Union investment companies acquire private equity skills
TRADE union investment companies have been around 20 years and more since their first establishment in the 1990s and many today have deep private equity and investment skills.
Cosatu’s investment arm is Kopano Ke Matla, and affiliate unions with investment wings include the Chemical, Energy, Paper, Printing, Wood & Allied Workers Union (Ceppwawu); SA Commercial, Catering & Allied Workers Union; National Education, Health & Allied Workers Union; SA Democratic Teachers Union; National Union of Metalworkers of SA (Numsa); National Union of Mineworkers (NUM), Communications Workers Union; Police & Prisons Civil Rights Union; SA Transport & Allied Workers Union; and SA Clothing & Textile Workers Union (Sactwu).
For instance, Sadtu Investment Holdings (Sihold) is the wholly-owned subsidiary of the Sadtu Investment Trust (SIT) – the investment arm of the South African Democratic Teachers Union (Sadtu), founded 1990. Sadtu represents twothirds of all basic education educators in South Africa.
These member educators are the ultimate beneficiaries of Sihold’s investment activities.
Sihold chief executive officer Thami Nompula explains that the investment company “has pursued equitable, responsible investment in the South African economy since it was founded in 1998.
“As it is Sihold’s sole mandate to create wealth for Sadtu and its members, directors do not receive any share options or ownership as compensation.”
Sihold derives income from dividends, rental and referrals and is currently invested in the financial services, media and communications, resources, property and consumer services sectors.
It is focused on portfolio diversification to ensure sustainable growth and effective risk mitigation, and currently maintains a healthy balance between listed and unlisted assets.
“Currently, investments with strong cash generative and high growth prospects are being pursued in an effort to bolster shareholder returns and safeguard portfolio growth,” says Nompula.
“Sihold analyses and evaluates the viability of project or transactional participation by applying the following investment criteria: valuation, deal structure and source of funding; strong earnings and above average return on investment; sustainable margins; unique value proposition with a sustainable competitive advantage; job creation; skills development and transfer; timeline: balancing medium and long-term investments; and ownership, balanced by strong management capa- bility with equity in the business,” says Nompula.
The company’s investment strategy for the medium to long-term, is to seek to diversify its portfolio by actively looking for investment opportunities in the following sectors and industries: property; renewable energy and resources; logistics and supply chain management; education and training; government services; hospitality, leisure and gaming; pharmaceuticals and healthcare; financial services; media, communications and printing; manufacturing; agro-processing; and general services.
“Consideration will be given to sound, lucrative and socially acceptable investment opportunities within lead industries, pending commercial fundamentals and due diligence assessments,” says Nompula.