Cooperatives and Community Economic Development: ICCED model

Small Business Development

07 November 2018
Chairperson: Mr X Mabasa and Mr N Capa (ANC)
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Meeting Summary

The Chairperson of the Portfolio Committee on Small Business Development, Ms Ruth Bhengu, briefed the Committee on the Cooperatives Based Community Economic Development Model. The Committee also received briefings from ICCED on the Model and its implementation plan. An advisor to the Gauteng Premier gave a briefing on the prospects for a co-operative development approach in South Africa, followed by a briefing by DGRV. Due to time constraints discussion was deferred to the next meeting.
 
 

Meeting report

The Chairperson said that since she is the one who is going to present the Cooperatives Based Community Economic Development Model, she will step aside from chairing the meeting. Mr Mabasa was asked to chair.

Mr X Mabasa (ANC) thanked the Chairperson for the opportunity. He noted that at 12pm he had to attend a Chief Whips meeting and would hand over to Mr Capa.

Cooperatives Based Community Economic Development Model
Ms Ruth Bhengu, Chairperson: Portfolio Committee on Small Business Development, said that this model is implemented by the Institute for Cooperatives and Community Economic Development (ICCED) for adoption and support by stakeholders and individuals who believe that South Africa should be transformed into a mixed economic system driven by three pillars which include:
▪ State Owned Enterprises
▪ Privately Owned Enterprises
▪ Community/Worker Owned Enterprises who use the concept of cooperatives to organise themselves and subscribe to values and principles of cooperatives to manage enterprises and distribute profits.

The purpose of the presentation is:
▪ To enable the Portfolio Committee to relook at the Cooperatives Based Community Economic Development Model again having been to Mondragon in Spain to see whether the model has elements of Mondragon and also relates to South African conditions.
▪ To give an opportunity to the Department of Small Business Development (DSBD) to also look at the model and decide to support or reject it.
▪ To afford both the Portfolio Committee and DSBD an opportunity to understand ICCED and how ICCED is implementing the model.
▪ The model is supported in principle by three international bodies of cooperatives and one International Training Institute.

What does the Cooperatives Based Community Economic Development Model means to South Africa?
▪ It is a politically informed intervention in the economy aimed at reducing exploitation of communities and workers by capitalists.
▪ It is informed by resolutions of the ANC conferences.
▪ South Africa cannot be allowed to have a welfaristic state for the poor dependant on government handouts on one hand and a developmental state for a few filthy rich capitalists on the other hand.
▪ Prof Ben Turok has written about this in his book Wealth doesn’t trickle Down – The Case for a Developmental State in South Africa.
▪ President Kwame Nkrumah also wrote about the phase South Africa is at in his book - Race and Class Struggle in Africa.
▪ This Model is about justice and democracy in the economy.

Relevance of the model to South African conditions:
▪ It is based on existing government policies and intervention programmes on poverty.
▪ It facilitates strategic alignment of government policies located in different departments.
▪ It has a potential to create permanent exit of poor families from social grant and indigent registers of municipalities thereby increasing revenue base of municipalities.
▪ A child born in a RDP house would not grow up to join the queue of RDP beneficiaries or mobilize communities to protest and demand more free services from government.

▪ It is based on cooperatives found in a particular area preferable at a ward level or a specific sector.
(Thathane Cooperatives are 17 cooperatives in ward 10 of Ubuhlebezwe Municipality all involved in agriculture; King Grange and King of Midlands are at sector level, the taxi industry).
▪ It is also based on existing assets at community level including;
natural resources such the sun, wind, trees; human resources; under utilised facilities found in communities such abandoned and dilapidated buildings which could be renovated; churches with land and unused buildings; closed down schools; properties belonging to government.

The model attracts investment directly to communities and knowledge transfer. International support to build capacity in South Africa would be derived from international cooperatives movements, training institutions and NGOs. Ms Bhengu noted from whom ICCED is already getting support.

Ms Bhengu spoke about the relevance of the model to government policies, addressed key features of the model and made historical comparisons between Mondragon and South Africa. She proposed a way forward to implement the model with support from DSBD (see document).

