The union that became a business empire

The clothing sector is sometimes called the rag trade. Rags and riches may be more apt. If you work, for instance, as a machinist in the rag trade in a KwaZulu-Natal area such as Newcastle, you can expect to earn a union-sanctioned wage of just R228 a week.
The same industry, though, paid R10-million to Edcon chief executive Steve Ross last year, nearly 1 000 times that of the machinist’s annual wages.

The riches do not stop there. The machinist may be a member of the South African Clothing and Textile Workers Union (Sactwu).

Trade unions are generally humble organisations, but Sactwu is the controlling shareholder in a huge enterprise, HCI, now valued at R3,4-billion.

HCI is cheekily bidding to control a former behemoth on the South African corporate landscape, Johnnic.

HCI, with as its major investment, seems set to gain control of Johnnic on its way to owning 100% of Tsogo Sun, which controls lucrative gambling rights in Gauteng, such as Montecasino and Southern Sun.

Sactwu’s investments are so vast that one clothing sector representative says companies controlled by its investment arm could soon employ more people than it has trade union members.

Sactwu’s investment activities have been spectacularly successful. According to Naledi, the research arm of the Congress of South African Trade Unions (Cosatu), Sactwu has assets valued at R1,3-billion. This is 90% of the assets held by union investment companies.

Its interests extend to the clothing and textile sector. It has a 20% stake in JSE Securities Exchange-listed Seardel, the largest player in both the clothing and textile sectors in the South African market.

Seardel, a R3,7-billion turnover company, is valued at R93-million, making Sactwu’s stake worth about R18-million.

Seardel’s Johann Baard says Sactwu’s shareholding does not betoken conflict of interest. “Our employees are our most valuable asset. Any cooperation or partnership with them is welcomed and encouraged.”

Sactwu’s other clothing investment is Durban-based Zenzeleni, a company that it took over in 1998, after owners Frame no longer wanted to continue production.

Renee Grawitzky, editor of the South African Labour Bulletin, says there is ongoing discussion in union circles over investing in sectors in which the union is active.

“Agreement is not likely as some unions invest in sectors in which they operate.”

Sactwu, as the sole employee representative, has a 50% vote in the National Bargaining Council (NBC) for the Clothing Manufacturing Industry.

The NBC is controversial among bargaining councils in that, while most industries face pressure from the strong rand, as imports have grown and exports fallen, the NBC has adopted an aggressive policy of prosecuting employers who do not adhere to its agreements. Councils covering other sectors have shown far greater flexibility, exemptions are commonplace and prosecutions infrequent, representatives of small businesses say.

The NBC has brought 714 prosecutions against employers’ representing an estimated 40 000 workers.

Don Moody of Cofesa, an employers organisation that represents mostly small employers, says the NBC is “very aggressive in protecting the interests of the larger employers”.

Sactwu deputy secretary general André Kriel says: “The decision to pursue non-compliance cases against a number of companies is a joint decision of all parties [including the employers] serving on the bargaining council, and is a requirement of the Labour Relations Act, as well as to root out unfair competition in the industry.

“It is not directed at destroying jobs. Unfair competition, based on non-compliance with the law, in itself causes job losses at companies which are law-abiding.”

Baard says Seardel does not support the prosecution of any employer that is not founded on a balanced assessment of all relevant considerations.

“These are, among others, the commercial viability of the enterprise, the nature and extent of non-compliance and the employer’s proposed programme for enterprise development within the framework of a timeline towards achieving compliance with the bargaining council’s provisions.

“We do not support a rigid application of a ‘one size fits all’ policy approach,” says Baard.

Kriel says there has been a deliberate attempt by some clothing employers, especially in KwaZulu-Natal, to try to make the council unrepresentative by encouraging companies to resign from employers’ associations.

“Some employer associations have tabled proposals for the expulsion of other employer associations from the bargaining council. This move is not supported by Sactwu, because it is not the most constructive manner to help resolve the industry’s problems,” he says.

Cost pressures, some employer representatives say, have led many larger companies to downsize and outsource production to smaller companies in the cut, make and trim (CMT) industry. But many of these self-same CMT companies are being prosecuted by the NBC.

Baard says he does not have detailed knowledge of which companies are facing prosecution. “Many of our divisions from time to time subcontract to non-party establishments. We do not discriminate on whether a manufacturer is a member of any employer association.”

HCI started life in 1995 with a R5-million loan from its union sponsors. The loan was repaid within a year.

Along the way HCI unbundled R1,5-billion of its investments to shareholders, R750-million of this going to its union sponsors, Sactwu and the National Union of Mineworkers. Sactwu’s investment arm SIG and associates hold 45,3% of HCI.

Kriel says Sactwu’s investments serve as a major benefit to members. “Its proceeds are ploughed back for the benefit of union members, in a multimillion-rand annual social welfare programme.

Programmes for members include R5-million a year in bursaries for university and technikon education, a comprehensive HIV/Aids support programme, an annual winter school for hundreds of matriculants, and numeracy and literacy support programmes at hundreds of schools in disadvantaged areas.

Kevin Davie

Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote. Read more from Kevin Davie

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