Saccawu Investment Holdings, or SIH, the investment arm of a major South African labor union, has been liquidated. Given its sponsor, the allegations of conflicts of interest should come as no surprise. Right now, union officials are in court answering accusations by the company’s liquidator that in 2001-02 they raided SIH for unauthorized cash advances totaling the equivalent of nearly one million U.S. dollars. In court papers, union leaders have denied wrongdoing, claiming the borrowed money constituted “donations” they had repaid. But more than a little evidence suggests the opposite: Union bosses transferred funds from the investment fund to prop up the labor organization’s shrinking treasury.
South African Commercial, Catering and Allied Workers, or SACCAWU, with more than 100,000 members in a country of 50 million people, has been at the center of an embezzlement scandal whose roots go back almost a decade. In 2002 the SACCAWU National Pension Fund (SNPF), several of whose members sat on the SIH board, went into curatorship following an official investigation by the country’s Financial Services Board (FSB) that found irregularities in the fund’s management practices. The probe also revealed that the pension administrator was collecting one rand (US$0.146 as of December 13) a month per union member and placing the money into a “trustee expense reserve account,” plus “various unauthorized payments,” including those for holiday expenses and a personal loan for the fund’s principle officer, Abe Mosiuoa. For the last three years, the South Gauteng High Court in Johannesburg has been trying to get the real story.
Theodor Wilhelm van den Heever, the court-appointed liquidator of SACCAWU Investment Holdings, is demanding that the union repay SIH what he says was embezzlement of more than 6.58 million rands (about US$960,000) disguised as borrowing. The payments to union members, he said, “were part of a scheme devised by SACCAWU, in collusion with SIH and others, to evade the express provisions of the Pension Fund Act and other statutory provisions.” Van den Heever also says that the union is in violation of the Companies Act, which prohibits directors and managers from making loans to any company or body “controlled by one or more directors and managers.” FSB Deputy Executive Officer Dube Tshidi states “there was no provision in the revised general rules of the SACCAWU fund for such payments” since January 1, 1999.
Union officials counter that the money was “donated.” Bones Skulu, then-general secretary of SACCAWU, explains the situation this way: “As we had no readily available funds to purchase tickets on a daily basis, we utilized the SNPF Travel Agency with an agreement that after receipt of invoices and accounts, we will be billed directly. Something did not happen until the FSB investigation on allegations of corruption and fraudulent activities by the suspended principle officer.” And in an amended plea to the court, the union wrote, “This agreement was a donation or a grant and at no time was intended that the money be repaid.”
But it is a fact that the union was in bad shape at the time of the thefts and that its leaders took unusual steps to close the deficit. Independent audit reports for 2001 and 2002 indicate the union had trouble managing its finances. In both reports, auditors stated: “The union did not institute adequate accounting controls over the collection of subscriptions from members and sundry income, nor did it maintain a register of members.” Another court document is a letter dated August 30, 2001 from SACCAWU President Amos Mothapo thanking SACCAWU Investments Holdings CEO Zolani Mtshotshisa for a 1 million rand payment, which had been received that July, and requesting an additional advance. The letter read: “The said request is made on the basis of the magnitude of the liabilities confronting the union and the current day to day expenses. This has become urgent and imperative due to the reluctance of Standard Bank to provide an overdraft facility without duly signed 2000 audits, which have been substantially delayed.” A week later, 2 million rand became available. The union proceeded to borrow a combined 883,000 rand in two draws from its investment fund during the first half of 2002. Of one particular “donation,” SACCAWU Assistant General Secretary Noel Mbongwe wrote: “Had this amount not been settled, the (new phone) system would have been disconnected, causing considerable damage to the union’s standing and administration.” That sounds like a debt being repaid.
SACCAWU’s travails should be placed in the context of extensive corruption and strife in South Africa, under black majority rule since 1994. The union is affiliated with the Congress of South African Trade Unions, or COSATU, a federation that is part of a “tripartite alliance” with the ruling African National Congress (ANC) and the South African Communist Party. South African historian R.W. Johnson, though an avowed opponent of the old apartheid rule, documents in his recent book, “South Africa’s Brave New World: The Beloved Country Since the End of Apartheid,” how the African National Congress has used its power to create elaborate kickbacks for members and institute pro-black hiring quotas throughout the nation, cracking down on dissenters. Current President Jacob Zuma, who replaced Thabo Mbeki two years ago, increasingly is aligning himself with the more radical members of his party and is refusing to condemn atrocities committed in neighboring Zimbabwe under the regime of Robert Mugabe. Even COSATU’s secretary general, Zwelinzima Vavi, has denounced the Zuma government as a “predator society.” If South Africa eventually plunges into chaos, its labor organizations will plunge with it.
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South African Union Federation Targets Ex-President; Launches Intimidation Campaign.