Business Maverick

LETTER TO THE EDITOR

Multipronged battle for control of Free Market Foundation unfolds by people with unjustified entitlement complex

In October, Business Maverick editor Tim Cohen wrote that the future direction of the Free Market Foundation was unclear and court papers had been filed about the status of an AGM held more than a year ago. Opposing sides accuse each other of underhand tactics. Two leading members of the FMF expand on the battle under way in the NGO.

Tim Cohen reports on the “bad blood” in the Free Market Foundation (FMF) in his balanced DM 168 article, “Free Market Foundation in turmoil as legal battle becomes fractious.”

The direction of the FMF has not changed. The left continues to dislike us because we are too “capitalistic” and “right-wing,” and the right continues to dislike us because we are too “liberal” and “left-wing.” The moderate majority of South Africans, when they hear about our work, are supportive, and endorse the FMF’s value proposition.

The “direction” issue is a red herring for what is in fact happening: a desire by a small group of individuals to hold absolute power over the organisation. If anyone had previously felt that the FMF might outwardly appear to be a cult of personality, this group seeks to solidify and make real what has hitherto been only a perception.

We have written this article to provide readers with an introduction to the FMF and a bird’s-eye view of what has been happening over the past two years.

What and why is the FMF?

The Free Market Foundation was founded in 1975 as a self-consciously classical liberal think tank dedicated to public advocacy for economic and personal liberty.

This was a time when accusations of liberalisme were about as bad as calling someone a kommunis, but the founders of the FMF knew what the FMF continues to appreciate today and has appreciated for five decades: classical liberalism is the necessary ingredient for a prosperous society. Classical liberalism is the philosophy of individual rights, property rights, free markets and free people, the rule of law, a free press, an independent judiciary, non-racialism, and independent critical thinking. All these things are necessary for flourishing communities and individuals.

Since the FMF’s 2020 annual general meeting (AGM) of members that is the flashpoint in much of the current drama, the FMF has held successful, broad-based roundtables on Expropriation Without Compensation and on National Health Insurance. It has awarded its first Free Market Foundation Award. It has continued apace with the handing over of title deeds to families who have been denied these for generations, through its Khaya Lam project.

In the past — as it does now — the FMF has consistently defended and advocated for the rights of street traders to conduct their business free from police brutality. It has advised on policy to free South Africans from the grip of the government-imposed monopoly that is Eskom, and for policies that would put more power back in the hands of the consumer.

It has, throughout its existence, argued for ideas and policies that aim to grow citizens’ wealth, to drive positive, sustainable and transformative growth, and to decrease poorer citizens’ dependence on an uncaring, destructive state. The FMF has prioritised coming up with policy solutions to the crisis of unemployment, consulting widely with the jobless on what they regard as the barrier to their prosperity — invariably, South Africa’s ill-considered labour legislation.

In just the past year, the FMF has established itself as the premier advocate for the implementation of the Africa Continental Free Trade Area (AfCFTA). Where countries are freer to trade and there are fewer tariffs and onerous government-imposed barriers, poor-to-middle-income citizens enjoy greater access to cheaper goods and services. The FMF has raised and detailed major problems with South Africa’s localisation master plans, which will hobble investment and capital formation and force consumers to spend more of their dwindling income on expensive goods.

Heading out of Covid-19, one of the best ways to generate transformative, inclusive growth is for the country to adopt pro-free trade, job-creating policies. This is the classical liberalism for which the FMF has always fought and will continue to fight.

Does this sound like a classical liberal think tank that has lost its way? One might disagree with the premises of classical liberalism, but the FMF has stayed true to its founding mission and will continue to do so, at least for as long as the two of us remain involved.

Recent tribulations in brief

That the FMF has apparently lost its way under ostensibly new management is the false narrative being peddled by a small group of opportunists. Cohen drew public attention to this fact in his piece. The FMF is not fazed, however. No non-profit organisation is without its challenges, and the FMF is no exception. We have worked through and continue to work through these tribulations in a productive fashion. We may share the following details.

In the months leading up to the 2020 AGM, it became clear to the organisation that a group of individuals styling themselves as “Stratcom” had decided to hijack the FMF at the AGM. Some of the members of this group were FMF insiders and some were wealthy outsiders or individuals who had only been involved with the FMF on the periphery. They sought, ultimately, to install a board that would grant them or their favoured persons inside the FMF absolute power and control of the organisation. Up to this time, this was not the case in the FMF — the FMF was subject to the oversight of an independent board and an executive comprising four co-equal executive directors.

Stratcom sought to achieve their ends, first, through removing the requirement that new members pay for the first year of their membership. The FMF is a membership-based organisation, and the obvious assumption of this voluntary association is that those with a legitimate interest in the vision and work of the FMF will be the ones who acquire a stake in its governance. The idea that anyone, even those who seek to do the FMF harm, must be able to determine the direction of the organisation, was obviously preposterous. No entity, left, right, or centre, operates in this fashion.

