Integrated Strategy on Promotion of Cooperatives: Department of Trade & Industry briefing

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

08 February 2011
Chairperson: Mr D Gamede (ANC, KwaZulu-Natal)
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Meeting Summary

The Department of Trade and Industry briefed the Committee on its Integrated Strategy on the Promotion of Cooperatives (coops). The briefing outlined the background to coops, highlighting their importance as a global driver for economic growth. International best practice was described, with a situational analysis of the position in South Africa, and the support programmes in place. The Department of Trade and Industry (dti) aimed to grow all forms of coops and increase their contribution to South Africa's Gross Domestic Profit, growth rate, social impact and economic transformation, to use them to create decent employment and reduce poverty, and to increase savings and investments whilst bolstering their financial access and support. Coops could provide an effective vehicle for rural and peri-urban development and economic improvement of marginalised groups. The position in some other countries was outlined. A sector and provincial spread of coops in South Africa was set out, showing the agricultural coops in the majority. A baseline study had been done on survival rates of coops and their contributions to gross domestic product. Because coops did not operate in a vacuum, they faced several challenges, which included lack of coordination, lack of statistics, poor access to registration and finance and business infrastructure, as well as management and organisational structure difficulties. There was still lack of awareness. It was necessary that all spheres of government, particularly local government, align to an integrated strategy, and that partnerships with civil society organisations be developed. The dti’s approach was based on four main pillars, which emphasised the need for cross-cutting programmes, coordination, monitoring and evaluation and information.

Several Members expressed their concern that outdated statistics were used and queried whether there was not a strategy for obtaining updated information, particularly from reports tabled to the Companies and Intellectual Property Registration Office. Members questioned why details had not been given of the position in some countries, nor had detailed those countries where coops had been a failure. A Member questioned whether coops might not be acting uncompetitively. Another Member gave her experiences of working with coops, but urged that there should be closer monitoring to ensure that they did continue, and urged more programmes of capacity building evenly spread throughout the country. Members also noted the limited access to finance, and questioned whether the Cooperatives Development Agency was a positive move, in light of the failure of many other development agencies at local government level. Members noted that agencies were to be rationalised, and that the dti believed that one agency should be developed solely to coops and had already engaged with National Treasury for funding. Members also noted the need for better awareness, and urged that the Department should not lose its focus. Whilst some Members were not in favour of coops, they had formed an important part of South Africa’s economic history and rural development, and more engagement was needed on their success. Members thought that this might be a useful subject for a study tour, possibly to Kenya.

Meeting report

Integrated Strategy on the Promotion of Cooperatives: Department of Trade and Industry (dti) briefing
Mr Jeffrey Ndumo, Chief Director: Cooperatives, Department of Trade and Industry, presented the Integrated Strategy on the Promotion of Cooperatives of the Department of Trade and Industry (dti).

He outlined the background to cooperatives (coops) and highlighted their importance as a global driver for economic growth. He also indicated the international best practice around coops. He analysed the situation around cooperatives in South Africa, the strategic principles, and the support programmes, setting out the institutional arrangements as well as strategic approaches for promoting coops in South Africa.

Mr Ndumo then highlighted the mission and vision of the dti in regard to coops (see attached presentation for details) and the objectives were also highlighted. These included growing all forms of coops and increasing their contribution to South Africa's Gross Domestic Profit (GDP), growth rate, social impact and economic transformation. Other objectives pertained to the creation of decent employment as well as the reduction of poverty via income-generating activities. The dti also wanted to increase savings and investment via the Integrated Strategy, and to give support to coops through banks and financial services.

Another objective was to support the creation of the vertical structure of coops as well as the conducting of awareness campaigns. The dti also said that it wanted to promote coops as an effective vehicle contributing to the development of rural and peri-urban areas, as well as the economic improvement of black people, women, the youth and people with disabilities.

Mr Ndumo said that coops were a highly successful business model and very relevant for South Africa.

He added that international coops movements represented 800 members. With regards to coops as a global driver of economic growth, he said that coops in Germany and France had created 440 000 and 700 000 jobs respectively. He also noted the position with Kenyan coops, and said that in the United States of America (USA), more than 100 million people were members of coops.

