Co-operatives Amendment Bills merging; International Co-operative Alliance briefing

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Trade and Industry

11 September 2012
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Dr Mutua Waema of Kenya, regional director for the International Co-operative Alliance, addressed the Committee following which it deliberated on the definitions contained in Section 1 of the merged Bill.

Dr Waema said one should view co-operatives as being part of the private sector. They were good creators of wealth but needed to be responsive to the business environment. Emphasis should be placed on primary and secondary co-operatives. Government support should be specific and for the purpose of growing the business, not in the form of continuous aid. Legislation should be a framework under which co-operatives could respond rapidly to facilitate business and co-operatives needed their own regulations to determine the rights and duties of its members. Government’s role should be to ensure that these rights and duties were implemented. Small co-operatives needed more support than bigger co-operatives and he suggested that co-operatives be graded according to their ability to manage themselves and be given technical support accordingly. 
        
The dti law advisor briefed the Committee on the merging of the two Bills, aided by input from Ms Kathy Idensohn, a lecturer in commercial law at UCT. He said that the two Bills had been merged with no re-drafting. Then amendments had been incorporated for consideration in the document marked “E”. The smaller document marked “E1” contained the first 15 clauses of the “E” document and was a work in progress.


Members suggested that the term “economically disadvantaged” in 1(f) be included, while others felt that the Parliament sitting in ten years time could change the legislation if there was no need to include the term “historically disadvantaged” then.

Ms Idensohn said that 1(h) should be amended to reflect the original constitution or as amended from time to time, to avoid confusion as to which constitution was valid. She said the list in 1(i) was too narrow, comprising only race and gender and should reflect all the equality clauses found in the Bill of Rights.

Members said the legislation in 1(i)(b)(iii) should reflect that there should be a quorum when making a majority decision vote.

In 1(i)(c), Ms Idensohn said “equitably” had many meanings in law and the meaning had to be spelt out .

Ms Idensohn said that in 1(i)(e), “reasonable education” could be replaced with “appropriate education”.

Mr Waema said that there was a continual need to educate on the difference between the co-operatives business model and other types. Co-operatives members needed to get involved in their co-operative and so the competencies of managers to do their work had to be improved.

Ms Idensohn said the wording of 1(i)(f) was too onerous and suggested a rephrasing which was agreed to.

Ms Idensohn said it would be useful to add ‘independent reviewer” to indicate who conducted the review in 1(l). In the same sub paragraph the term “juristic person’ needed to be defined as including trusts which were not automatically a juristic person.

Ms Idensohn said that the wording in 1(m) be revised to reflect that compliance be to the legal requirements and its own constitution at the same time.

Ms Idensohn said “ as set out in its constitution” should be added to the end of the definition in 1(s).

Meeting report

International Co-operative Alliance (ICA) briefing
Dr Mutua Waema, ICA Regional Director, said that co-operatives were more sustainable than micro finance institutions in Africa and that the Co-operatives Bank in Kenya was of the three largest in the country. The Co-operatives Bank was the main supplier of liquidity in the country because it was also where most credit unions held their money. He said one should view co-operatives as being part of the private sector and that unlike companies that moved from country to country as economic fortunes swayed, co-operatives remained in a country as it was locally based. NGOs were good distributors but co-operatives were good creators of wealth and therefore needed to be responsive to its business environment. Emphasis should be placed on primary and secondary co-operatives and these should have a short decision making structure. Government support should be specific and for the purpose of growing the business, not in the form of continuous aid. Legislation should be a framework under which co-operatives could respond rapidly to facilitate business and that co-operatives needed their own regulations to determine the rights and duties of its members. Government’s role should be to ensure that these rights and duties were implemented and to this end the examination of the accounting and business planning of the co-operatives were important. In Kenya, the government had given money but more importantly had supervised co-operatives. Small co-operatives needed more support than bigger co-operatives and he suggested that co-operatives be graded according to their ability to manage themselves and be given technical support accordingly. 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
Discussion
The Chairperson asked if only professional auditors be used or could others such as accountants and other people be included.

Mr G Selau asked how credit unions related to co-operatives.

Mr Waema said that in Kenya, credit unions were positioned alongside co-operatives. Co-operatives got loans from credit unions and credit unions pooled the savings of co-operatives in the Co-operatives Bank. He said in Kenya, the accounting for co-operatives had been standardised and so auditing was easy. It was a simplified program and the interim audits were more important as problems could be identified earlier. The auditing was part of the supervisory work of the Government. He said co-operatives should not be seen as a place where one begged from the government, but should be systems driven.   

Mr X Mabasa (ANC) asked for his comments on a co-operatives educational facility.

