful radio station.
Cosatu’s plan has raised eyebrows among the union businesspeople, who say it will not work. “Each union company is at a different stage of development. There are huge disparities. They are different people doing different things with different goals,” says Marcel Golding, the architect of trade union investment companies. He says such unified action should have happened years ago.
Cosatu has also set down new rules to prevent personal enrichment: no workers or union officials must earn directors’ fees, and it wants to end the share participation rights which have made millionaires of Golding, his colleague Johnny Copelyn and a host of newcomers who are set to do the same.
The two were the cowboys at the frontier of trade union investments – they made their fortunes by securing the right to take up a personal investment in any deals they cut.
Whether it is a display of “the politics of envy”, as one union businessman puts it, or a more genuine concern, there is much rumbling about Golding’s and Copelyn’s tactics.
For Cosatu, the slogan is: “Business is not just business.” Its foray into commerce should be guided by a different ethos.
Trade unionists, dismayed at the swish Sandton offices, the BMWs and the zealous embrace of the market by its investment companies, have been lobbying behind the scenes for months. They want benefits to flow to members more quickly – although union executives say that it takes at least three years to make a profit.
At Cosatu’s central committee meeting earlier this year, unionists from its public sector and chemical industry affiliates managed to get a series of resolutions passed to force change on the investment companies.
The controversy is set to hot up with Shilowa now taking a personal hand. He says he is less worried about enrichment than other unionists may be. With a partner worth millions (the union chief is married to businesswoman Wendy Luhabe), he is used to a certain lifestyle and says: “Former trade unionists don’t have to be poor. Socialism is not about poverty.”
He wants the Cosatu Investment Council to co-ordinate investment activities and to oversee companies. At the heart of the controversy is also a plan to expand Cosatu’s new investment company, Kopano ke Matla. Shilowa says that all unions have agreed to the goal of one union investment company.
But three investment companies have already formed a rival company called Union Alliance which in turn is manoeuvring to become the umbrella body of trade union investments. Union Alliance was formed by Cosatu’s affiliate trade unions in the public sector, railways and the new Communication Workers Union. Older investment companies like those belonging to miners and clothing workers will probably want a greater stake of the new company because they already have a larger capital base. The federation’s mission is to create a holding company with different sectors so that trade unions do not compete for investments but pool their resources so that they can buy bigger stakes in companies.
Since the advent of trade union investment companies, the results pages of newspapers have won new adherents. This affinity with the bottom line, the markets and profits is also a target. Cosatu wants less speculation on the market and more investment in productive sectors of the economy. Many investment companies have taken a knock with the market crash because of their investments on the Johannesburg Stock Exchange.
Cosatu also says that the resources of stokvels, retirement funds and investment companies should be pooled to effect social change and development. They want investment targeted at housing, infrastructure, tourism, media and information technology. “How do you calculate returns?” asks Shilowa, adding, “You cannot say you won’t invest in housing because the returns are low. You can’t judge returns by money alone.”
At the opposite end of town from Cosatu’s Braamfontein headquarters where the investment companies have taken offices in Sandton, a different ethos prevails. This is the world of the executive officer with an MBA, of deal- making, long business lunches and the bottom line.
Some executive officers believe there is sufficient trade union oversight on their activities. Regular meetings with trade union trusts ensure that they keep their eye on union goals. They say they are too busy for additional Cosatu meetings as well and would prefer a more hands-off approach. Most say that the federation’s demand that no deals be concluded secretly is a tough call. “In business there’s a thing called confidentiality,” says Sandile Zungu, the CEOofficer of Sarwhu Investments.
He adds that union-owned companies need a basket of investments, some geared at securing the highest profits and others at creating or saving jobs. His company, for example, has bought into companies where jobs were in jeopardy and has created others with its Rent-a-Bakkie shares.
“The South African Rail and Harbours Workers Union wants investment in the transport industry. It’s not a sexy industry, but we have done it for political and altruistic reasons,” Zungu says.
Building is not sexy either – it’s what is called a “doldrum industry”. Yet Copelyn says that the Southern African Clothing and Textile Workers Union is considering various investments to ensure that its members have greater access to housing.
“All our investments were very successful,” he says adding that benefits have already flowed to members in the form of bursaries for university and technikon training as well as primary and secondary schooling.
He adds that trade union investments will increasingly be in a mix of social development sectors and high-growth industries.