Why it pays to be Cosatu’s boss

Cosatu’s internal financial report shows it spent more than R5-million in legal fees – mainly to fight the union federation’s factional battles – but only spent a fraction of that amount on its members.

Part of the legal fees were racked up during the expulsion of general secretary Zwelinzima Vavi and the National Union of Metalworkers of South Africa (Numsa), which had been the union federation’s biggest affiliate.

The report, seen by the Mail & Guardian, was tabled by treasurer general Freda Oosthuysen at the central executive committee meeting in March.

According to the report, Cosatu spends more to fund its leaders’ lavish lifestyles and on political programmes than on its core constituency, the workers who finance it.

Cosatu president Sdumo Dlamini denied spending more than R5-million on legal fees to fight factional battles, saying: “It is the wrong conclusion to have. Legal fees represent many things from the provinces and also for different activities that we do.”

He also said it is a “distorted argument” to say Cosatu prioritises its leaders over its workers. “Cosatu is fighting for workers, but you don’t want to see it,” he said.

The report said that more than R4-million was spent on the organisation’s vehicles, including fuel and maintenance. These are mostly used to transport national office bearers. Housing allowances for office bearers cost Cosatu R424 000 as of December 2014. The top leaders’ “household needs” are budgeted at R3 500 an individual a month, with their water, rates and electricity setting Cosatu back an additional R1 800 a person. The federation provides accommodation for its senior officials for the duration of their terms of office.

Cosatu has spent R4.5-million on political activities, including election campaigns to support the ruling ANC and internal programmes of the South African Communist Party, whereas a meagre R58 359 was spent on the workers.

Declining membership
Cosatu has also lost close to R1-million since Numsa’s expulsion, and other unions are also struggling to pay their monthly affiliation fees, mainly owing to declining membership. Other affiliates, such the South African Municipal Workers’ Union, the Police and Prisons Civil Rights Union and the South African Transport and Allied Workers’ Union, are accused of financial mismanagement amounting to millions of rands. According to the report, affiliates owe the federation a combined R9.5-million in subscription fees, with the Food and Allied Workers’ Union being the worst with a debt of just over R2-million. The farmworkers’ union, one of seven affiliates that are boycotting Cosatu meetings until Numsa is reinstated, has not paid its subscription fees for five months.

The National Union of Mineworkers – which lost a substantial number of members to the rival Association of Mineworkers and Construction Union – is also in arrears of R1.8-million.

Meanwhile, the South African Commercial, Catering and Allied Workers Union (Saccawu), which narrowly escaped liquidation because of a R30-million debt, also owes Cosatu more than R1-million in affiliation fees. Because of the union’s commitment to pay off the R30-million in R500 000 monthly instalments, it may also prove difficult for Saccawu to service its R371 000 monthly affiliation fee to Cosatu. The Financial Services Board successfully applied to put Saccawu’s provident fund under curatorship in 2002 after allegations that workers’ retirement funds and disability benefits were invested irregularly and that senior Saccawu leaders had abused the fund for their personal gain. The threat of liquidation still hangs over the union’s head should it default on its obligation to pay its creditors the required R500 000 a month.

Plans for cost cutting
Cosatu president Dlamini said a team has been tasked with coming up with a new funding model for Cosatu. “Already we have done a lot of cost-cutting measures and we saw what we could live without in the federation,” he said.

There are plans to freeze at least seven positions at its head office, as well as retrench two bodyguards. Part of cost cutting includes shopping for a cheaper medical aid scheme and limiting fuel consumption for Cosatu vehicles to four tanks a month. The federation is also proposing a reduction in the daily allowance for foreign travel from $100 to $50 a day. To reduce telephone and fax costs, it has also been suggested that Cosatu members make more use of Skype, WhatsApp and WeChat.

Cosatu’s financial report shows that it spent R30.2-million in staff costs in the year ending December 2014. Overhead expenditure stood at R28.8-million, the largest portion of which – R9.2-million – was spent on leasing photocopiers, security systems and video conferencing equipment, with R6-million spent on renting its office building in Braamfontein, Johannesburg.  

In contrast, Cosatu spent far less – a total of R58 359 – on workers’ issues: only R3 574 on “industrial policy”, R4 736 on health, safety and HIV matters, R4 823 on “trade policy”, R7 849 on skills development, R11 818 on retirement funds and R25 559 on social development.

Limpopo gained the most financial benefit from Cosatu’s provincial activities, to the tune of R1.1-million. Almost half of this sum – R450?755 – went towards funding last year’s May Day celebrations at the Peter Mokaba stadium in Polokwane. The event came just days before the country’s general election and Cosatu hosted President Jacob Zuma as one of the main speakers.

At Vavi’s press conference on Sunday, he claimed the decision to expel Numsa from Cosatu, and the subsequent pronouncement by seven other affiliates that they would not participate in central executive committee meetings until Numsa is brought back, has put the federation in “an absolutely unviable financial position”.

Combined, the rebel Cosatu unions pay the federation more than R27-million in annual subscription fees – the amount the organisation would lose should these unions be expelled. According to Vavi, Cosatu is spending R300 000 a month beyond its income – which means it faces a possible deficit of R3.6-million by the end of the financial year.

Chris Malikane, associate professor of economics at the University of the Witwatersrand, said Cosatu’s current financial situation will make it difficult for the federation to run its campaigns and implement its resolutions.

“It [Cosatu] would be forced to cut jobs, something they fought against in the past,” said Malikane. – Additional reporting by Sarah Evans and Mmanaledi Mataboge

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