Millions of rands put aside to keep food on the tables of striking South African Municipal Workers’ Union (Samwu) members were redirected to cover some of the union’s operational costs and to buy t-shirts.
This is according to a damning forensic investigation, conducted by accounting firm Ernst & Young (EY), into allegations of misappropriation of funds at Samwu — the country’s largest municipal union.
The report, seen by the Mail & Guardian, was commissioned by the union after it became concerned about the rate at which the funds were depleted between 2012 and 2015. It has previously been alleged that Samwu’s coffers were looted of R176-million, but the report found that the union’s actual total deficit between 2012 and 2015 was just over R88-million.
The EY report was signed and seemingly sent to the union’s former general secretary Simon Mathe in September 2018 and is expected to be tabled at a CEC meeting on Tuesday. But Mathe told the M&G on Tuesday that he only became familiar with the findings of the report in February.
Among its findings are revelations relating to the depletion of an over R30-million strike fund, containing money initially put aside to compensate striking members not being paid by their bosses. According to the report, Samwu members contributed R5 per month to the fund.
But EY investigators found that the funds “were not used for their intended purpose”. Instead the money was for used the union’s operational expenses and to pay for t-shirts, the report finds.
Annual financial statements show that at the end of 2013, the strike fund contained over R35-million. In 2012, contributions to the fund were abolished and in August 2013 Samwu’s central executive committee passed a resolution to pay back the money to union members.
The strike fund reserves are now depleted, however it is alleged that not all the Samwu branches and members have received their pre-approved payouts.
Despite the August 2013 decision to redistribute the strike fund reserves, later that year the central executive committee made a decision to use the fund to buy t-shirts. According to the report, Samwu made payments in the amount of R9 163 353.50 for the purchase of t-shirts.
A further R8 781 000 was transferred out of the strike fund account into other Sawmu accounts to be used to cover operational costs.
In the 2015 financial year — long after a reimbursement strategy was supposed to be implemented — a series of payments to the tune of R4 270 025 were made to buy t-shirts.
According to the report, investigators did not receive supporting documents in respect of six payments totalling over R7-million made by Samwu to t-shirt suppliers.
Mathe explained to the M&G that there was no proper policy in place for how the strike fund was to be utilised and that the decision to use the money for regalia was unanimous.
In December last year, there were allegations that the EY report was being suppressed by Mathe. On Tuesday, Mathe denied this allegation, pointing out that he is not implicated in the report.
Over the years, Samwu has been plagued by persistent allegations of financial mismanagement by its leaders. The union, which has about 150 000 members, has been weakened over the years as a result of internal battles over the alleged looting of Sawmu’s coffers.
The union’s financial position was put in sharp relief when earlier this year when it became the first ever union to be put under administration by the labour registrar.
In March, labour registrar Lehlohonolo Molefe revealed his decision to place Samwu under administration owing to the union’s failure to comply with various sections of the Labour Relations Act.
The labour registrar can place organisations — including employers’ organisations and bargaining councils — under administration and deregister them if irregularities relating to governance failures are found.
At the heart of Molefe’s decision was Samwu’s financial statements, which reflect a range of irregularities.
According to Molefe, in 2013 the union’s financial statement received an adverse opinion which included some provinces not being audited and irregularities regarding building contracts, furniture and computer equipment.
For two years, in 2014 and 2015, the union’s audited financial statements failed to comply with section 98 of the LRA which requires the auditor to “express an opinion as to whether or not the trade union … complied with those provisions of its constitution relating to financial matters,” Molefe told the M&G at the time. Samwu’s audited financial statements for the year ended December 2016 is outstanding.
The union’s 2017 financial statement is the most damning.
The financial audit revealed that Samwu had that year taken out an R11.8-million loan from the now defunct VBS Mutual Bank, allegedly using its Johannesburg headquarters as collateral.
But the audit could not establish whether the union’s central executive committee had approved the loan, as required by Samwu’s constitution. More than R9-million of the loan was used to buy printers from an information technology company, Samserv.
The financial audit report also revealed that the union’s current liabilities exceed its assets by R29.4-million.