Private Equity: concern in South Africa at Shoprite buyout
The secrecy surrounding the buyout by private equity of South Africa’s Shoprite Checkers and the huge debt burden this has left are causing concern to affiliate SACCAWU.
The union has 35,000 members among Shoprite’s 60,000 workers and a collective agreement - but already it detects a new industrial relations climate in a company where the identity of the ultimate owner or owners is a secret.
Shoprite Checkers is active in 15 African countries and this week commercial workers' unions are meeting in Johannesburg to discuss the impact of the buyout.
The buyout group claim that a broadly-based black economic empowerment partner - a big issue in post apartheid South Africa - but no details of this partner have yet been divulged.
SACCAWU opposed the buyout - announced at the end of last November - and had urged intervention by the Competition Commission.
The buyout cost 13bn rand, financed with 9.5bn rand debt. The union warned that with de-listing from the Johannesburg Stock Exchange it will not now “be easy for workers to access the financial performance of the company, remuneration packages, salaries, perks and bonuses of its executives”.
UNI’s Philip Jennings met SACCAWU leaders during a visit to South Africa this week and is advising on a strategy for protecting Shoprite workers under the new owners.
“Private equity is a growing issue around the world,” said Philip Jennings. “We have to drive them out from the shadows where they prefer to operate and tackle issues of accountability, job security and economic stability.
“We are concerned about corporate governance being driven underground, where broader concerns other than shareholder value disappear out of the window.”
In a letter to the Business Day, South Africa he said:
“Debt levels have reached dangerously high levels. When economic circumstances change, we are going to see spectacular corporate failures.”
“As a global union we are concerned about job security. The private equity buyout of Shoprite has occurred with no reference to jobs. Some individuals stand to become fabulously wealthy, leaving the rest behind.”
“All of this requires a vigorous public debate and why start in the South African Parliament?”
One element of the Shoprite deal is the involvement of senior management in owning equity in the restructured business.
In his letter to Business Day Philip Jennings warns, “there are ethical issues emerging form management buyouts – danger of collusion and conflicts of interest”.