Casualties of Cola

Outsourcing, exploitation and the new reality of work

By Richard Poplak, Diana Neille, Sumeya Gasa and Shaun Swingler. Illustrations by Moses Mkhondo

1 Outsourced

Above a faded couch in Moses Mkhondo’s makeshift home hangs a framed tableau of the perfect South African village. The collage was assembled by Mkhondo himself, back when he made a living driving trucks filled with Coca-Cola to spaza shops and taverns and corner cafes throughout Johannesburg’s East Rand. The collage is meant to represent Mkhondo’s ideal world: a bustling middle-class town, centred around a Coca-Cola depot from which great trucks ply the roads, dispensing bottled joy to a booming country.

For 30 years, Mkhondo could pretend to himself that he lived in this world. In early 2014 he was forced to stop pretending.

Long before he understood that he’d been outsourced, Moses Mkhondo was one of Coca-Cola’s star drivers, a model employee who won prizes and was sent on an international trip for exceeding his performance targets. Born in Alexandra in 1959, he began his career in 1984 as a crewman at Amalgamated Beverage Industries (ABI), South Africa’s largest bottler of Coca-Cola and other major soft drink brands.

Twenty years later, Mkhondo became an exemplar of an affirmative action policy that made local and international headlines—a black economic empowerment (BEE) initiative that would, for better or for worse, come to define the future of work in the New South Africa. ABI, along with the company that would come to fully own it, the beer giant SABMiller plc, dubbed the programme “owner-driver” (OD), and its intention was to transform one-time employees into prosperous, independent businessmen. OD helped earn the companies a host of social responsibility awards, and burnished their ironclad reputations as the Rainbow Nation’s most upstanding corporate citizens.

Today, however, Moses Mkhondo lives in a hastily built home on the fringes of Heidelberg, not merely broke but catastrophically in debt. He, his family, and the thousands of South Africans caught in the OD scheme’s steady implosion are trying to make sense of what went so wrong. Andries Nkome, the attorney that represented Lonmin miners after the 2012 Marikana Massacre, is now assisting 150 former owner-drivers in their bid to sue ABI and SABMiller for losses amounting to over R6 billion. They are facing off against a vast corporate entity that is soon to become even bigger—if the single largest acquisition in the history of the London Stock Exchange passes regulatory muster, in 2016 SABMiller will join Anheuser-Busch InBev at their headquarters in Belgium, as part of a $350 billion multinational with a 29 percent market share of the planet’s beer consumption.

On trial is not just SABMiller’s local record as an engine of empowerment, but the very concept of outsourcing and casualisation in a country with enormous and unsustainable divisions between rich and poor. Those pursuing the matter intend it to be a landmark case, a precedent-setter that helps redefine the nature of work in South Africa. And this may only be the beginning—Nkome has initiated proceedings that, if successful, will prove that SABMiller’s vaunted BEE brainchild was, in the words of Shaun Dlanjwa, an Economic Freedom Fighters (EFF) ward secretary and the liaison between former drivers and their legal representatives, “less a scheme than a scam.”

“Make no mistake, this case is huge,” said Dlanjwa. “You watch. It’s going to be bigger than Marikana.”

Twelve former ABI owner-drivers, their wives and widows share their common experiences of the scheme & how it subsequently shaped their lives.

***

It wasn’t always this way. In the 1980s, Moses Mkhondo loved working at ABI, and ABI appeared to love him back. “It was a good place,” he told Daily Maverick Chronicle during a series of interviews in his cramped Heidelberg home. ABI, in order to ensure that Coca-Cola was as lightly tarred by apartheid’s brush as possible, adopted a number of progressive employment measures at their bottling plants. Mkhondo was paid R100 a week, almost R40 more than the wage at comparable companies. “At Christmas,” he said, “they would give us presents, bonuses, groceries and packs of cold-drinks. It was a very top company.”

In 1994, shortly after the euphoria of the first general elections had subsided, Mkhondo was sent to Chamdor, Roodepoort, to earn his truck driver’s licence. During apartheid, long haul driving had typically been the preserve of white males. Like many big companies, ABI understood that they would need to change the racial metrics of their workforce if they hoped to stay ahead of looming affirmative action regulation.

