South Africa: The Runaway Union

Published by MAC on 2013-04-28
Source: The Hindu

The Runaway Union

Aman Sethi

The Hindu (Op-ed)

27 April 2013

Turmoil at the legendary National Union of Mineworkers is indicative of the unresolved contradictions in post-apartheid South Africa

Emperors Palace casino - edifice of dreams, self-proclaimed Vegas of Africa with its 1,724 slot machines, 68 gaming tables, and giant fibreglass statues of Egyptian pharaohs - is a five-minute drive from Johannesburg airport.

In a country of desperate inequality, the casino offers one way past the seemingly impermeable barriers of race and class. Yet, Emperors Palace is a bet in itself, a wager, placed by the National Union of Mineworkers (NUM) on behalf of its many thousand members that money pulled from gamblers' pockets in Johannesburg will find its way past the city's smart suburbs into the streaked overalls of men crouched at a faraway mine face thousands of feet underground.

The casino is part of a diverse portfolio, with a net asset value of just over R3 billion (Rs.1,786 crore), managed by the Mineworkers Investment Company (MIC), an investment company set up by NUM, one of South Africa's largest and wealthiest unions.

Till recently, NUM had 320,000 members, a cash surplus of R134.4 million, and was pivotal to South Africa's resource driven economy: mining employs half a million workers and accounts for 10 per cent of Gross Domestic Product and 38 per cent of all exports. MIC is one of the most successful investment companies in the country and disburses R45 million every year as dividends to a union-controlled trust to finance education bursaries for the children of mineworkers. NUM is also part of the national government through the Congress of South African Trade Unions (COSATU) federation. COSATU, the African National Congress (ANC), and the South African Communist Party form South Africa's ruling alliance.

At the National Congress in May 2012, NUM General Secretary Frans Baleni described the union as "stable, growing and developing."

But in August, NUM failed to defuse an increasingly violent strike at Lonmin's mine in Marikana near Rustenburg, North West province, which was directed against the management and NUM itself. Mr. Baleni demanded the police "deal decisively with the criminal elements in Rustenburg and its surrounding mines." Three days later, security forces killed 34 miners, some armed with machetes, in one terrifying afternoon.

Since then, NUM has lost tens of thousands of members and its claim to speak on behalf of the country's working class. The union's many detractors now call it the "National Union of Management," a profound ignominy for an organisation once lionised for its militant anti-apartheid roots.

The turmoil at NUM is indicative of a deeper disquiet. Twenty years after the first non-racial elections, working class South Africans fear that the promise of the rainbow nation has been replaced by the meritocracy of the casino: anybody can get lucky, but the house always wins.

****

In 1994, white commercial farming accounted for 87 per cent of agricultural land in South Africa with black farmers granted communal rights to the remaining 13 per cent. Rather than expropriation, the post-apartheid government tried to redistribute land by buying white-owned land at market rates. The policy made little headway as, a 2012 ANC policy paper notes, "it had a huge fiscal implication." Only seven per cent of land has been redistributed to date.

Industry was entirely controlled by the white population, and one group, the Anglo American Corporation, controlled 43 per cent (by market capitalisation) of the firms listed on the stock exchange. The new government unveiled the Black Economic Empowerment (BEE) policy where companies were told to meet specific targets of black ownership. In the mining sector, for instance, black individuals or companies must own 25 per cent of each company by 2014.

"Few black people had capital to invest," said a veteran of BEE deals, "White companies loaned money to black partners to buy company shares and recovered the loan through dividends on the very same shares." Companies invariably allied themselves with influential individuals with access to the government or with union investment companies that reliably represented a large black constituency.

The transition affected the unions as well. Foreign funding, intended for the fight against apartheid, dried up with the liberation and unions were forced to seek new cash sources. NUM and the South African Clothing and Textiles Workers Union (SACTWU) set up their own companies. NUM set its subscription at one per cent of member salaries, unlike other unions that set a fixed fee, so it did not have to renegotiate fees with wage inflation and was well capitalised.

