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BOARDROOM NATURALS

28 Sep General

SACTWU INVESTEMENT GROUP

Linked to union: Southern African Clothing & Textile Workers`Union

Founded: 1996

Capital contributed to date: n/a

Total assets: R4bn

Main investments: 40% stake in HCI, which in turn is invested in e.tv, Tsogo Sun, Vukani Gaming, Johnnic Holdings and others

Beneficiaries: Sactwu Trust runs an extensive social welfare programme for Sactwu members. Union members have received bursaries for children and retraining for retrenched workers

Paid out to date: More than R100m

The two biggest union investment companies are also fierce rivals. Though the SA Clothing & Textile Workers Union (Sactwu) Investment Group (SIG) used to work in partnership with the Mineworkers Investment Company (MIC), the two are now acrimonious competitors for the juiciest empowerment deals.

Sactwu has made its R4bn fortune thanks to its interest in listed Hosken Consolidated Investments (HCI). HCI may be among the most successful union-linked investors, but it is also one that courts controversy. Its long-running battle for control of Tsogo Sun saw it clashing with other empowerment companies, including Fabvest, Nafcoc and Johnnic.

HCI won the battle, entrenching its deal-making acumen. It is also known for running lean, mean businesses, and turning loss-making e.tv around single-handedly. Not exactly “capitalism with a heart”.

But the workers should also be grateful. Since its establishment in 1996, SIG has channelled more than R100m into initiatives that benefit members of its union parent company.

The story of the growth of HCI is also one of its ruthless deal-makers, Johnny Copelyn and Marcel Golding. After positioning SIG to take advantage of the black economic empowerment opportunities in the licensing of new business in the media and telecommunications industries, Golding and Copelyn took SIG into mainstream commercial activity. In collaboration with the MIC, Sactwu won a few assets, including 5% ofVodacom and Highveld Stereo.

In 1996 the group reverselisted these assets, then worth about R500m, into HCI. SIG held 30% and the MIC 20%.

The MIC walked out of the HCI boardroom in 2000 and subsequently disposed of its stake in the company. Golding and Copelyn, who then held less than 5% of HCI, began to accumulate interests in the company through share options and investments in expansions. The two now control more than 20% of HCI shares.

SIG`s holding in the company has increased to about 40%. Strong dividend flow plus HCI donations have enabled Sactwu to run a comprehensive social welfare programme for its more than 100 000 members.

The Sactwu situation has also been helped by the close relationship the union has kept with both its investment wing and HCI. This is despite the existence of a separate and independent trust which owns SIG. The relationship is reflected in the representation of union agents in both HCI and SIG.

“There exists a healthy relationship between the investment company and the union, which allows for regular meetings and report-backs on investment activities,” says Amon Ntuli, Sactwu`s former president. Ntuli is a director of both SIG and HCI.

Sactwu`s social benefits include a bursary scheme for dependants of members. The scheme covers about 4 800 students a year, which amounts to R4,5m.

About I 600 students covered by the bursary scheme attend universities, institutes of technology and colleges. The union has also set up a Matric Winter School programme that has to date assisted 2 200 pupils.

MEMBER INTERESTS

NUMSA INVESTMENT COMPANY

Linked to union: National Union of Metalworkers of SA

Founded: 1997

Capital contributed to date: R320 000 (Interest-free loan from Numsa)

Total assets: R450m

Main investments: Doves Group (100%), Union Money (60%)

Beneficiaries: Bursary scheme for members` dependants

Paid out to date: R8m

After a strinq of failed acquisitive initiatives, the National Union of Metalworkers of SA Investment Company (NIC) has decided to refocus its energies on businesses that are closer to its members. Established with an interest-free loan of R350 000 in 1997, NIC has watched a number of deals slip through its fingers. Deals with Netcare, Capitol Caterers, and technology group Mustek were all on the cards but fell apart before completion. One apparent success was when NIC gained a stake in SAs first national lottery operator, Uthingo. However, that, like the others, is now worthless as Uthingo lost the licence to run the Lotto. Under the leadership of former trade union activist Tony Kgobe, NIC is making a strong push into financial services that serve Numsa`s membership base. “Our main focus has shifted towards improving the disposable income of Numsa members so that they can take care of their loved ones,” says Kgobe. The group has bought one of the largest funeral services operations in the country, Doves Group, which also has a significant funeral insurance operation. It has more than 150 branches across SA. “Through this operation we are able to provide an essential service at affordable levels to members,” says Kgobe. NIC has also joined forces with financial services group Metropolitan to establish an entity focused on the lower end of the market, called Union Money. It provides credit and investment services to members, says Kgobe. “We needed the muscle and experience of an established player to lay out a sound base for this business,” he says. The company is also invested in Internet service provider UI Play. The R8m in contributions to its trust has primarily been used in a bursary scheme that has funded 178 students.