He tabled international best practices for Canada, Spain, Kenya, Bangladesh, India and Italy. He noted that 2005-2009 had been the boom period for coops, in terms of  numbers. He tabled an overall provincial picture of registered coops to the Committee. He noted that the total number of coops by March 2009 had been 22 619 and that it had been spread provincially. The majority of registered coops were situated in Kwa-Zulu Natal (38%) with Eastern Cape at 19% and Gauteng at 10%. A comparison of the sector diversification of registered coops was also provided, showing the agricultural sector top of the list with 25%.

He tabled a comparative analysis of registered coops in the Companies and Intellectual Property Registration Office (CIPRO) and the dti baseline study. The baseline study related to the mortality and survival rates of coops. He also tabled the sector analysis of the contribution of coops to the Gross Domestic Profit (GDP).

Mr Ndumo outlined that a number of supportive initiatives had taken place relating to coops in the public sector. It must be remembered that coops did not operate in a vacuum. There were several challenges, including the challenge to the government of inadequate economic and social impact statistics on coops. Coordination was also sometimes a problem. Another issue was the accessibility of coop registration to the local communities. In the past, there had been very little promotion, and consequently very little awareness around coops. Coops further faced limited access to technology, finance and business infrastructure. There were management and organisational structure challenges, as well as problems around the market.

Mr Ndumo stressed that it was necessary that national, provincial and, particularly, local government should align to one integrated national coops strategy. Government aimed to partner with the cooperatives movement, community based organisations (CBOs) and non-governmental organisations (NGOs).

Mr Ndumo noted that the coops strategy catered to the entire coops beneficiary base. This included women, children and people with disabilities and special geographical areas.

He tabled the supported coop types that were promoting the value chain, as well as the proposed strategic approach for the promotion of coops in South Africa. This was based on four main pillars. In relation to the need for cross-cutting programmes, Mr Ndumo noted that research, monitoring and evaluation were to be conducted by the dti and CIPRO. In relation to coordination, monitoring and evaluation, Mr Ndumo noted that the strategy had proposed three key performance reporting mechanisms. These in turn pertained to the Annual Cooperative Review Report, the three-year Mid-term Review Report for 2011 and the Ten Year Comprehensive Review Report for 2009-2019. A coops information communication system was also noted, for the provision of information on coops development. An action plan was outlined to the Committee (see attached presentation).

Mr RA Lees (DA, KwaZulu Natal) said that he was saddened at all the plans to put together something which had been a failure in South Africa, the former Union of Soviet Socialist Republics and Cuba.

Mr Lees also noted, with some concern, that statistics used in the presentation were out of date. Although statistics had been given for the United States, Germany and France, the presentation had not really included those countries. He added that the presentation had expanded on coops in countries such as Kenya and Canada, but the details regarding Germany and its coops had not been included in the presentation.

Mr Sipho Zikode, Acting Deputy Director General: Enterprise Development, Department of Trade and Industry, said that the dti had looked at the both the developed world and the developing world in relation to coops. The dti was benchmarking efforts in South Africa against those efforts that had been made in countries with similar types of cooperatives and similar stages of development.

Mr Lees noted that there had been constant reference to “co-operation” in the presentation and note his concern about uncompetitive behavior that could cost the taxpayer money.

Mr Ndumo said that coops targeted vulnerable communities and people who were being marginalised. For these reasons, he did not think that coops were a threat to competition in the industry.

Mr Lees noted again that the statistics being presented were more than two years old. He said that surely the dti must have some way of getting and presenting more updated statistics. He sought clarity on whether coops needed to submit an annual report to CIPRO.

Mr Ndumo noted that it was very costly for CIPRO to do follow ups. He noted that coops had to provide an annual report to CIPRO, including the annual returns that had been generated. He said that this report would not just relate to financial issues.

Mr Lees also displayed concern as to why the presentation had included the term “tiers of government” as opposed to “spheres of government”.

Mr Zikode said that the use of this term would be corrected.

Mr Ndumo added that the use of the term “tiers” was a genuine error, and there was no political connotation behind it. This mistake would be rectified.

