The matter of trade union investment companies in South Africa was thrown in to sharp focus recently with claims that political commentator and businessman, Moeletsi Mbeki was involved in a “dirty” BEE deal with the investment company (NIC) of the National Union of Metalworkers (Numsa). The allegation was presented, along with a reference to Scaw Metals, without any evidence of wrongdoing and was rejected out of hand by both NIC and Mbeki, the younger brother of former president Thabo Mbeki.
It was something I would, in any circumstances, have felt compelled to investigate. But I also had an additional reason: Mbeki chairs the Forum for Public Dialogue (FPD) a think tank where I am a board member (unpaid). The allegation was made by consultant and commentator Prince Mashele in a letter of resignation as chief executive of the FPD after he had been summoned to a disciplinary hearing by the board.
What stood out from a labour viewpoint was the fact that NIC appeared to be breaching the long-standing practice of union investment companies not to invest in areas where their members are engaged. In the past, Cosatu has held this to be almost a matter of principle.
The rule was obviously applied to avoid the potential for embarrassment, should union members end up striking or otherwise protesting about the actions of a business owned by their own investment company. Critics complain that this is merely another example of of trying to square circles; of trying to obscure the contradiction of a worker-owned organisation becoming an employer.
But NIC chief executive, Khandani Msibi maintains that this view is idealistic. He notes: “It is contradictory (in a capitalist society) to talk of workers owning the means of production and then not investing in the places where they work.” He maintains that union owned companies, investing union funds, are the only true examples of socially responsible business investment because all profits accrue to workers or projects that benefit them, and not to private shareholders.
This argument has recently been made strongly within Cosatu, but Msibi admits that NIC still has something of an uphill battle to persuade the federation that NIC’s move to buy into the steel and engineering sector is the right one. However, the main thrust of the investment strategy is not to invest profits in ongoing and established projects such as “at cost” housing for union members, but to resist “the progressive de-industrialisation of the country”.
In this new ownership drive, NIC is reacting to fears expressed within the union about what is widely seen as the progressive loss of industrial capacity in the country, something Mbeki has also warned about. According to Msibi, NIC has conducted a series of investigations into the steel and engineering sector and has “come up with a number of startling facts”.
Central to these is the 20-year increase in world steel production — from 600 million tonnes to 1 400 m/t — at a time when South Africa’s production has fallen from 9 m/t to 6 m/t. NIC research also shows that countries such as Germany, Japan and Britain. none of which have any great coal or iron ore resources, produce up to 20 times the tonnage of steel that South Africa does.
As a result, says Msibi, NIC is making moves to obtain a major stake in the sector as part of a strategy to halt “continuing de-industrialisation” in South Africa. So there are ongoing talks about the possibility of the union-owned company taking over the 74 per cent shareholding in Scaw acquired last year from Anglo American by the Industrial Development Corporation (IDC).
Advising NIC about tactics to revitalise the steel and engineering sector is Moeletsi Mbeki. “He is a public figure with strong views on the performance of the state, but it was his economic policy views that we found much aligned to those of Numsa,” says Msibi. While NIC and Numsa might not agree with all of Mbeki’s political views, “there is an alignment with his views on economic policy and industrialisation”.
However, Scaw is not the major focus for NIC. That position is held by Macsteel, perhaps the largest privately owned steel trading company in the world and South Africa’s only locally-owned steel major. Founder and executive chairman Eric Samson is now preparing to retire and the African operations of the empire he founded in 1950 are about to come onto the market.
Says Msibi: “We looked at the value chain of the steel Industry, and the most important company in our Industry is Macsteel.” He notes that the African operations of the company — Macsteel Service Centres — has an annual turnover in excess of R15 billion and employs more than 5 000 workers.
The fear of the union, the investment company and Mbeki is that this “banker of the local industry” will fall under foreign control. “The biggest mistake for South Africa was to allow (once formerly state owned) Iscor to pass into the hands of Arcelor Mittal,” says Msibi.
This Indian owned global enterprise, he maintains, is able to play one region of the world off against another, having interests in both. “Lines decommissioned in Vanderbijlpark, for example, have simply been relocated to India,” he says.
But to buy into this industry is an expensive business and the trade union movement as a whole, let alone NIC and Numsa, might not have deep enough pockets, especially to challenge for Macsteel. So NIC has travelled abroad looking for potential partners and is hoping that Mbeki’s “extensive contacts and network” will enable a successful NIC-led bid for a large or controlling part of local industry.
“There is nothing BEE, let alone dirty about any of this,” says Msibi. “We are aiming at big, transformative deals and Moeletsi Mbeki is helping us. We don’t know Prince Mashele from a bar of soap.”
So far, however, there appear to be no deals struck, although there is confirmation that talks are still underway between NIC and the IDC.
Follow Terry Bell on Twitter: @telbelsa