The removal of paid membership was proposed to the pre-AGM Board, but no resolution to this effect was adopted. In other words, new members still had to pay the nominal R300 annual membership fee in order to vote at the AGM. When this plan did not materialise, the wealthy Stratcom outsiders made their money talk, signing up hundreds of their employees as FMF members, and paying for them. These employees then ostensibly appointed the wealthy outsiders — their bosses — as their proxies, to vote on their behalf at the AGM. This had the absurd result that one nominal FMF member could and did represent upward of 500 votes.

When the FMF followed up with some of these new “members,” some did not know what on earth we were talking about. They had never heard of the FMF before. One can deduce that the vast majority of these hundreds of new “members” were nothing more than a spreadsheet of names used expediently for the AGM, and not individuals with a real interest in joining the voluntary association. Nonetheless, the constitution at the time was vague on various details and the FMF allowed these “spreadsheet members” to be signed up. They could vote at the AGM through their proxies.

When the AGM date came, a wealthy member of Stratcom occupied the FMF premises in cooperation with some insiders, excluding FMF administrative staff from doing what they had been appointed to do by the board, and intimidating anyone who lawfully attempted to disregard their unauthorised instructions. The wealthy member was accompanied by six personal security operators. They behaved themselves well and appeared blameless in the fiasco, but the wealthy member did not behave himself well at all. He attempted intimidation against FMF members and staff while his security looked on.

After much struggle and shouting, the AGM proceedings were allowed to begin. The chairs of the AGM (the Chairperson of the FMF, Ayanda Khumalo, and Deputy Chairperson, Robert Wassenaar) were clearly in control of the meeting, and did not allow the presence of the security operators to intimidate them. The Stratcom delinquents, who were only a handful of individuals in the AGM venue, attempted to derail the process by interrupting the chairs and generally being disruptive. One Stratcom delinquent attempted to unseat the chairperson but was compelled to stand down. No participant, even those on Stratcom, at the time acknowledged the disruptor as the chair.

The chairperson at some point did leave the meeting in disgust, but the FMF Constitution made provision for what must happen in such an event. The deputy chairperson, obviously, was authorised to, and did, take over chairing the AGM.

When it came to voting for the new board of the FMF, the deputy chairperson confirmed a long-standing FMF practice at AGMs of “no negative voting”. Just as at the 2021 municipal elections we cannot vote “against” the ANC or “against” the DA, but only in favour of our preferred party, the same rule applies in the FMF. There were more than 15 board candidates (15 being the maximum size of the board), and FMF members were asked to vote for the candidates they supported. The 15 with the most votes would be the new board of the FMF. These instructions by the deputy chairperson were clear and unequivocal, and were entirely lawful in terms of the FMF constitution.

Once voting had been completed and the AGM was closed (with FMF staff and the deputy chairperson also leaving), a group of “auditors” who were not appointed by the FMF ostensibly “announced” a new FMF “board” consisting of only seven individuals — the Stratcom candidates. The FMF insiders on Stratcom promptly used the FMF’s media resources to announce this false “board” to the world.

Soon after this, behind the scenes, the FMF’s jurists and lawyers, being Martin van Staden (Head of Legal Policy at the time), the late Jacques Jonker (legal analyst), Rex van Schalkwyk (Chairman of the FMF Rule of Law Board and former judge), and Leon Louw (CEO at the time and attorney) gathered to consider the situation. The majority agreed that the “negative voting” was improper and in contravention of the deputy chairperson’s instructions and therefore unlawful. One of the authors here, Martin van Staden, mentioned that there was effectively a coup d’etat in the organisation by the Stratcom group. Many emails and phone calls were exchanged, and discussions held.

It was the constitutional duty of the chairperson of the AGM to announce the results of the election, not of unauthorised “auditors.” This much was clear.

Once the FMF got the situation under control, the chairs of the AGM announced the lawful and present board of the FMF. Because Stratcom announced a false “board” already, this created the ridiculous impression that there were two boards, two chairs, and two deputy chairs, but this is obviously not the case. The board, the only board, includes all Stratcom candidates, since they too were validly elected, but discounts the unlawful “negative votes”. In other words, there was a full and proper “reconciliation” between what is ostensibly two “camps” in the FMF, despite some Stratcom members continuing to spread the falsehood that they sought reconciliation to no avail. Everyone Stratcom wanted on the board, is on the board.

This board, the only board of the FMF, has governed the FMF since September 2020 according to the best standards in corporate governance and the FMF’s classical liberal values. The new chairs, Rex van Schalkwyk and Robert Wassenaar, have been close to the FMF for many years. No FMF member other than a handful of Stratcom disruptors complained about the legitimacy of the board. No special general meeting was called by any dissatisfied member to right any perceived wrongs. No litigation took place.

