Thursday, December 31, 2015


This article first appeared in the Business Times section of The Sunday Times on 13 December 2015.

This week Minister Mildred Oliphant set the cat amongst the pigeons when she confirmed her comments made at the COSATU National Congress to POWER98.7’s Tim Modise

She alleged that trade unions, in and outside of COSATU, have interests in labour broking firms and remain invested in companies benefiting from Gauteng Freeway Improvement Project.

Challenged to present evidence, Oliphant said she had the evidence in her possession and has also requested the unions to carry out their own investigations.

The Minister must have touched The National Union of Metalworkers of South Africa (NUMSA) on their studio, leading to a lengthy press statement in response to her ‘spurious accusations’. The union alleges that Minister was ‘sub-tweeting’ it in her comments. 

This exchange has re-opened the issue of the purported independence of trade union-owned investment companies and their shareholders.

Naturally, NUMSA denies they have any financial interest in any company involved in labour broking. But hold on.

If the NUMSA Investment Company claims to be independent of NUMSA the union, why not then invest in any company they wish, including labour broking firms? 

If CEO Khandani Msibi’s main concern, as head of an independent investment business, is deriving maximum return from the capital deployed, why would he not consider an investment in a business that supplies temporary staffing solutions?

Says Msibi “If you look at the listed environment, shareholders like pension funds and the like, would decide that they do not want to be associated with certain products like cigarettes or liquor for various reasons. Similarly, I think we need to be sensitive to the aspirations and sometimes, the dislikes of our shareholders." 

"However, there have been instances where unions instruct their investment companies not to invest in industries where the union is organising. And when we [management] came in and took over the NUMSA Investment Company, it was one of the resolutions we took up for review and we said to NUMSA, ‘if you are organizing in a company that we believe is of value from an investment point of view, we should not be precluded from investing in that particular company’. We were able to persuade NUMSA to revoke that resolution.”

This therefore means, an investment company, wholly-owned by the trade union can easily find itself on conflicting sides to the interests of its shareholder – which in itself contradicts the notion that union investment company interests must always be aligned, or at least sensitive, to the aspirations of its shareholder.

For example, imagine the NUMSA Investment Company was a shareholder in a motor manufacturer, which found itself in the middle of a dispute with NUMSA. In whose interest would the investment company act?

Let’s suppose the union is demanding a 15% wage increase and the board is offering 6%. What does the non-executive director serving on the investee company board, as a representative the union investment company do?

According to the Companies Act, that non-executive director’s fiduciary duty is to the investee company, not the union investment company, and certainly not the union. 

By law, the director is compelled to act in the best interest of the company. In this instance, the best commercial interest of the company could be settling on the lowest possible wage increase, while the union would seek to secure the highest possible increase for its members.

The irony of this independence debate is that Kopano ke Matla, COSATU’s investment company, invested in construction company, Raubex, prior to it being awarded work in the e-tolls project.

Of course that didn’t stop the DA and other opposition parties calling out the ‘hypocrisy’ in COSATU, who on the one hand wanted e-tolls abolished and on the other, benefitted from the project through its investment company. Then CEO of Kopano was forced to resign as Chairman of Raubex in an unsuccessful attempt to prevent a perceived conflict of interest.

Trade unions will do well to park the Marxist literature, and heed the Good Book’s advice. ‘Then you will know the truth, and the truth shall set you free’.

The truth here is that union-owned investment companies are not independent of their shareholders. 

Unions know this. Union-owned investment companies know this.

NUMSA’s response to Minister Oliphant’s utterances, essentially on behalf of its investment company, underscores the inextricable and umbilical chord-like connection between the union and its investment company. 

The rest is just smoke screen.

Andile Khumalo is the CIO of MSG Afrika and MD of POWER 98.7. He also presents POWER Business on POWER 98.7 at 5pm, Monday to Thursday. This article first appeared in the Business Times section of The Sunday Times on 13 December 2015.

Click here to listen to Khandani Msibi's interview on POWER Business with Andile Khumalo

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