Are South Africa’s unions striking against themselves and what other options do they have to spur economic transformation?
Happily, South Africa is heading into summer, which means a sharp decline in the number of strikes. But for several months, as is traditional in winter, we have had a fair few incidents of industrial action, some of them quite vicious, in terms of not only damage to the country’s broader economy, but to the companies employing the workers.
Fair enough: isn’t that what strikes are supposed to do?
Indeed they are. A strike is designed to put the squeeze on a particular company or sector and to hurt the business owners to the extent that they back down to the demands of the workers.
But hold on a moment! Who are the real owners of these businesses? Who are the people suffering loss as a result of the strikes in South Africa? Who are the ultimate beneficiaries?
My attention was drawn to this question by one of South Africa’s most respected financial journalists, Allan Greenblo, editorial director of the specialist publication, Today’s Trustee. I call it a specialist publication because it’s aimed at trustees of pension funds, but in fact it deals with matters which concern all of us, because nearly all of us contribute to, and will eventually depend on, our pensions. The Today’s Trustee website makes the point that there is $1.3 trillion “invested on your behalf by SA retirement funds.” (www.totrust.co.za/faq.htm)
Which is exactly Greenblo’s point. Speaking in Johannesburg this week at the Chartered Secretaries of SA annual Corporate Governance Conference, he explained that the country’s retirement funds ”represent the largest single category of shareholders in JSE-listed companies” and that “they are the major, and often the only, repositories of black workers’ savings.”
Greenblo suggested that of the roughly eight million members of local retirement funds, perhaps six million would be black. I would also add that a very significant proportion of those would be members of the various unions and their confederations. Thus, union members, via their pension funds, are the single largest group of investors on the JSE.
Hence my suggestion that the unions are striking against themselves.
That’s almost irrelevant, because Greenblo reminded his audience that “In 1996, mainly at the insistence of COSATU, the Pension Funds Act was amended to provide for equal representation by employers and members (employees) on the board of retirement funds.”
In other words, not only do trade union members own most of the capital employed on the JSE, they also have a legal right to at least 50% representation on the boards of the institutions that control the JSE-listed companies – the pension funds. Bear in mind, as Greenblo again reminded us, “in law, institutional investors, including retirement funds, are exempt from charges of collusion in their activism.” This means that several pension funds could act in concert to vote their shares either for or against any specific set of board resolutions about anything, including housing schemes or executive remuneration.
We could therefore speculate that a proper application and understanding of the laws related to this subject might have led to a far greater degree of shareholder – i.e. trade union – activism at Lonmin prior to the Marikana Massacre.
As Greenblo concluded: “Put bluntly, retirement funds are the owners of capital and the owners of companies. Where they don’t act as owners, they abrogate a duty to protect millions of members who comprise the most representative cross-section of SA’s demographic.
“Were these sleeping giants to awaken, not only would there be an instant acceleration of economic transformation within parameters offensive in the national debate to nobody of any ideological bent. There would also be glue for a social compact because the interests of all South Africans are inextricably tied to the interests of their retirement funds.”
The mystery is why this hasn’t happened sooner. Thanks, Allan Greenblo, for reminding us that it’s possible. Of the many plans and demands related to transformation I’ve seen, it’s the one that makes the most sense.