Zuma's balancing act: Cosatu takes on Vodacom

Immediately after the election, and referring to President Jacob Zuma selecting his first cabinet, I observed that the vested and conflicting interests of business and labour was going to be a particularly tricky political tightrope that he needed to walk. On Friday, and while we are still digesting the appointments in cabinet relating to this specific area, Cosatu joined by Icasa fired a particularly nasty broadside in attempting to interdict the Vodacom listing.

The timing of the application could not have been worse and the impact that it will have on overseas investment will take time to gauge. This in the face of the fact that Icasa and Cosatu have had ample opportunity to put forward their challenges. Icasa previously confirmed that their permission was not required and Cosatu failed to take substantial legal action after the initial purchase last year and the intention to list earlier this year.

What then was the motivation behind them bringing an urgent application to halt the listing on the Friday before the Monday which even required it be heard on a Sunday?

According to Cosatu, as supported by the South African Communist Party, this deal will result in a loss of jobs and afford controlling interest in a major South African company to foreign investors.

Can that ever be right?

In order to create jobs on a grand scale we need to expand opportunities for foreign investment in South Africa, not sabotage it. Accordingly organised labour should rather be finding ways to encourage that investment while simultaneously placing themselves and their membership beneficially within those opportunities. By pulling stunts like Friday and thereafter, when you can’t get your own way and call for a nationwide boycott of Vodacom, all that is achieved is a loss of investment which will eventually result in a loss of jobs. This of course does not factor in the opportunity cost that instability and volatility will occasion.

In terms of foreign ownership of a major South African corporation I am at a loss to understand the problem. This seems to be a global trend with, for example, traditionally British or American firms being partially or wholly owned by investors from abroad. Accordingly to suggest that South Africans have to own the majority shareholdings in our major companies is going to close a whole lot more doors than it will open.

The ANC’s strategy prior to election was to maintain fiscal and monetary policy as close as possible to what had worked previously. The additional revenue required for funding the five-point priority list would, according to what they told foreign investors, be sourced from creating new streams of income. Indeed Zuma at his inauguration called on all stakeholders to form partnerships to further the common interest.

Accordingly this interdict and planned boycott flies in the face of the government’s strategy while showing the country in a bad light.

Two very interesting articles relating hereto may be found in Moneyweb and the Business Day.

“But the application for an interdict wasn’t about competition issues, nor was it labour matters, nor even about concerns about foreign ownership of Vodacom.

If Cosatu or Icasa had had any genuine concerns about jobs or the telecoms market they would, presumably, have taken action in March, when the Vodacom listing was announced, or even as far back as October, when Vodafone made its R22bn bid.

What this does seem to be about, however, is the continuation of a battle between old and new ANC elites over who gets the spoils of empowerment, though now with the new elite in control. And that may help to explain why the application was brought only after the elections and the appointment last weekend of the new Zuma Cabinet.” (Business Day)

Whatever the reason for this last-ditch attempt to scupper the listing — elitists fighting over the spoils, labour flexing their muscles at business or even labour showing the government who’s who in this zoo — one thing is clear, the protagonists in this story don’t seem to care who gets hurt or more worryingly the stakes involved.

Had this deal collapsed the damages would have run into tens of billions, the rand would have taken a bath and investors would have thought ten times before ever considering investing in South Africa again. As a result who would be the biggest loser? Certainly job creation, which is our number one priority during the Zuma presidency, would have taken a major hit.

Accordingly Friday’s application, had it been successful, would have occasioned the very damage it seeks to prevent.