Missing Funds: Clothing workers and employers must stand together and demand answers

According to the M&G workers in the clothing and textile sector are “in a ferment over their unions failure to communicate with them about what exactly is going on.” Yet, the union demands wage increases, and closes factories because levies are not paid. However, the majority of business owners in this sector remain silent.  Why are we not hearing from them? This is an ideal opportunity for workers and owners to develop some solidarity and collectively demand answers from the clothing and textile union.

The company that lost R100 million in Southern African Clothing and Textile Workers Union (Sactwu) provident funds in a dubious loan to a BEE business wanted to bump up the failed business’s value by using more union funds.  This week, the Western Cape High Court ordered the provisional liquidation of Canyon Springs Investments 12 because it can’t repay at least R100m it owes the provident funds. The workers’ funds now face getting less than half their missing money back, while two Trilinear businesses are under investigation by the Financial Services Board. The Godongwanas have denied culpability in the loan scandal.  Canyon Springs is owned partly by Deputy Minister of Economic Development Enoch Godongwana and his wife Thandiwe. The directors of both Canyon Springs and PABS are Patel and Thandiwe Godongwana. He said the loan had been arranged and much of the money passed on to Canyon Springs before he and his wife were involved in the business. “We are still investigating stuff from even when we were there.”  (“Union million were under more threat,” Business Report, 17 June 2011).

Deputy Minister of Economic Development Enoch Godongwana has deepened the controversy about his role in the disappearance of millions of rands of workers' retirement money this week, insisting he did not know that the company he co-owns borrowed R93-million from clothing factory workers provident funds. This is despite the fact that Godongwana's family has a 50% stake in the company, Canyon Springs Investments 12, and that he was its chair at the time of some of the loans. In addition, papers submitted in court this week show that his name appeared on stationery as the company's chair between August 2008 and March 2009, when the company received R19.8-million that ultimately came from workers' provident funds. A total of R420-million from five provident funds in the clothing and textile industry may have gone up in smoke in various failed investments, potentially affecting the retirement benefits of more than 20000 workers.  Trilinear Capitals attorney, Chris Briston, told the Mail & Guardian Godongwana knew that the Canyon Springs loan came from clothing workers provident funds. The fact that Godongwana was involved in procuring the loan, and that his family trust had a stake in Canyon Springs, made the loan proposition more attractive to Trilinear Capital, Briston said. ("Godongwana and the missing union millions," M&G, 17 June, 2011) For more click here.

Trade union pension and provident funds control billions of rands, the oversight of which is too often carried out by small networks of political and business cronies who didnt struggle to be poor. The growing list of scandals involving the theft of workers' retirement savings reflects an apparent belief among union leaders and their corporate enablers that they are entitled to a little extra benefit, skimmed off the top of employee benefits. In some instances, this means simply collecting commissions from steering investments toward fund managers eager for this lucrative line of business. The result is investment choices that are not made with workers financial interests front and centre, and underperformance that slowly eats into their chances for dignified retirement.  More and more often, however, it is more blatant than that. The looting of close to R700-million intended for retired mineworkers and their wives and orphaned children in Fidentia Asset Management is the most prominent example, but it is far from unique.

Now a scandal of comparable scale is unfolding in the clothing and textile industries, where more than R400-million formerly held by five provident funds may have gone up in smoke. As we report in this edition, workers are in ferment over their unions failure to communicate with them about what exactly is going on. What is crystal clear is that with the say-so of the South African Clothing and Textile Workers Union, workers' savings were squandered in a series of failed investments by companies apparently set up to "empower" their owners. A fundamental rule with retirement money is that it should be conservatively invested in large, stable vehicles with a proven track record. Why did Sactwu breach its fiduciary responsibility to members by departing from this prudential rule? It beggars belief that Godongwana, whom we have always regarded as among the most credible of ANC policy leaders, did not know where the millions in loans to his company came from and Trilinear has publicly scoffed at the idea. As a former trade unionist himself, and now the deputy minister in a portfolio supposedly advancing workers' interests, he has a lot to answer for. (“Pension funds not a piggy bank,” M&G, 17 June, 2011). For more click here.