Ms B Abrahams (DA, Gauteng) felt that this presentation was positive one and that, as a previous Ward Councillor, she had personal experience of working with coops in the past. She said that some of the coops, in her experience, would train and be successful for a month or so, but that thereafter no effective monitoring would take place. She implored the dti to look into an effective monitoring system.

Mr Zikode said that the dti realised that the coops incentive scheme had been based solely on the submissions of business plans, and agreed that there had not been much by way of detailed report-back after they had been operating a while. The dti was now, however, in the process of developing a monitoring mechanism to ensure proper monitoring.

Ms Abrahams noted that the vulnerable groups in South Africa, such as people with disabilities, were extremely marginalised. She noted that in regard to capacity building, there were only ten programmes, and said that more were needed. She sought clarity as to how these programmes would be spread throughout the country.

Ms E Van Lingen (DA, Eastern Cape) also expressed her disappointment with the outdated statistics that had been used in the presentation. She made reference to the limited access to finance and wanted to know how the dti wanted to structure such access via the banks. She pointed out that most  banks looked largely at what could be put up as collateral security.

Ms van Lingen was not in favour of the Cooperatives Development Agency. She felt that there were too many development agencies in municipalities already that did not work.

Mr Ndumo said that at the moment Government was looking to rationalise the agencies. He made reference to Kenya and Bangladesh, and said that the assistance those countries were giving to the development of coops was enormous. The dti in South Africa had a chief directorate that dealt with the development of coops, whilst sister countries had whole departments to do so. He said that South Africa currently had very little capacity for coops. He added that engagement with the provinces had shown that usually there was only one person responsible for driving coops and that some of them also had to juggle their time between attending to small businesses and coops. The dti had therefore believed that there was a need for an agency that was solely dedicated to coops. The dti had already engaged with the National Treasury (NT) on a possible budget. The dti was also looking at how the Department could access money from the Lotto. He added that the dti was not intending to establish a whole new infrastructure, but was hoping to use the existing infrastructure.

Mr Zikode agreed that there was very little capacity at all. He added that the dti, in conjunction with the University of Johannesburg, had developed a programme where officials from municipalities could be trained on issues of economic development. The dti had put aside a budget for the sole purpose of the training.

Ms Van Lingen noted that a number of jobs would have to be created to cater for the Cooperatives Tribunal.

Ms M Dikgale (ANC, Limpopo Province) sought clarity on the term “decent jobs” that had been used in the presentation.

Ms Van Lingen added that the research seemed to indicate that India had the largest number of coops. She suggested that the rural people in South Africa could perhaps be sent to India to learn about coops. That might reduce the mortality rate of coops and their projects in South Africa.

Mr A Nyambi (ANC, Mpumalanga) questioned why the dti was still viewing the promotion of and awareness of coops as a challenge.

Mr Ndumo noted that the dti wanted to embark on massive awareness campaigns. He stressed that  more awareness was necessary.

Mr K Sinclair (COPE, Northern Cape) noted that the presentation had offered a new approach to the challenges. He added that the dti must be careful not to lose its focus and still to engage with the real issues as it embarked on the turnaround strategy.

Mr Sinclair noted that the issues would be debated in the House and that the interactions would be formalised in the Government Gazette. He said that it was necessary to remember that in the past, cooperatives had formed a large part of the economic success story in South Africa. This had been at a time when the imperialist British government had oppressed the Afrikaaners. There had been a deliberate attempt to get the Afrikaners out of the trenches of poverty, and coops had played an instrumental role in achieving that aim. Whilst he heard the view of Mr Lees, he urged Members not to ignore the history of the coops. The development of rural South Africa was also built on a strategy of having effective coops.

Mr Sinclair agreed with Ms Van Lingen that the commercial banks were not developmental banks. He added that part of the success of the Indian cooperatives had been the development of a bank specifically to deal with coop issues. There needed to be more engagement regarding the success stories of coops, and suggested that this might be something to be studied usefully during a study tour.

The Chairperson suggested that it might be appropriate to undertake a study tour to Kenya.

The meet
ing was adjourned.


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