In 1995, NUM set up the Mineworkers Investment Trust as the sole shareholder of the Mineworkers Investment Company. The union loaned MIC R 3 million as seed money with the understanding that MIC would invest in all sectors of the economy except those in which NUM was active and the returns would be paid to the trust. The union could not use the money to fund its day-to-day operations and a shareholders' agreement was signed to keep the presumably socialist union at arm's-length from its capitalist investment company.

"We had a state that was creating a favourable environment for black empowerment whereas the private sector wasn't," said Clifford Elk, a founding director at MIC. "Our challenge was to persuade businesses that they desperately needed us as their partners, and they needed us so badly that they would facilitate the deals in the form of a discounted loan or vendor financing."

The biggest licensing deals were for five per cent stakes in telecom giants MTN and Vodacom. SACTWU snapped up MTN and when the Vodacom stake came up, MIC and the SACTWU Investment Group took over a listed insurance company called HCI Holdings and used it to buy their stake in Vodacom. In 2001, the Vodacom stake was sold for about R1.5 billion according to a COSATU report. HCI went on to pick up stakes in gambling, television, beverages, coal and transport in 14 countries.

Deals such as these made some former trade unionists very rich and also placed them on both sides of the negotiating table. While MIC withdrew from HCI in 2000, the textile workers union is HCI's biggest shareholder, and now owns Seardel, one of South Africa's biggest apparel manufacturers. Seardel is in the process of laying off workers, but in 2012, HCI holdings earned nearly R2 billion in pre-tax profits and distributed R45 million in dividends to the textile union. Its bosses, both two former-trade union leaders, were paid R11.4 million each.

On a rainy day this April in Johannesburg's posh Parktown suburb, workers were changing the art on the walls of the Mineworkers Investment Company's elegant glass-fronted office, replacing almost everything except for the large black-and-white print of an underground mineworker.

Kuben Pillay, MIC's thoughtful soft-spoken chairman, went to school in Swaziland with the children of anti-apartheid stalwarts like Nelson Mandela and Archbishop Desmond Tutu and was studying law in the U.S. when he saw a PBS documentary on Cyril Ramaphosa, NUM's charismatic founder.

"It resonated with what I was studying on civil rights and trade unions, he said. He returned and set up NUM's legal cell, "I've had only one employer, I worked for the union, I became their attorney, and when they set up MIC, I came here."

Mr. Pillay strongly believes in MIC's mission, particularly the education bursaries for the children of mine workers. "Those children would have been relegated, generations of them, to working in the mines underground. You now have mine engineers, doctors, lawyers, and accountants," he said, "MIC raises all its funds commercially, it doesn't tap into workers provident funds or subscription funds. It only pays its dividends to one shareholder - the trust."

The trust is the sole shareholder in MIC and employees are not offered stock options. CEO Mary Bomela said salaries were in line with market salaries to attract the best talent but did not offer details.

But, from the outside, MIC's programmes look no different from the social responsibility policy of any large corporation. The money is spent on schemes that help a tiny fraction of mineworkers to stop being mineworkers, rather than channelling it into instruments like strike funds to support workers in their battle against management.

"None of the unions in our alliance have a strike fund," said COSATU spokesperson Patrick Craven. Union organisers said they had asked NUM's leadership for such a fund, but had little success.

Instead, in 15 years, the trust disbursed 3,500 education bursaries and produced 632 graduates, accounting for slightly over one per cent of over 3,00,000 mineworkers. The focus on investments, beneficiaries and stakeholders, threatens to turn a once-militant union into a corporate-friendly NGO.

****

"Unions use their black worker credentials for BEE deals but the workers are not shareholders, they are beneficiaries," said an investor speaking on the condition of anonymity, "This means the workers have no say in how money made in their name is spent." A large majority of workers see little direct benefit from MIC's investments.

The NUM is also grappling with "social distance," a union euphemism for the divergence between the lives of workers and the union officials who serve them.