Now, more than a year after the 2020 AGM, the FMF is being sued. The applicant in this case, never before involved in FMF corporate affairs and having manifested no protest to the legitimacy of the board right after the AGM, suddenly took an interest in this matter.

It was clear following the AGM that the FMF constitution had to be revised. Martin van Staden led a constitutional committee to consider the issue, with the board’s authorisation, for many months. Once this process was completed and the board announced a special general meeting (SGM) to amend the FMF constitution, the applicant sprang into action.

The amendments to the FMF constitution were largely aimed at ensuring the issues that plagued the 2020 AGM did not repeat themselves in 2021 and thereafter. The focus, therefore, was largely on ensuring any new members in the FMF are real members with a real interest in the organisation, and not just names on spreadsheets. Proxy voting was also significantly checked, by providing that a member may only be a proxy for one other member.

Having malicious members show up at an AGM with 500+ proxy forms in their back pocket, of new “members” who signed up in the hours before the AGM, is highly inappropriate and could destroy a values-based organisation like the FMF in a heartbeat. It was only due to strict adherence to procedure and corporate governance standards that the FMF was able to avert this in 2020.

The FMF’s membership remains as open as ever, with necessary safeguards against the chaos unleashed upon this small organisation during the 2020 AGM. The FMF today has more writing fellows than ever before, with topics as diverse as liberalisation of education, red-tape relief for small businesses, and, as Zakes Mthembu recently wrote for the FMF in Politicsweb, the recognition of customary forms of property rights. The only elitism recently displayed at the FMF was efforts by malicious Stratcom members who sought to entrench themselves in absolute power.

The applicant, however, was not happy about the SGM and the proposed constitutional amendments. On the morning of the SGM, the FMF was served with papers indicating that the FMF was being sued, disputing the legitimacy of the 2020-2021 board of the FMF because, ostensibly, there was no lawful chair at the 2020 AGM. This argument has no merit and will not be dealt with here. According to various eyewitness affidavits and the very provisions of the FMF Constitution at the time, it is indisputable that the deputy chairperson properly functioned as chairperson of the AGM.

The applicant wanted the SGM to be postponed on the strength of his ambush litigation. The FMF members at the SGM, however, overwhelmingly voted against this proposal and overwhelmingly approved the amendments to the FMF constitution, which are operative today. The court case is still being pursued, however, but now in a significantly compromised legal position that the applicant must know will not win the day.

It is noteworthy that neither the applicant nor anyone else who is apparently concerned about the so-called “change of direction” of the organisation has taken the time to discuss such matters with the staff, who work in the environment and who have been subjected to much psychological stress, gaslighting and undermining by Stratcom.

What’s next?

The FMF has been defamed by Stratcom, including (with or without their knowledge) the applicant in the litigation against the FMF, in public as having abandoned its roots and is engaged in some kind of elitism. This, of course, appears nowhere in the court documents, where the only, baseless, argument is that there was no valid chair at the AGM.

This is a multipronged attack, aimed exclusively at bestowing absolute control upon persons with an unjustified entitlement complex.

As is so often the case, one must wonder whether nonsensical accusations of racism are next on the agenda (despite the fact that there is no division based on race at the FMF), as has already been implied by some desperate Stratcom members behind the scenes. The FMF has always been, and at least for as long as we are around will remain, an organisation dogmatically committed to nonracialism. The executive committee of the organisation adopted a detailed resolution some months ago on exactly this matter.

Stronger today

These tribulations might have been somewhat shocking to a small NGO like the FMF, but they are hardly exceptional in the world of members-based organisations and companies. The 2020 AGM was a lively and passionate affair, but not, as Stratcom and Stratcom-adjacent people want it to seem, a chaotic earthquake that rocked the foundations of the FMF. The board and staff of the FMF calmly and decisively repaired any damage that was done, reversed any unlawful action taken, and above all, continued with the crucially important public advocacy work that has characterised the FMF since 1975. The FMF emerged stronger from these challenges.

Much has been said regarding the proud history and legacy of the FMF and what it has accomplished. All of that stands to be undone in the pursuit of ego and a desire for complete control. Do not allow disgruntled Stratcom members to distract us from the prize: securing a free future for all South Africans, particularly the marginalised who with every passing day are subjected to new regulations that make them poorer.

Classical liberalism was for the longest time the biggest opponent of the apartheid regime, and it shines today again at the vanguard of freedom advocacy in South Africa. The FMF remains committed to principle above pragmatism, the rule of law above cheap populism and racialism, and liberty above the lust for power. BM/DM

Martin van Staden serves on the Free Market Foundation Rule of Law Board of Advisors and Chris Hattingh is FMF Deputy Director. Both are members of the FMF Executive Committee.

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