Mkhondo quickly earned his Code 14 licence and was promoted to full-time driver. After winning an intra-company driving competition in 1998, he was handed the keys to a brand new truck with chrome finishing and a CB radio; he christened the truck “Bozzo.” According to Mkhondo, the managers were polite and solicitous. The pay, which amounted to R7000 a month, came with benefits and sick leave and paid time off, but was not quite enough to afford the home he’d bought for his wife and three children in Tembisa. In 2003, Mkhondo and dozens of his colleagues were introduced to a new initiative, passed down from minority shareholder South African Breweries. “They told us that OD was a good thing and then it will make our lives easier,” Mkhondo said. “They explained that there’s more money in it. So then I got attracted to it, because I needed enough to pay my bond and take my kids to school.”

***

SAB had borrowed the OD concept from American companies like Arkansas-based Tyson Foods, which had developed “team driving” programmes in order to shift what would traditionally be the most expensive and burdensome item on the budget—labour costs—into the more manageable “services” category. By transforming employees into standalone business contractors, these programmes had the added benefit of chipping away at union power and eliminating the strikes that had traditionally disrupted delivery schedules.

In South Africa, OD schemes had a third and vital function: black economic empowerment. It was the perfect gambit: the new programme would not only appease regulators, but would also function as a comprehensive public relations campaign. OD would allow ABI to calve off a portion of its distribution network to hundreds of BEE-rated companies, while Coca-Cola, once the apartheid regime’s mixer of choice, would surf a wave of good cheer into the new dispensation, with the Department of Trade and Industry (DTI) jumping in and giving them points for complying with the laws of the land. ABI’s acting managing director, Velaphi Ratshefola, grew up homeless in Soweto, and he made a strong case for ABI’s commitment to black upward mobility.

According to De Wet Schutte, a SABMiller analyst at the equity research and trading firm Avior Capital Markets, the scheme proved immensely successful for both ABI and its parent company. “Apart from the public relations aspect of it, OD is very important because it essentially outsources a core function of the beverage market—distribution. They have to be able to transport a quantity of heavy stuff across the country on a daily basis with extreme efficiency,” said Schutte. “And the clincher is that you get your own people to buy into that strategy, because they own their own business, they share in the profits of the business, and you get to keep the government and the politicians happy as well.”

Politicians have been very happy with SABMiller plc indeed. The company is a donor to the Nelson Mandela Children’s Fund and other high end causes, while deputy president Cyril Ramaphosa once sat on a board that has long provided a comfortable sinecure for African National Congress (ANC) bigwigs. In 2013 alone, the company contributed R9 million to the six largest political parties in accordance to their representation in the National Assembly—part of an “on-going commitment to encourage the development of the South African democratic political system” that, by its nature, favours the ANC. ABI’s annual sales of 320 million cases of soft drink helped SABMiller generate a staggering 3.7 percent of South Africa’s gross national product in 2009. The company is, and always has been, beyond influential.

The owner-driver scheme has helped make it all but untouchable.

***

For Moses Mkhondo, it began rather badly. He remembers how, in April 2003, he and more than a dozen other employees were summoned to the ABI training room, asked to resign, and handed a 66-page contract with seven appendices. “We were not given enough time to take the contract home, or to get lawyers,” claimed Mkhondo, an assertion backed up by 40 current and former ODs interviewed over the course of this investigation. The respect that had once been a hallmark of employer/employee relations had curdled. “The managers were rude to us,” said Mkhondo. “They insisted we must sign right away. When they talked to us, they didn’t beg. They told us ‘sign, or else you lose your contract.’”

Photo Moses Mkhondo outside the house he built in Heidelberg. He had to sell his Thembisa home to pay off some of the debt he accrued as an owner-driver. Photo credit: Shaun Swingler.

In an instant, Mkhondo and his colleagues had lost their benefits and, unwittingly, their collective bargaining rights. “We became enemies of the people,” said a former driver named Thomas Mashitwa. “We were now just ex-members of the union, siding with management.”

Mkhondo’s fellow newly-minted entrepreneurs were given a R25,000 start-up lump sum (which would later become a monthly stipend of about R2,100), and leased company trucks for phase one of their contractual obligations. They were assigned a business advisor—in Mkhondo’s case, Mike Melnick of M Melnick Financial Services—paid for out of their stipend, who opened business bank accounts and ran the books on their behalf.

