SAFTU disgusted at write-off of workers’ investments 

6 December 2018

The South African Federation of Trade Unions is disgusted that the Government Employees Pension Fund (GEPF), which manages the savings of government employees, has had to write off huge investments of workers’ money, as a result of the collapse of Steinhoff’s share price in 2017. 

The Public Investment Corporation (PIC), on behalf of the GEPF, invested R4.3bn in Steinhoff’s ‘empowerment shareholder’, Lancaster 101, which is 51% owned by the PIC and 49% by former trade unionist Jayendra Naidoo. The investment has been rendered worthless after the 2017 accounting scandal wiped off about R200bn of Pepkor’s value. Naidoo resigned as a member of Steinhoff’s supervisory board in January.

"The impairment in Lancaster 101 is directly linked to the collapse of Steinhoff’s share price," says Renosi Mokate, Chairperson of the GEPF board of trustees.

It is doubly ironic that Lancaster 101 became Steinhoff’s “strategic black empowerment partner” after the PIC loaned it R9.35bn in 2016 to acquire Steinhoff shares in a bid to drive transformation within the company. It has not empowered any of the black majority but impoverished them.

The GEPF has also written off about R1bn of loans and investments in companies controlled by Iqbal Surve, the owner of Independent Media, because of their failure to honour their payment obligations under the transaction agreements.

Other write-offs were the R375m investment in VBS and R492m in Afgri Poultry.

This news provides further evidence for SAFTU’s view that fraud and corruption have never been restricted to the Gupta scandals, but are rife throughout a structurally corrupt capitalist system off which Steinhoff is an extreme example.

The company used earnings manipulations, uncontrolled acquisitions, tax frauds, and swindles known as a Ponzi schemes, defined in Wikipedia as “a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.”

The truth about these deals was concealed behind a web of complex and fraudulent bookkeeping exercises, setting up bogus companies, which transferred money to and from each other, and spinning of excuses for the disappearance of investors’ money as just “accounting irregularities”.

As SAFTU said when the Steinhoff scandal was first reported: “It is not only the companies now exposed as directly involved in these crimes that must now be investigated and prosecuted, but also all the regulatory bodies, stock exchanges, auditing firms and investment portfolio managers. Those who advised the funds like the PIC who were managing workers’ money to invest in Steinhoff have to explain how they could give such advice.

“They all failed to detect and warn about activities which they must have known were at the very least suspicious. In some cases, like KPMG, they used their reports to cover up obviously dubious activities.”

The GEPF write-offs prove that these are not victimless crimes. Steinhoff CEO, Markus Jooste, and his accomplices made themselves billionaires at the expense of workers whose life savings were invested in his company. Its collapse also jeopardized the jobs of over 130 000 workers in 32 countries around the world, in what was Europe’s second-largest retailer.

The price the poor majority have to pay is living in a corrupt kleptocracy, in which money created by the labour of workers is squandered in speculative and often fraudulent ventures, while suffering under an economy relegated to junk status, with sluggish growth, grinding poverty for millions and unemployment six times the world average. 

Such cases also dispel the myth that the rich cannot afford to pay higher taxes. They have made themselves so rich that South Africa has become the most unequal society in the world. 

One of the top priorities of the New National Director of Public Prosecutions, Shamila Batohi, must be to prosecute Jooste and others implicated in this robbery.

But it is not only Jooste, his accomplices, individual CEOs and companies who must be put on trial, but the whole monopoly capitalist system, for being a racket run purely to amass the biggest profits in the shortest time to enrich a powerful ruling class at the expense of the majority.

The federation repeats its demand that “To counter this we have to return to the values of the Freedom Charter, and bring power to the people, and not the corrupt and greedy capitalists we see being exposed very day in our media”. 

SAFTU’s campaign of mass action, including a three-day stay away early in 2019, will include a demand for the PIC and other managers of workers’ pension funds, to be run by, and responsible to, elected representatives of the workers.

They can then ensure that the workers’ moneys is not only scrupulously managed and accounted for, but also that its investment policy is not solely based on making the quickest profit from building more skyscraper offices in Sandton but by investing in public projects which will benefit the poor majority of South Africans.

Issued by Patrick Craven, SAFTU Acting Spokesperson, 6 December 2018