Ms Bhengu noted that it had taken 10 years to develop the model from 2006 to 2016. It was improved after every consultative session with a number of people and organisations. It has blind spots like all other strategic interventions, however it had now reached a point where it was worth implementing and addressing areas of improvement as they move forward. The Departments of Human Settlements and Rural Development have shown interest and identified five pilot projects for the establishment of sustainable communities by aligning development of Housing Cooperatives (RDP houses) to the One Household, One Hectare programme of DRDLR. Every journey starts with one step. They should take that one step.

Institute for Cooperatives and Community Economic Development (ICCED) briefing
Mr Ivan Samdaan, Executive Director: ICCED, said ICCED is an NGO that facilitates active participation of underdeveloped communities in the economy by creating jobs and reducing dependency on government social grants and free services. It was established in 2016. ICCED focuses on stakeholder management that leads to sustainable community development through co-ops. Their motto is they are not in the business of setting up co-operatives for communities, but rather to develop communities through co-ops.

Mr Samdaan spoke about strategic intent and proposed strategic tool. Their developmental approach is asset-based community development (ABCD). The ABCD is presented as an alternative to needs-based approaches to development. Their strategic goal is to ensure an understanding of the concept of cooperatives by all so that resources deployed by government and others can be use effectively to reduce poverty; Ensure the development of successful cooperatives and use those cooperatives as effective tools for facilitating establishment of community owned enterprises (COEs); workers owned enterprises (WOEs); community finance institutions and co-operative banks, thereby developing sustainable communities as well as transforming South Africa into a Mixed Economic System

What informed their strategy?
▪ 88% failure rate of cooperatives – despite the large financial investment by government into the sector;
▪ The narrow perspective adopted by both government and communities in regarding co-ops as a tool to address poverty and unemployment (and its related causes);
▪ Lack of utilizing the legislative platforms created by our government to encourage and motivate communities to mobilize themselves into co-ops.

What informed the establishment of ICCED?
▪ Government support services which are not addressing felt needs of cooperatives and communities who want to use the concept of cooperatives to develop the community socially and economically.
▪ Failure to align development of cooperatives to skills development programmes, service delivery challenges and poverty reduction interventions of government.

Mr Samdaan explained exactly what ICCED does to change this situation, the expected end results and objectives. Their strategic partners are government departments and state owned enterprises (SOEs) which have a responsibility to facilitate participation of communities in their own development using the CBCED Model and ABCD Model. They also work with educational and research institutions collaborate/partnership with the aim of developing, relevant, appropriate community-based education and training programmes, material and research outputs. They were exploring co-funding/resourcing opportunities with the private sector and with technologies which could be used by communities to facilitate their own development thereby facilitating community participation in the Fourth Industrial Revolution. They also work with NGOs, CBOs, FBOs and traditional leaders.

Mr Samdaan listed the target groups for their programmes which include existing cooperatives who are not productive especially those involved in agriculture, food processing and manufacturing, as well as land claim beneficiaries who are not using their land productively. He explained the value-add of supporting cooperatives as a tool for community economic development and noted current interventions include:
▪ King of Midlands Co-operative: Tyre Fitment, Filling Station and King Grange Co-operative Bank – a Taxi Association initiative supported by the DSBD and Umsunduzi Municipality.
▪ Sustainable Communities Project: partnering Department of Human Settlements and Rural Dev. and Land Reform – assist in facilitating housing, agriculture and renewable energy generation co-ops
▪ Thathane Secondary Co-op: supported by DSBD and Ubuhlebezwe Municipality – focussing on skills development, high value crop, dairy and fish farming.

Co-operative development approaches in South Africa - what are prospects?
Mr Tebogo Phadu, Adviser to Gauteng Premier, said that in terms of identity co-operatives are an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise, organised and operated according to co-operative principles (Co-operatives Act of 2005 as amended).
 
