Cooperatives Development: NACSA, NCASA, SANACO submissions; Large company non-payment to small business

Small Business Development

14 November 2018
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Committee received briefings on the roles played in cooperatives development by the National Apex Cooperative of South Africa (NACSA); National Cooperative Association of South Africa (NCASA); South African National Apex Cooperative (SANACO).

Members asked the three organisations how to address the 88% failure rate of cooperatives, what SANACO’s role was in the African Conference, why nothing was said about Mondragon in Spain, how many cooperatives are supplying the big retail stores like Pick n Pay and Checkers, what the relationship is like between SANACO and local municipalities in the development of cooperatives, whether NCASA really exists or not, and for a report from SANACO on the R39m that was paid to the President of SANACO. The Committee plans to hold a workshop with all the organisations before the Summit on Cooperatives which will be held before the end of the 2018/19 financial year.

My Clan Name Is African, a small business which conducts free and fair elections for private companies, appealed to the Committee to assist it with a non-payment from an Independent Power Producer, Enel Green Power (EGP), who it had assisted with a Community Trustee election process. The Committee agreed to invite both parties in order to resolve the matter.

Meeting report

Before the cooperatives development briefings, the Committee heard from an Independent Power Producer.

Independent Power Producer lack of payment to a small business
Ms Kolisa Xinindlu, company owner of My Clan Name Is African Pty Ltd, said that her company’s sole mandate is to conduct private elections for private companies or bodies, labour unions and any organisation that is interested in free and fair democratic elections within its institution. Sometime in 2015, she received a call from a lady who identified herself as Ms Lizeka Dlepu, an employee of a company called Enel Green Power (EGP) who requested her company profile. EGP is a renewable energy company operating in various provinces of South Africa. Ms Xinindlu was invited to make a presentation to EGP and the reason it called her was to explain Community Trustee Election process as EGP said it knew nothing about the process. It requested her to provide the names of other service providers that conducted elections, and she did so.

Ms Xinindlu said EGP sent them a scope of work requesting proposals to conduct Trustee Elections in six of EGP Wind Farms (situated in seven areas). Reference was made to a document marked:  Scope Of Works Rev – 1.0 dated 4 December 2015 and the proposal sent to EGP marked: Technical Proposal. She received an Engagement Letter for three of the six Wind Farms (Nojoli Wind Farm and Jeffrey’s Bay in the Eastern Cape and Paleisheuwel in the Western Cape).

Ms Xinindlu said during their first meeting after the appointment, she asked some questions of clarity but the EGP team said they have no answers as they did not know the process. The team leader refused to receive the list of questions (she only demanded to see the list during one of the dispute meetings).  During the meeting, Ms Xinindlu indicated the importance of understanding the process and making an input but the EGP team leader told Ms Xinindlu she has no interest in understanding the process as she would never do election work in her life. This attitude led to more problems later.

Ms Xinindlu said that upon submitting their Voting Progress report for Nojoli Wind Farm Trustee Elections 2017 and the invoice based on 3000 participants and indicating the total number of people enrolled, EGP demanded that they provide it with the actual registers. They obliged. They had sent an invoice for the extra participants enrolled. EGP then demanded that they provide the actual forms completed by participants.  They agreed to bring the forms but refused to leave those forms with EGP. They were also required to verify these forms in front of an official appointed to witness the process.

After verification, it was agreed that some papers be removed and the remainder be regarded as the final figure. She was told this was going to be discussed and decided by the board. She must emphasize that EGP took very long to respond to emails and as such, it took sometime before her company was invited. When the invitation finally happened, they were told that EGP had considered the fact that both parties have not adhered to the contract. For this reason, they were offered R90 000 compared to the more than R500 000 they had invoiced EGP.  The fact that they conducted the process of enrolling more than the 3000 prescribed without authorization is cited by EGP. 

Ms Xinindlu said her view on this is that EGP did not have the community’s interest at heart. The fact that her company was expected to ensure maximum participation and produce a free and fair election was never intended by EGP. Ms Xinindlu sent a counter proposal of R350 000 but did not get any response until much later when they were asked for the breakdown of the R350 000. This happened even though there was no breakdown of EGP’s proposed R90 000 nor the quantification of the breaches said to have been caused by her company.  In her view, the main issue here is the misrepresentation of the spread of Nojoli Wind Farm. If EGP had provided answers earlier on, the matter could have been handled differently.

