/ 3 June 2016

Union maverick’s road to ‘BEE’ riches

Union Maverick's Road To 'bee' Riches

Johnny Copelyn is a walking contradiction.

A labour movement stalwart with a history entangled with that of a socialist-oriented trade union, he now heads a JSE-listed investment company and is, by his own account, “embarrassingly” rich, with net wealth of just under R1-billion.

That company, seeded with union member money, has successful investments in casinos and media – whereas the clothing and textiles industry, where its roots lie, is in severe distress. Copelyn is criticised for being a white person who has built up a vast personal fortune on the foundations laid down for black economic empowerment (BEE).

Copelyn, as the chief executive of investment holding company Hosken Consolidated Investments (HCI), manages a range of investments including a large stake in casino group Tsogo Sun, Seardel (which owns e.tv and OpenView HD) and Golden Arrow Bus Services.

Reconciling the contradictions and complexities of these matters is no easy task. And it’s perhaps for this reason that, in his recently launched book Maverick Insider, Copelyn cuts his personal memoir 20 years short and avoids tackling much of the controversy he has faced since. Even so, one thing his book does show is that Copelyn does not shy away from confrontation.

It details through his eyes the transformation of the labour movement in South Africa between 1970 and 1996, in which he was instrumental.

It takes you from his early days as the national organiser for the Textile Workers’ Industrial Union and as general secretary of the South African Clothing and Textile Workers’ Union (Sactwu) to becoming the chief executive officer of the Sactwu Investment Company, while also being an MP between 1994 and 1997.

Copelyn then took up his position as chief executive officer of empowerment investment holding company HCI, controlled by union investment companies. This is where the story ends – at least as far as the book is concerned.

Though the wealth generated on behalf of Sactwu’s investment arm is outlined in the book, Copelyn does not go into much detail about the personal fortune he built up over the years.

As Maverick Insider explains, the new government ushered in economic empowerment opportunities for black South Africans. And, while deciding whether the union should take up such opportunities, which was an “idea that appeared to contradict the very purpose of the trade union movement”, it was not the first difficult idea Copelyn had presented to Sactwu and convinced it to accept.

“There were too many opportunities to simply close one’s eyes and throw up one’s purist hands in disgust. It was a moment that, if we hesitated, would be gone,” he writes.

The Sactwu Investment Company, with Copelyn at the helm, started with R2-million in union savings and a R13.6-million loan from the Industrial Development Corporation to invest as empowerment shareholders in Real Africa Investments Limited, a JSE-listed company.

The next investment was an empowerment opportunity in MTN. Third was the company’s participation in broad-based black-owned companies (the idea of now-billionaire mining magnate Patrice Motsepe) that would go on to bid successfully for casino licences.

“Our successes soon resulted in the union investment company being worth several hundred million rands,” Copelyn writes, adding that he and the chief financial officer, Mohamed Ahmed, soon “were earning money we found embarrassing”.

In 1997, Copelyn and Marcel Golding, who headed the National Union of Mineworkers’ investment arm, took up executive roles in HCI. Each had reversed a number of assets acquired for Sactwu and the National Union of Mineworkers (NUM) and exchanged this for shares in HCI, which gave the union investment companies control of it.

The Sactwu investment company has grown in value to more than R7.5-billion at present. Independent research organisation Who Owns Whom puts Copelyn’s disclosed wealth at R913-million, with a remuneration of R11.4-million at the end of March last year.

The organisation said it expected he would now fall within the top 60 richest South Africans.

Copelyn’s high net worth has seen him being accused more than once of being among a handful of white South Africans who have gained a large personal fortune thanks to BEE.

One of his critics, political economy professor Patrick Bond, has described him as “another white man nicely empowered by BEE”. In the past Bond has said that Golding and Copelyn, as the heads of HCI, were getting involved in “easy-money casinos, cellphone and television deals”.

He has also argued that trade union investment arms bring no additional value other than to front for large mineworker and clothing worker pension funds, “for which they paid themselves generous individual finder fees, quickly becoming multimillionaires”.

Bond’s comments, although written some years ago, still seem to get Copelyn’s goat. In his book, he describes Bond as “exceptionally self-righteous” and someone whose criticisms are not particularly well developed. He notes that many unions have investment arms but none has operated as openly as HCI.

This week, in reply to questions put to him by the Mail & Guardian, Copelyn refuted claims that his personal wealth was built on the back of empowerment deals.

Copelyn and his now former business partner, Golding, were given options to buy 1% each of HCI shares when they took over as executives and had to pay them off over a few years, he said.

But, in about 2000, financial institutions lost so much confidence in HCI that they compelled it to sell its most valuable asset and offer them an exit from the then loss-making television station it controlled.

The effect for Copelyn and Golding was to concentrate their interest in HCI fourfold before offering to take the company private with borrowed money.

“We risked everything we had, as well as everything we might ever have for the rest of our lives, including our homes, to make that offer,” he said. “It was absolutely not an empowerment deal but was a public offer in our personal capacities at a time the world deserted us.”

Nicoli Nattrass and Jeremy Seekings say in a recent paper, Trade Unions: The State and “Casino Capitalism” in South Africa’s Clothing Industry, that “the focus of union investment on high-end property, media, hotels and especially casinos indicates that there was not much ‘social’ about the form of capitalism it typically engaged in”.

