The 1.6 million-strong Cosatu is in serious financial trouble. The federation’s latest financial report received an “adverse finding” from external auditors for possibly containing material misstatements.
Cosatu had qualified audits in 2015 and 2016, but this is the first time it got the more severe “adverse” warning from auditors Deloitte.
The finance report tabled at this week’s 13th national congress is deceptively rosy, showing an unusual R16m surplus following a loss in 2015 and break even in 2016.
In reality, Cosatu’s finances were saved last year by two special windfalls that disguise the increasingly dire state of affairs at its affiliate unions.
One windfall was the write-off of more than R11m in unpaid rent Cosatu owed for its headquarters in Johannesburg. The owner of the building is a Cosatu investment company, so Cosatu has effectively subsidised its operations with its investments.
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It will also stop paying rent in the future, according to the financial report.
The second windfall was an unprecedented dividend from Cosatu investment company Kopano Ke Matla totalling R9m.
Exceptional income in the year also included a capacity-building grant from the National Skills Fund of R4.15m.
Excluding these special items, the actual fees received from affiliated unions fell slightly in the year and did not cover expenses.
Despite raising the fee per member, Cosatu received affiliate fees of R73.9m last year, compared with R74.6m in 2016, due to falling membership.
AFFILIATES IN ARREARS
Non-payment of fees by affiliate unions is becoming a crisis. All Cosatu unions are supposed to pay the federation R3.95 per month per member.
In the political report tabled at congress, Cosatu notes that affiliate non-payment “has literally collapsed the federation’s capacity to implement its programme, has destroyed the staff morale as they are always unsure if they will get paid at the end of the month, and has also destroyed the political and organisational credibility of the federation”.
The report even calls on Cosatu unions to find “friendly business people in the country who can help raise enough capital towards Cosatu’s new investment entity”.
The financial report tabled this week reveals that Cosatu has made provision for R34.6m in fees owed to it as “doubtful debts”.
A year earlier, this amount was R13m.
This includes almost R9m Cosatu is still trying to reclaim from the National Union of Metalworkers of SA and the Food and Allied Workers’ Union, who left to found the rival SA Federation of Trade Unions.
Major remaining Cosatu members are, however, also racking up massive arrears.
The big ones are the SA Transport and Allied Workers’ Union, which owed R15.8m at the end
of last year.
The SA Municipal Workers’ Union (Samwu) owed R10.2m, while the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union owed R7.1m.
In reports tabled at the congress this week, the three are identified as trouble unions that have suffered from factionalism and breakaway unions.
These fees are not necessarily being withheld indefinitely, but unions have started to pay as late as possible to earn interest on their cash, Cosatu’s re-elected general secretary Bheki Ntshalinsthali told City Press last week.
Samwu has, however, been unable to settle debts before congress and is the only Cosatu union “not in good standing”.
Despite this already dire underfunding, the documents tabled at the congress show that Cosatu affiliates also think the fees are too steep and that Cosatu itself should bear more of the costs of federation meetings and events.
A resolution proposed by the SA Commercial, Catering and Allied Workers’ Union calls for a “feasibility study be conducted on an appropriate and equitable but effective and sustainable formula on affiliation fees”.
It also calls for Cosatu to hold less expensive meetings and to use the federation’s investment company to pay for Cosatu activities that affiliates currently pay for.
Despite the financial crisis, this week’s congress saw all delegates receive voluminous congress books hundreds of pages long printed on expensive glossy paper.
Much of this printed material just copies bulky publicly available government reports, including the annual Commission for Employment Equity report.