Ms Xinindlu asked the Committee to intervene in this matter as her company does not know what else to do in order to resolve this impasse with EGP. 

The Chairperson said that the submission highlights the problem of big companies dealing with small companies, which requires the focus of this Committee. Secondly, community participation in the economy requires the focus of this Committee if they are talking about economic transformation.

Mr R Chance (DA) welcomed the presentation from Ms Xinindlu. However, her presentation had a lot of information to digest with limited time on their side.

Mr H Kruger (DA) said that they should get an ombudsman to sought out the challenges faced by small businesses.

Mr X Mabasa (ANC) said that big companies have a tendency of bullying small companies in South Africa and this is a big problem when it came to transformation and economic development.

Mr Kruger said that the statement that big companies bully small companies is not correct and Mr Mabasa should withdraw that statement.

Mr N Capa (ANC) said that they should not discuss this non-payment matter now, but rather note it and try to find a solution at a later stage.

Rev K Moshoe asked why Ms Xinindlu did not insist on a written agreement with EGP.

The Chairperson said the Committee should note the submission and facilitate a process of engaging EGP to resolve this matter. The Committee will invite her together with EGP to resolve this. 

National Apex Cooperative of South Africa (NACSA) briefing
Ms Ann Ngutshane said the role of NACSA is to create decent employment for all; eliminate poverty; democratize ownership and control of the economy; and restructure the economy to meet the basic human needs for all. The country must come up with extra ordinary measures to address the needs of the cooperatives as they are still in the lowest echelons of the economic landscape; they are in fact the poorest of the poor. To this end, a new breed of entrepreneurs under the leadership of NACSA is committed to lead cooperatives across the social spectrum to participate in transforming the economy through the establishment of a vibrant cooperative ecosystem.

Ms Ngutshane said NACSA is committed to leading South Africa to build cooperatives in all spheres of the cooperative system. The previously white owned Cooperatives and the new wave of black economic empowerment Cooperatives point to the following characteristics of the cooperative sector:

▪ Fragmentation – some Cooperatives have a presence in the formal economy but in the main operate in the “second” or township economy
▪ There are no value chain linkages – upstream and downstream – organised through Cooperatives. Even on the consumption side the cooperative sector is not very developed or organised.
▪ The various Cooperatives are not organised sufficiently and there is no real presence of a coherent and established cooperative movement leading the development of Cooperatives
▪ The SA Cooperative Movement is divided along racial lines; cooperatives mainly in agriculture, housing and finance belong to white conglomerates
▪ Thousands of black cooperatives are mostly initiated by and dependent on government
▪ The cooperative movement is not engendered, women owned cooperatives are mainly operating in terms of their traditionally prescribed roles, women are mostly found in the lower echelons of the cooperative  hierarchy
▪ There is therefore an urgent need to build a sustainable movement in general and a  women led cooperative movement in particular

Ms Ngutshane said the current status of cooperatives in terms of registration is that the promulgation of the Cooperatives Act of 2013 as amended, facilitated a boom in the registration of new cooperatives never seen before in South Africa. The number of new cooperative registrants has almost quadrupled. The majority of these new cooperatives are black woman-owned. Youth-owned cooperatives have also begun to emerge. However, most of these new entrants remain vulnerable and very weak and require high and sustained levels of support.

Ms Ngutshane said NACSA was founded by 25 Cooperative Tertiary organisations at a conference that took place in Pretoria on 24 and 25 June 2016. They are now standing at 30 members. NACSA was founded in terms of its constitution. NACSA leadership was elected at the conference. NACSA was formed in compliance with the requirements in the amended Act. NACSA was formed in compliance with a resolution that was taken in Taung, North West in 2015 by all tertiary cooperatives.

Ms Ngutshane spoke about financial self-sustainability training programs, market development and access, advocacy work and pioneering six economic sectors within the cooperative eco system: Cooperative Bank; Agriculture; Transport; Consumer; Manufacturing; and ICT (see document).

Ms Ngutshane noted the challenges NACSA faces causing the high mortality rate of cooperatives:
• Lack of resources
• Government interference
• Lack of support from Department of Small Business Development (DSBD)
• Poor understanding of the Cooperative business model
• Low levels of education
• Fighting within cooperatives
• Corruption and theft of cooperative funds.