Mr B Radebe (ANC) asked for his views on juristic persons being part of co-operatives and on proxy votes.

Mr Waema said co-operatives training should be geared towards competency. He said Unisa’s distance learning methods could be used to enable access across the country. He said co-operatives benefited from juristic persons such as trusts, as capital was a big weakness of small co-operatives. Trusts were normally run by qualified management and so were beneficial to co-operatives. From a practical point of view, proxy votes had to be acknowledged but that regular absenteeism should not be condoned otherwise decisions would be taken in which the vote holder had no say.

Ms Kathy Idensohn, a UCT lecturer, said that in SA law, trusts were not juristic persons and one needed to insert a special definition of a juristic person to include trusts.

Merging of the Co-operatives Amendment Bills
Advocate J Strydom, dti law advisor, said that the two Bills had been merged with no re-drafting. Then amendments had been incorporated for consideration in the document marked “E”. The smaller document marked “E1” contained the first 15 clauses of the document and was a work in progress. In Section 1(b) of “E1” the definition of agricultural co-operatives would be deleted as it existed in the principal act.

In the same paragraph under “audit” the words “if any” would be deleted.

Adv Charmaine Van Der Merwe, parliamentary legal advisor, said that the amendment to include who the author of the annual report was still had to be included in the amendments.

Adv A Alberts (FF+) suggested that in 1(f) that the term “economically disadvantaged” be included.

Mr Radebe said that the Parliament sitting in ten years time could change the legislation if there was no need to include the term “historically disadvantaged” then.

Ms Idensohn said that 1(h) should be amended to reflect the original constitution or as amended from time to time, to avoid confusion as to which constitution was valid.

Ms Idensohn said the list in 1(i) was too narrow, comprising only race and gender and should reflect all the equality clauses found in the Bill of Rights.

Ms Idensohn said the word “including” in 1(i)(b) should be replaced with “through”.

Mr Radebe said the legislation in 1(i)(b)(iii) should reflect that there should be a quorum when making a majority decision vote.

Ms Idensohn said Section 14(u) and 14(v) gave the democratic provisions for participation. This would be enough or it could be spelled out under section 1(i)(b)(iii).

In 1(i)(c), Ms Idensohn said “equitably” had many meanings in law and the meaning had to be spelt out .

Mr Mabasa said that what was being sought was that members had to contribute.

Ms Idensohn suggested that it be phrased as “equally and in proportion to the member’s contribution”.

In 1(c)(iii) the wording suggested by Ms Idensohn would be used.

Ms Idensohn said that in 1(i)(e), “reasonable education” could be replaced with “appropriate education”.

Mr Mabasa said the practical element had to be captured.

Mr Waema said that there was a continuous need to educate on the difference between the co-operatives business model and other types. Co-operatives members needed to get involved in their co-operative and so the competencies of managers to do their work had to be improved.

Mr Huang suggested the phrase “appropriate education and practical training” be used.

Ms Idensohn said the wording of 1(i)(f) sounded too onerous and suggested a rephrasing which was agreed to.

Mr Radebe said the intention was to encourage co-operatives to link up with other co-operatives.

Ms Idensohn’s recommended adding “ for the period which they relate ” in 1(k) line 7 .

Ms Idensohn said it would be useful to add ‘independent reviewer” to indicate who conducted the review in 1(l). In the same sub paragraph the term “juristic person’ needed to be defined as including trusts which were not automatically a juristic person. She said the Companies Act could be used as it included trusts as juristic persons.

Ms Idensohn said that the wording in 1(m) be revised to reflect that compliance be to the legal requirements and its own constitution at the same time.

1(n) defined an operational secondary cooperative.

Mr Jeffrey Ndumo, Chief Director of Co-operatives in the dti, said 1(p) reflected that primary co-operatives should have a minimum of five natural members, if a co-operative was established only of juristic persons , the minimum number of members was only two as juristic persons were normally on a stronger footing than natural persons. If a co-operative was a combination of natural and juristic persons then the minimum number of members was five. He said in a policy context, co-operatives were seen as drivers of employment creation.

The Chairperson said this clause would be sent back to the subcommittee for consideration.

Ms Idensohn said “ as set out in its constitution” should be added to the end of the definition in 1(s).

Mr Ndumo said the term “surplus” as used in 1(u) came from the International Co-operative Alliance document as South Africa wanted to comply with international standards. Co-operatives were not like companies and served its members generating a surplus or overcharge.

Mr Waema said surplus was the excess over market price.

The Chairperson said the clause would be reviewed by the subcommittee.
 
Ms Idensohn asked if the definition in 1(w) included primary and secondary co-operatives.

Mr Ndumo replied that it covered only primary co-operatives.

The meeting was adjourned.

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