The investment arm of the SA Clothing and Textile Workers’ Union (Sactwu) is a major shareholder in Hosken Consolidated Investments (HCI), which controls Seardel, but Sactwu said it would not be guided by profit considerations as a shareholder, and its priority is to save members’ jobs.

In April, Seardel announced the closure of Frame Textiles, which is composed of the spinning, weaving, finishing and denim divisions of Seardel.

Sactwu will enter formal legal negotiations to stop the 1 400 job cuts or to minimise them, said Andre Kriel, Sactwu’s deputy general secretary.

After much debate in the union, Sactwu bought low-voting shares in Seardel to inject capital into the company and build support for local manufacturing, according to a statement issued by Kriel.

“We took a formal decision that our interest in our own sector would be based exclusively on social and employment considerations…” the statement said.

In 2008, Seardel, on the verge of bankruptcy appealed to the union for help.

To prevent the loss of 15 000 jobs that would be cut if Seardel closed, Sactwu again found a way to raise fresh capital for Seardel.

It injected about R250 million into the company through shares issued by HCI. Sactwu did not nominate board members when HCI took over the management of Seardel. Kriel said.

Even if there are no Sactwu members on the board, it can still raise potential conflicts from the perspectives of other businesses, said Mike Morris, an economics professor at the University of Cape Town.

“You can’t tell me the people who sit on the board aren’t having discussions with their shareholders,” he said.

One would expect businesses associating together to have a common interest and represent that shared interest in respect to the government, trade unions and stakeholders, Morris said.

“When one of the members of an employers association is also partially owned by the union, it creates an interesting potential conflict that the other businesses may be looking at him and saying: whose side are you on?” he said.

Many unions throughout the world invest in companies to sustain the unions rather than to make profits, said Saliem Patel, director of the Labour Research Council.

He said conflicts of interest in employment issues may arise when unions have heavily invested in companies with few or poorly organised union members.

Ninety percent of the 1 400 workers affected by Frame’s closures are Sactwu members, Kriel said.

While the relationship between a union and a company it has invested in may be manageable in handling job cuts, a larger issue is wage bargaining with the union in the National Bargaining Council, Morris said.

“How will other manufacturers feel about sitting down and discussing their bottom line positions when they are uncertain who the company is also talking to?”

Source: Cape Times – Jenny Gross