National Cooperative Association of South Africa (NCASA) briefing
Mr Mzukisi Ronyuza said that service delivery in South Africa still remains a challenge despite existing aggressive policy and administrative reforms. Historically, cooperatives exist to respond to the harsh realities of the second economy which is characterized by abject poverty, unemployment and the burden of diseases. The concept cooperative is developmentally focused. It matches the developmental context of local government and the aspirations of the developmental state. Cooperatives are seriously faced with ideological, organizational and operational challenges.

The concept of cooperatives is clearly understood in theory but poorly understood in practice. Some see cooperatives loosely as government extensions whereas others see them as non-governmental organizations, projects, self-help groups or associations. These paradoxical interpretations pose a problem to understand what exactly this cooperative phenomenon is all about.

Mr Ronyuza spoke about the history of cooperatives in South Africa. There is no clarity on the best model to follow. Spain and Italy provide exceptional cooperative case studies including that of Tanzania and Kenya. Spain and Italy operate in the Department of Labour environment whilst Tanzania and Kenya operate under the specialized Ministry of Cooperatives and Marketing. This poses a big problem here in South Africa, cooperatives have migrated from the homage of the Ministry of Agriculture to that of Trade and Industry. The environment is full of neoliberal dictates compared to the case studies referred to earlier.      

Mr Ronyuza said cooperatives do have a competitive edge of job creation advantage over other types of enterprises. However, bordering cooperatives on the fence of Broad Based Black Economic Empowerment (BBBEE) Act is a fatal mistake. It has to a certain extent compromised the socio-economic thrust of the cooperatives. The get-rich-quick logic of BBBEE and the SME has short-changed and weakened cooperatives. They are reduced and obsessed to bidding to survive as cooperatives.

Mr Ronyuza said in terms of organisational challenges, the proclamation of the 2005 Act set NCASA to a technical moribund, because the emphasis was now on incorporated Secondary and Tertiary (Apex) whilst it remained primary. Resolutions of the 2008 Cooperatives Conference paved a way to the launch of the worker co-op sector leader (SANACO) with hope that when combined with other sectors an Apex of Apexes would be achieved. They even handed the Cooperatives representation baton at NEDLAC. When the contrary happened they resolved to amend the Act to set the tone for a properly legislated single Apex co-op, and defined powers. The new Act was proclaimed in 2013. Instead of building strong functional sectors they witnessed contestation of power around the word Apex organisation. Today, cooperatives are receiving technical support from the Department of Small Business Development, Cooperative Development Unit (CDU) to keep an eye on cooperatives and the Registrar of Cooperatives.

However, from 2005 to date, the Registrar of Cooperatives does not have reliable statistics about the formation of the cooperatives broken down by sectoral representation. Many cooperatives membership exist on paper but are in practice dysfunctional, and without the comprehensive list, it is difficult to point to how cooperatives have created employments improved community livelihoods or improved quality of lives and contribution to GDP. The Department chose to award SANACO a tertiary co-op and NACSA an NGO the Apex status to be leaders of the movement.

Mr Ronyuza concluded by listing possible solutions:
• NCASA as the mother body should be resuscitated to fight for the interest of the cooperatives as one of the civil society formations. This time around, it must exist free from party political gimmicks.
• The Registrar of Cooperatives should provide a comprehensive and credible database of cooperatives as opposed to current paper membership which does not tally with the reality on the ground.
• The debate on establishing a Cooperatives Ministry as opposed to DSBD should be revisited and compared with the feasibility of the current institutional arrangements.

Currently, cooperatives are more biased to economic returns than to social transformation and development. The two, economic and social mainstreams, should be practically brought to a balance.

South African National Apex Cooperative (SANACO) briefing
Mr Lawrence Bale, President: SANACO said SANACO was established in 2008, initiated by cooperatives in the country. The Department of Trade Industry (DTI) felt that it was not so productive in dealing with each cooperative individually, and that a cooperative body needed to be established where cooperatives can fall under one umbrella body.  The plan came into fruition in 2008 in a Tshwane conference hosted by DTI to initiate the cooperatives Apex body. SANACO provided a regional background, national background, continental background as well as the global background of the organisation. Siyathuthuka Military Veterans and other tertiary cooperatives are members of SANACO. SANACO has been established by functional tertiary cooperatives that are functional and/or operational. SANACO footprints are at municipal, districts, provincial, national, regional and global level.