He listed the Co-operative Principles. Co-ops address social needs and aspirations (employment, housing, food etc) through an enterprise model, but they are not a panacea to all socio-economic problems. They must be understood in the context of a mixed economy – where public, private and social sectors play their appropriate roles. Co-ops are about collective-self empowerment (for example education and training) of communities and workers. They have collective ownership and democratically control their enterprises: They are about community-and worker based development, linking enterprise with a territory and people working in a locality (not run-away investors)

Some key lessons to be learned from Mondragon include:
▪ Consider co-operative development strategy as a system approach – not as isolated enterprises, but linked economically to each other (not just representation linkages).
▪ Self-supporting institutions (education, training and technical support services) of the sector based on co-op model ( as opposed to externally driven support institutions (donor or state);
▪ Central and active role of Co-op finance ( banking and insurance) playing central role – financially backing development of worker-owned co-op enterprises, but in turn these co-ops backing their financial institutions.

He suggested sectoral strategies are lacking – for instance, there is no specific strategy for worker co-ops – co-ops formed to address unemployed – making up 95% of all co-ops that are operational

Mr Phadu noted the triple crisis facing co-ops:
▪ A crisis of identity: Most co-operatives exist in name only, not by nature and purpose. The various country co-operative registries are yet to clean out this mess.
▪ A crisis of environment: the legal, institutional and administrative context continues to prevent, not support, the emergence of genuine, self-managed growth-oriented co-operatives.
▪ A crisis of management: Most of the existing co-operatives are unable to survive without subsidies or grants.

Yet he believed the potential remains great and outlined the gains.

Mr Phadu said that there is therefore a need for a mapping exercise to facilitate the development of co-operatives in different sectors. Each country has to apply its own catalytic entry points:
▪ In Mondragon – it was worker co-ops that shaped the development of co-operative movement
▪ In the United Kingdom – it was consumer co-ops.
▪ In Germany and United States – it was financial co-operatives (co-operative banks, credit unions) and also agricultural co-ops
▪ In Kenya – agricultural marketing and supply and financial co-operatives.
These must not be isolated from overall national development strategies but rather integrated into them as too much fragmentation equals disaster. Co-op development strategy uses a movement-building approach, that is to say a bottom-up approach. He outlined the government policy on Co-op Development:
▪ giving a clear, legal definition of a genuine co-operative enterprise;
▪ reforming the co-operatives administration;
▪ ensuring that the legal framework does not hinder the development and growth of cooperative enterprises;
▪ making a clear distinction between technical support services to co-operatives and the regulatory functions of the state;
▪ facilitating the formation of co-operatives with the objective of encouraging instead of replacing self-help;
▪ allowing co-operatives to set up their own support service institutions; and
▪ coordinating and orienting external assistance to co-operatives and self-help groups.

Mr Phadu noted that it has been 14 years since the Co-op Policy was adopted by Cabinet. Ownership of the economy must be supported by an assessment of the status quo as it must be inclusive, participatory (bottom-up), involving key sectors and types of co-ops. It must also support the 2030 Vision.

DGRV briefing
Mr Bongumusa Ntuli, DGRV Organizational Development Practitioner, said that due to time constraints he would not go through the presentation. However, he noted that co-operatives are an effective social and economic inclusion instrument that build community resilience and promote self-helping sustainable communities. The presentation focuses on the intended outcomes of cooperatives development; challenges to address; cooperatives in achieving NDP imperatives, the Africa Development Agenda and SDGs; pillars of cooperatives success; one municipality one cooperative bank; and significance of leadership.

Conclusion
Acting Chairperson Capa said that since they do not have enough time to interrogate the presentations it is important for the Committee to find another day to discuss the presentations.

Mr N Xaba (ANC) said that there are many questions he wanted to put to all the presenters but due to limited time, he suggested that they put their questions in writing and these be responded to in writing.

Mr S Mncwabe (NFP) welcomed the cooperatives model presented by the Chairperson and the other presentations. He suggested that since there are lot of questions, they find another day to discuss what has been presented to the Committee.

Acting Chairperson Capa asked whether the presenters will be available the following week’s meeting so that the Committee can engage with them.

All the presenters noted their availability.

The Committee agreed to defer the discussion on the presentations to the next meeting.

Acting Chairperson Capa thanked the presenters for their availability and inputs.
 
Meeting adjourned.

 

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