At first, the programme appeared to function as promised. “My husband would come home carrying R180,000 every month,” said Moipone Mantshu, whose husband Samuel Ramokongoane worked for ABI as an OD for 17 years before his death. This was an astonishing sum by any measure, but there were numerous hidden expenses embedded in the contract, along with clauses that allowed ABI to move the compensation goalposts without outside vetting or consultation.

“The money we were getting was much better than I was earning as a company driver,” Mkhondo explained. “But then I must pay my crews. And then the fuel, and also maintenance on the truck, because ABI wanted us to maintain their trailers.”

After SABMiller acquired 100 percent of ABI in late 2004, the company’s culture darkened even further. “When SABMiller took over, that’s when the salary dropped,” said Moipone Mantshu. ABI was contractually allowed to move the compensation goalposts. “You know, if my husband was earning R180,000, then it would be R74,000, then the next month R54,000, and then the next R35,000.” Where ABI once paid per case, which worked out to roughly R3,000 a load, it was soon paying between R300 and R1000 per load. At one load a day, the returns were barely worth it.

“We were just working to pay the diesel,” said Mkhondo.

As the OD scheme became institutionalised, ABI began to outsource other elements of its delivery and distribution infrastructure. In 2011, Mkhondo was approached by a manager and asked to run what ABI termed a “Marketing and Logistics Partner”, or MLP—a small warehouse plugged into the supply chain. Mkhondo’s MLP was in Tswelopele, Olifantsfontein, close to ABI’s head office, and he started out in November 2011 with three crewmembers and five bakkies, servicing 300 customers throughout the sub-region.

According to Mkhondo and others who were offered similar opportunities, the process was booby-trapped with inconsistencies. For one thing, the Tswelopele MLP was little more than a garage. For another, the billing system did not line up with ABI’s accounting software. “The MLP system was not the same as the ABI system,” Mkhondo explained, “and we as ODs could pay huge money for this problem.” After month-end stock-taking in June 2013, Mkhondo complained to his ABI representative that he had not been paid for 2000 cases, a shortfall amounting to roughly R60,000. His manager told him that because the systems didn’t line up, stock was bound to go errant, and that the MLP operator was ultimately responsible for the shortfall.

In October 2013 the wires became tangled even further, with ABI insisting that Mkhondo was R340,000 in arrears. He nonetheless won an in-house competition for beating all of his performance targets, and was sent to Brazil to watch a FIFA World Cup qualifier match as a reward. When he returned in November, the shortfall had ballooned to R747,000. Although the word was never uttered, Mkhondo understood that he was now branded a thief. He and his ABI representative continued to investigate where the leak might be emanating from. On January 7, 2014, without warning, Mkhondo received a termination letter, effective immediately.

Strangely, the letter made no mention of the missing stock, but invoked clause 15.2 of his contract, claiming that his delivery standard was almost 30 percent below the required 95 percent—a surreal charge considering he’d just returned from a trip rewarding him for exactly the opposite.

He was evicted from the MLP the very same day.

***

This inaugural Daily Maverick Chronicle investigation tells the story of how SABMiller and its soft drink subsidiary ABI contractually transformed employees into service providers and then were able to terminate their contracts without any concession to South Africa’s comprehensive labour laws. It’s the story of how, under the guise of BEE and its successor B-BBEE, massive multinationals have increased their profits while eliminating their most troublesome liability—labour. And it’s the story of how outsourcing and various iterations of labour brokering have become the reigning phenomenon of the South African workforce, insofar as a country with a 40 percent real unemployment rate can be described as a having a “workforce” at all.

“OD was not empowerment, it was de-empowerment,” said Moses Mkhondo. The way he sees it, the scheme has destroyed his life. He lost his house in Tembisa and was forced to sell his trucks in order to build a new place on the edges of a highway in Heidelberg. There is no money for school fees, and no money for food. “One day, I thought I should get a gun, kill the whole family and kill myself,” he said. “So now I’m praying—everyday I’m praying, ‘Please God, help me not to do these horrible things like ABI did to us.’ It’s very hard. We don’t have bread now.”

The only mementos that remain after a 30-year career are his awards, his termination papers, and the painting of an ideal world that hangs above his couch.