Copelyn said that, although HCI remains a publicly listed commercial company that has no obligation to invest in the clothing and textile industry, it has been “unbelievably” involved in that industry and continues to employ thousands of workers in it.

Nattrass and Seekings said: “HCI, under pressure from Sactwu, made a substantial investment in the clothing industry through its involvement with Seardel, then South Africa’s largest employer in the clothing industry.”

The NUM’s investment arm, they say, has a shareholders’ compact preventing it from taking a direct stake in any company in the sectors where it organises workers. “The advantage was that Sactwu could – and did – act to save jobs for its members that might otherwise be lost.”

Even so, HCI struggled to save Seardel, eventually selling the remaining apparel units directly to Sactwu, although HCI still employs thousands of workers in the sector.

In addition to this, the dividends from its investments allow Sactwu to invest in a number of social projects, including putting hundreds of millions of rands into job-creation projects and providing education bursaries to its members’ children.

Maverick Insider is an engaging account of Copelyn’s involvement and influence in growing and shaping the South African labour movement, and offers several gripping anecdotes, interesting political insights and is peppered with dry humour.

But an aspect lost to Copelyn’s book is the dramatic decline of the clothing manufacturing industry in South Africa since then, which critics say is partly because of the union and its role in the bargaining council, and its extension of a wage agreement to even those who are not party to it.

According to a 2013 paper again authored by Nattrass and Seekings, clothing manufacturing is South Africa’s most labour-intensive industrial sector, but it has experienced a severe decline in the face of increased international competition, especially from China, and the appreciation of the rand between 2003 and 2011.

At the same time, the paper says the national bargaining council for the clothing manufacturing industry has been used by Sactwu and employers to impose higher labour costs on employers in non-metropolitan areas such as Newcastle, that in the past had been able to pay a lower minimum wage.

In supporting Sactwu’s aim to have only “decent” jobs in the sector, the minister of labour allowed the wage agreement to be extended to all employers in the sector, and the bargaining council, through the courts, used it to shut down firms that did not pay the minimum wage.

It resulted in what the report calls an “unholy coalition” of a trade union, some employers and the state that has undermined labour-intensive employment and exported South African jobs to lower-wage countries.

But in 2013, a legal challenge from a handful of companies in the Newcastle area succeeded in having the extension set aside.

Between 2002 and 2011, jobs in the sector dropped from 120 000 to 52 400. At the end of September last year, Statistics South Africa reported an uptick in jobs in the sector to 90 100. At the time, Sactwu said this could be attributed to strong support from the government and the union’s aggressive “save jobs” campaign.

Sactwu has 85 000 members, down from more than 180 000 in 1991, but unionisation among workers has been on the decline generally.

Asked for his view on the role the bargaining council played in losing jobs, Copelyn said this week that it was not helpful to workers and employers in the industry, or for the formulation of good government industrial policies, to depress wages in outlying areas to half of what of workers in metropolitan areas earn.

“Instead of creating more jobs, you simply disrupt the entire industry, forcing workers in metro areas out of work and allowing retailers to get the same garments made more cheaply from areas where wages have been artificially reduced,” he said.

“The notion that the union should perpetuate the gross disparities of wage levels of clothing and textile workers in different areas of the country is an appalling solution to the industry’s problems.”

In closing his memoir, Copelyn writes that his intention in writing Maverick Insider is to highlight some of the events that had a powerful effect on his life, “even though their significance has either been forgotten or recast in a version of the struggle for freedom in South Africa in which the good guys did only good deeds and the bad guys did only the bad”, he writes. “In reality it is never so simple.”


Memoir offers no more clarity on the Golding question

Excluded from Johnny Copelyn’s Maverick Insider, besides details about the accumulation of his personal fortune, is the very public split with his long-time business partner and friend, Marcel Golding, before Golding resigned from Hosken Consolidated Investments (HCI).

Copelyn affords him only a brief mention in the final chapter, where he writes about how the two took up executive roles at HCI.

Golding’s resignation was widely reported in 2014, when a tearful Copelyn sat alongside him to announce it. Although Golding’s departure was justified by unauthorised share dealings in Ellies Ltd, in court papers filed in an attempt to have his suspension overturned, Golding claimed the tension was about his resistance to political influence over news content on e.tv.

Golding’s wife, Bronwyn Keene-Young, resigned as chief operating officer in protest. In a parting letter, she said Copelyn had misrepresented the facts about Golding’s removal, had known about the relevant matter for months and had not acted.

Keene-Young claimed, among other things, that Copelyn had told the executive committee that eNCA’s news coverage was “problematic” for HCI’s other interests and needed to be reined in.

Former public enterprises minister Barbara Hogan resigned from the HCI board, citing her unease over the claim that the issue related only to the shares.

This week Copelyn said Golding was subjected to a disciplinary inquiry held by an external attorney arising from R24-million in unauthorised share dealings in Ellies. “Rather than present his point of view to such an inquiry, he chose to resign,” Copelyn said.

Copelyn said HCI believed the “political” interference claim was totally untrue and opportunistic. “HCI had always promoted an independent and critical news service and continues to do so.”

Keene-Young and Golding did not want to comment further. — Lisa Steyn