INVESTMENT 101

NEHAWU INVESTMENT COMPANY

Linked to union: National Education Health & Allied Workers` Union

Founded: 1997

Capital contributed to date: Began with zero

Total assets: R420m

Main investments: Eyesizwe Mining (20%, which was recently halved and converted into a stake in Exxaro), Nehawu Securities (60%), a consortium member of Sanlam`s BEE partner Ubuntu-Botho

Beneficiaries: Nehawu Investment Trust has a bursary scheme which funds members` dependants and also runs a women-focused skills development programme

Paid out to date: The trust received R5m last year. The FM could not ascertain if earlier payments had been made. Union’s development programmes.

The investment wing of the National Education Health & Allied Workers Union (Nehawu) surprised the market when it decided to dispose of half its investment in Eyesizwe Mining — which was integrated into a bigger, newly established Exxaro Resources. Though Nehawu Investment Company CEO Sello Mkhondo says the disposal formed part of a programme to raise expansion capital, sources close to the deal say it was a forced seller because of its own cash needs and those of its union parent company. The sources say it fell victim to the tendency of trade union investment companies and their parent bodies to use their investment portfolios as an ATM machine, thwarting the objective of developing a sound capital base. The investment company recently handed a cheque for R5m to Nehawu to use in the Mkhondo says this money was part of an Rllm dividend from investments. Established in 1998, the investment arm claims to have amassed a portfolio valued at more than R420m. Mkhondo says the company is pursuing plans to grow and diversify its portfolio. It raised about R50m last year from the sale of assets and has announced intentions to raise a further R50m in capital to pursue acquisitive opportunities. Apart from investments in Sanlam, the investment company also recently announced a joint initiative with stock broking firm BP Bernstein to form Nehawu Securities.

A PILE OF ASSETS

POPCRU GROUP OF COMPANIES

Linked to: Police & Prison Civil Rights Union (Popcru)

Founded: 1997

Seed capital: Funding of R1,5m provided by the now-defunct Ferreira Group

Total assets: R200m

Main investments: Lesaka Employee Benefits (wholly owned), Petra Mining (3,5%), Protea Hotels (13,6% disposed of on July 1 for R60m), Shishangeni Lodge in Mpumalanga, and Transition Hotel at OR Tambo International Airport

Benefits to date: More than 500 workers dismissed for embarking on an unprotected strike were provided with a stipend and food parcels for a year. A new R10m social responsibility fund has been set up to assist the dependants of deceased members with schooling costs.

Though smaller than MIC and HCI, the investment arm of the Police & Prisons Civil Rights Union (Popcru) has built a pile of assets. It has restructured its Popcru Investment Holdings into the Popcru Group of Companies (PGC) to align its structure so that its investing entities are owned by a trust. The initial entity was founded with a Rl,5m injection from the now defunct Ferreira Group, a financial services company. The Rl,5m was in payment for access to Popcru membership for marketing purposes. Relaunched in 2003, PGC is now chaired by Themba Matsane, Popcru`s national treasurer. Its Group CEO is @ Zwilenkosi Mdlethse. Matsane says the company has R200m worth of assets. The partnership with the Ferreira Group included Lesaka Employee Benefits, which the company now owns. It also owns 3,5% of coal miner Petra Mining, worth just under R10m, property, and tourism and leisure investments. When the Protea Hotel group was sold to Australia`s Stella Group, PGC realised about R60m for its stake in the hotel chain. Pat Ntsobi, executive for strategy and communication, says the company now aims to provide bursaries for deceased members` beneficiaries. Matsane says it has paid out R30m since 2004, including R10m to set up a social responsibility fund. Much was paid out to protect workers during strikes.

A FOCUS ON SERVICE

HELPING HAND

Linked to union: Solidarity

Founded: 2005

Capital contributed to date: R5,22m

Total assets: 6 desks and chairs. Office equipment is shared with Solidarity

Main investments: n/a

Paid out to date: R5,22m by the end of September. (September is also the end of their financial year)

When trade union Solidarity was designing its business arm. Helping Hand, the focus was not to make money. “We felt that we had to offer the best possible service to our members,” says Solidarity`s deputy general secretary, Dirk Hermann. “We wanted to ensure that we came up with a model that covered every life cycle, from that of children to the elderly.” While most other unions were establishing investment companies that became influential players in business, Solidarity opted to stick with what Hermann calls its “core business”: servicing its members. Helping Hand is an autonomous entity that operates independently of the trade union, though it receives financial assistance from the trade union`s members. Registered as a non-profit organisation, the company receives R350 000/month from members. This is used to fund a feeding scheme for children at 42 schools. The second entity, known as Sol-Tech, is a bursary and training programme for young people, which is largely funded by a small but lucrative short-term insurance and loan business. The union plans to hand out Rl,3m in bursaries over the next year. The union attempts to place trained workers through its Express Personnel Network. Members also have the option of taking out a Solidarity retirement plan and additional medical aid. The Solidarity model was met with some scepticism at a labour conference in Canada last year, where Hermann presented an outline of the union`s business arm. “Many people felt that this was just not trade unionism,” says Hermann. “But we believe trade unions have taken on the role previously played by employers.” Compared with the more aggressive investment models of other unions. Solidarity seems positively benign.

Source: Financial Mail – Sibonelo Radebe