In May last year, the Mail & Guardian newspaper reported that the union paid its General Secretary, Frans Baleni, R1.4 million a year from union funds, apart from which he earned an additional R4,00,000 a year as member of the board of directors of the Development Bank of Southern Africa. NUM spokesperson Lesiba Seshoka denied the M&G report, but refused to reveal Mr. Baleni's salary on grounds of privacy.

This week, the Daily Maverick revealed a decades old arrangement in which the NUM President's union salary is paid by AngloGold Ashanti, a gold-mining concern, and BHP Billiton pays his deputy's salary.

The average salary of mineworkers is R5,451 a month, according to NUM data, or R65,000 a year, or about five per cent of Mr. Baleni's alleged salary. Union posts have become so lucrative that office-bearers are willing to go to great lengths to retain their posts. A few months before the Marikana firing in 2012, delegates showed up at the annual NUM conference with bodyguards to protect themselves against factions within their union.

Former South African President Thabo Mbeki sees the increasing social distance as an unintended consequence of the success of the union. Describing Mr. Baleni's salary as "huge," President Mbeki said, "As a result of interventions like BEE you have a movement of significant numbers of miners into relatively well-earning positions [who] say we can afford to give him so much. It is a consequence of the positive results you have achieved...[but] they are working further away from the people who are underground in the same mine."

In 2010, the NUM commissioned an audit to assess its relation with its members. When asked to name the most important thing the NUM had done for them, 44 per cent of platinum workers said "Nothing," 46 per cent said the union had disappointed them, while 41 per cent of NUM members said they had never been visited by a union organiser.

Tumi Mokgatle joined the NUM when he started work as a plant operator at Impala Platinum in Rustenburg. He soon became a part-time shop steward and built strong relationships with workers in his section and conveyed their difficulties to the union. But once he became a full-time shop steward, he was moved away from the line and into a cubicle in the Human Resources Department.

"As a shop steward you do administrative matters, prepare cases and go to meetings," he said, "You work office hours and get weekends off." Line workers get five days off in the month, divided by shift rotation. He was also entitled to a work computer and a smart phone with 120 minutes of airtime paid by the company. Some companies gave stewards a company car for union related activities.

At the same time, intra-union politicking plagued his branch as former union office bearers began inciting workers in the hope of winning back their posts and their privileges. In January 2012, the rock drill operators in Mokgatle's plant went on strike demanding higher wages and refused to let the union negotiate on their behalf. Impala responded by firing the striking workers, thereby triggering a plant-wide strike that lasted over a month and was largely autonomous of the union. "The workers set up their own strike committee saying that the NUM has betrayed workers," Mr. Mokgatle said.

A month later, Impala relented and the drill operators were given a raise. Mr. Mokgatle said his team ensured that all dismissed workers were reinstated, but by then it was too late - workers were leaving NUM in droves for the rival Association of Mineworkers and Construction Union.

News of Impala's surrender spread quickly through the platinum belt. In August, the Lonmin drill operators in Marikana went on strike; NUM had no answers for the striking workers, and did nothing when the police opened fire on the men who had once been their comrades.

This February, the management at Impala informed Mokgatle that NUM membership had fallen below an agreed threshold and it was no longer the recognised union at the plant. Mokgatle had risen to the post of branch secretary at the plant, but he was now out of a job. He asked NUM's regional council to contest his dismissal, but said his appeals fell on deaf ears. He is unemployed at present.

****

Gamblers tired of the Emperors Palace casino's many distractions can take a walk through the property's indoor faux-Italian town square complete with a replica of David, Michelangelo's iconic sculpture.

Where Michelangelo's masterpiece stands in serene expectation of battle with his muscles tensed, sling over shoulder, his counterpart in Johannesburg wears the self-deprecatory smile of a retired sportsman endorsing hair-replacement products. The famous sling is missing, replaced by casino loyalty vouchers. "David got his Bally Ready Winners Circle Card," reads the sign at the foot of the statue, "Did you?" These days, David doesn't fling stones at Goliath; he sits across the table from the giant and throws the dice.