Edition: May/July 2018


Loud silence of workers’ capital

Fresh political momentum and revitalised optimism offer the chance to revisit old economic challenges with new energy, John Oliphant and Ryan Short* urge.

There is now a focus from all groups to return the economy to higher levels of growth and investment. As we push forward with necessary reforms, it is important to balance the goal of growth with the needs for economic justice and greater inclusivity. Likely to receive emphasis is restructuring of ownerships, especially in favour of workers.

It is easy to forget or deny that black worker ownership is already well under way. Black workers own a sizeable chunk of the JSE-listed equity sector.

Institutional investment (pension funds, insurance funds and investment schemes) now accounts for between 52% to 58% of the JSE’s top 100 shares (the biggest by market capitalisation).

This is by far the largest category of domestic investment, and overwhelmingly represents the interests of black workers.

Workers’ pension funds have 83% black membership. The biggest investor on the JSE, the Government Employees Pension Fund (GEPF), owns nearly 40% of reported assets. These primarily represent the interests of ordinary workers.

Moreover, recent reports commissioned by the JSE and National Treasury find that 20% to 23% of shares in the JSE top 100 are owned by black South Africans; about half directly and about half (between 11% and 13% of JSE) indirectly thorough institutional funds.

If foreign investors are excluded, the proportion owned by black South Africans is higher. This can be a foundation on which to build further transformation in our economy. Yet, given such significant black ownership, there’s a pertinent question: Why aren’t workers using the rights of ownership to push for reform in corporate SA?

Why aren’t workers using the rights of ownership to push for reform in
corporate SA?

Consider the issue of corporate leadership. The Steinhoff debacle again highlights the importance of representative diversity in leadership positions of large companies. Despite progress, few of the boards and senior management teams of big companies are truly representative. Within the JSE’s top 40 companies, roughly 90% of chief executives and 85% of board chairpersons are white men.

Why don’t workers, as owners, press companies for more racially diverse leadership? Why don’t they demand better corporate governance, social and environmental performance; or, for that matter, shared-value business models that could make a meaningful difference in their lives?

The answer lies in the intermediary relationship set out in this diagram above.

  1. Workers collectively hold huge savings in institutional funds.
  2. They delegate oversight of these savings to trustees, half of whom are worker-nominated. Worker trustees are often workers themselves, elected from the shop floor or through a union. They are not professional investors and rarely have access to financial or commercial networks. Many do not have investment, economic or fiduciary training to be an effective trustee.
  3. Consequently, they delegate most decisions to the professional asset-manager industry. This industry is not yet highly transformed. A 2017 survey by 27four Investment Managers found that, of the total R4,7 trillion of savings and investments, only 9% is managed by blackowned asset management firms.
  4. Thus, predominantly white-owned or controlled asset managers retain de facto control over the levers of transformation in corporate SA: deciding where capital should be allocated, who should be appointed to boards, and who should be endorsed for senior executive positions.

White asset managers naturally have networks of trust in finance and commerce that remain largely white. They make appointments from these networks, perpetuating the racial patterns in the listed equity sector.

To be fair, this is not a conspiracy as much as the outcome of a segregated history that makes us more comfortable with those who look, talk and live like us. And there is little incentive for a white fund manager to challenge the status quo if it is not being demanded by clients.

Here are five solutions that will help to break this cycle:


we need to speak more honestly about the benefits and limits of ownership. Ownership does not always create wealth. Nor does it always give control.


worker pension funds could organise and vote collectively on investment mandates for a corporate agenda in which they believe. They could establish a central coordinating body and common guidelines for trustees.


more investment is needed in training and developing a professional class of black worker trustees.


workers’ trustees must hold asset managers to account for the nomination and election of directors and for a meaningful environmental, social and governance (ESG) strategy in every company where they invest. The UN-backed Principles for Responsible Investment already provide a model investment mandate that trustees can use. Funds managers should also be expected to engage actively with companies on their plans to help resolve social challenges.


the Minister of Finance should look at introducing specific regulations aimed at promoting transformation; for example, mandatory savings vehicles such as pension funds could by regulation be required to be managed by financial services providers (FSPs) that reflect SA demographics both by ownership and management.

Finally, to widen the field for senior appointments, black and white business associations could be more proactive in creating platforms for white and black asset managers to identify, meet and build trust with talented black managers and executives.

Worker capital already owns a significant part of the economy but it has not yet grasped the power or responsibility that comes with ownership.

  • Oliphant is chairman of Third Way Investment Partners, All Weather Capital and R H Bophelo; Short is a partner at Genesis Analytics. They write in their personal capacities.