Mr Bale was voted as the chairman of the SADC region in a conference attended by eight countries from the SADC region without any opposition. Other members of the region have since joined SADC Cooperative Federation. SANACO has met with the other countries such as Namibia Swaziland Mozambique, Zimbabwe, Lesotho, Botswana, Zambia, Kenya and Malawi. SANACO is a member in good standing of the International Cooperatives Alliance (ICA) which was formed in 1895. SANACO hosted the 2018 BRICS Cooperative Leaders meeting attended by cooperative movements from People’s Republic of China, Brazil and India. The meeting identified key area of collaboration within and amongst countries within the BRICS bloc such as  skills transfer from the Chinese to South Africa around mass production and supply of raw materials such as beef, cotton, coffee. SANACO convened the 2018 ICD celebration in July 2018 with the first day being the cooperative conference. The Deputy Minister of Small Business Development Mr Cattle Mathale addressed the cooperative conference.

On the SANACO role in cooperatives development, SANACO has been able to partner with different Sector Education and Training Authorities (SETAs) on support for Cooperatives. SANACO facilitates education and training for cooperatives in all the provinces of South Africa. SANACO has a partnership with Productivity SA that dates back since 2012. SANACO facilitate the training of all cooperatives by Productivity SA which was able to surpass their annual target with this partnership.

SANACO is working with structures such as Financial Sector Commission Campaign (FSCC), South African Youth Council, South African National Civic Organisation, Women’s National Coalition and National Council for People with Disabilities.

Mr Bale concluded that SANACO remains committed to its mandate of advocating and lobbying for cooperative development in South Africa. Cooperative development remains a strategic centre for economic development and inclusion of the majority in the mainstream economy. SANACO has grown in leaps and bounds and looks forward to a bright future for coperatives in years to come.

Mr Chance (DA) asked the status of engagement between SANACO and NACSA in order to form one organisation to represent cooperatives. He asked why there was a need to form NACSA whilst there was already SANACO.

Mr Capa said there is nothing much to say to these organisations but what they need to know is their role in the development of cooperatives because each of them has a different system in developing cooperatives, and once cooperative development is understood then Members will be able to interact with these organisation.

Mr S Mncwabe (NFP) asked SANACO how many cooperative members it has and how many members it has supported and what services it offers to those members. What are they doing to address the 88% failure rate of cooperatives? He asked what role the youth structure played in the African Conference. He asked why nothing was said about Mondragon in Spain in the presentation. He asked how many cooperatives are supplying the big retail stores like Pick n Pay, Checkers, etc. What is the relationship like between SANACO and local municipalities in development of cooperatives? He asked if NCASA does exist or not because on page 12 of the presentation it indicated that NCASA as a mother body must be resuscitated.

Mr Kruger asked SANACO to provide a report on the R39m said to be paid to the President of SANACO. In terms of the training of 39 000 cooperatives where 3% of them survived, was the training they give to the cooperatives up to standard?

The Chairperson said all these organisations that presented to the Committee are lobbying the Committee for funding and self-interest because none of them have ever written a letter to the Committee. She asked why they have not approached the Committee since 2014 when the Committee was first established. The legislation on cooperatives resides with this Committee and Department.

The Chairperson asked who they are lobbying between the Committee and the department? Why they are not picketing against the department? What their role is? How are they helping their members? Are they serving their self-interest or serving their members?

Mr Mabasa said a good organisation is not the one that dies with you, but is the one that lives forever ong after you are dead.

Mr Manasa suggested that all the organisations should provide a report which categorized cooperatives’ members, supported and surviving cooperatives, and failing cooperatives so when the Committee goes on oversight it can identify those cooperatives. He gave a deadline of seven days for the reports.

Mr Mncwabe said that he was disappointed that when the liquidation order of Venda Banking Services (VBS) was granted by the court, none of these organisations that claim to represent the interests of cooperatives challenged that order or even said something about the liquidation of VBS, which is a cooperative by the way. He asked about their relationship with Ithala Bank in KwaZulu-Natal. These organisations must try to have non-racial cooperatives because poverty cuts across all racial lines.

The Chairperson said due to time constraints, there is no time to engage on the questions posed by Members. They’ve just opened a can of worms and they will have to first have a workshop with all the organisations that presented today before they hold a Summit on Cooperatives. Therefore, the questions raised will not be responded to. All the organisations that presented to the Committee will be invited to a workshop before the end of this financial year.

Mr Bale noted that SANACO knew nothing about the R39m; this is just something to tarnish their name.

The Chairperson interjected that he should not respond to that or any other question as she has already ruled that they will have a workshop and clear up all the issues they need to.

The Chairperson thanked the organisations and communication will be made to them for the upcoming workshop.

Meeting adjourned.

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