When free lunches are hard to swallow

Corruption, although usually of a more subtle kind than the outright bribery recently highlighted by the Mail & Guardian, is very much part and parcel of the world of pension and provident fund investment. Which is scarcely surprising, given the huge sums involved and the commissions these can generate.

Within the trade union movement, billions have been made by those who chose the path of investing the money of unionised workers. As a result, financial investment companies are constantly trying to get hold of — or to hold on to — the savings of workers that are controlled by various trustees.

Following trade union pressure and changes in the law, many more of those with a say in where and how funds should be invested are now union and worker representatives. And just like the union leaderships themselves, they become targets, offered a variety of inducements to persuade them to favour one or other investment product, company or fund manager.

Gifts or loans of cars, free holidays or simply access to private boxes at sports events or accommodation at no cost for union meetings, all help to grease the wheels of business and, from time to time along the way, the palms of the recipients of corporate largesse. There are plenty of “free lunches” to be had for those with influence.

But, as the Temperance Unions of the United States pointed out 150 years ago, there is no such thing as a free lunch. At the time, such lunches were being offered by various saloons in New York to those prepared to buy high-priced alcoholic drinks.

The “free lunch” scheme paid for itself in the drinks consumed, while creating a link between food and alcohol and, all too frequently, a dependence on the latter. The unions are now becoming increasingly aware that they are subject to the same corrupt — and corrupting — free lunch tactic.

This is an environment in which it is extremely important for any company wanting to do business with the labour movement to gain the broadest possible support within the unions. An apparently trusted, union-friendly company, often one whose branded bags and other paraphernalia are handed out at union conferences and workshops, is much more likely to win custom for its products. However, permission to hand out such branded largesse has first to be got from the union leaders.

This is an area into which consultants swarm to tout the wares of their principals. The better connected they are, the more their chances of success: a former trade unionist, well considered within the movement, has a big advantage.

It is into this category that Noluthando Vavi, wife of Cosatu general secretary Zwelinzima Vavi, fell until she resigned last week from SA Quantum following the admission by Cosatu pension fund co-ordinator Jan Mahlangu that he had received a car from the financial services company. She was a leading figure in the Cosatu-affiliated South African Democratic Teachers’ Union (Sadtu) and any financial institution hoping to make a killing within the trade union movement, and especially among Cosatu affiliates, would see her as a great asset.

As Vavi himself noted about his wife in an interview with Destiny magazine in September last year: “She’s now into consultancy and looking at government tenders and companies that are bidding, trying to facilitate that those bidding win the tenders.”

He added: “I don’t want to control anybody, but in a way I end up sort of compromised, I must say.”

This is a classic dilemma at a personal level, especially when trade unions are the target of the well-connected consultant. But it is also an aspect of the contradiction that has plagued the trade union movement for decades: that of having billions of rands to invest in an economic system where the fundamental interests of unions and business are diametrically opposed and where corporates compete to win the right to manage funds.

The core creed of trade unionism — and the motto of Cosatu — is that an injury to one is an injury to all; that the priority of worker organisations should, therefore, be to maximise the wages and conditions of all workers. The dominant creed within the corporate system — supported by legal imperatives — is that profit to shareholders should be the overriding priority.

In an attempt to resolve this contradiction, SRI — socially responsible investment — has become the catchphrase of most trade union investment groups. Yet there is little or nothing to distinguish their portfolios from those of any other investor — and strikes by workers against companies in which their unions have shares are not unusual.

It is this contradiction, coupled with a growing awareness of conflicts of interest and the potential for corruption, that has opened up fresh debates within the labour movement about the way forward for unions and their huge financial resources. At the very least, it seems, what constitutes a conflict of interest will be much more broadly defined to include the actions of spouses and close family members.

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