Forensic Report delay; SANACO & NCASA Reports; National Cooperatives Summit; with Minister
Small Business Development
06 March 2019
Chairperson: Ms N Bhengu (ANC)
The Committee expected a briefing from Auditor-General South Africa on the Forensic Investigation Report. AGSA reported that the management report listing AGSA findings had been compiled and issued to the Department accounting officer on 22 February 2019. AGSA held discussions with the accounting officer and the Minister on 28 February 2019. On the request of the Minister, it was agreed that Department management will have until 31 March 2019 to provide responses to the findings and recommendations. The Committee agreed that it will afford the Department and Minister the 31 March 2019 deadline to respond to the findings and a further week for AGSA to produce a final report. It will ask the Speaker to allow the Committee to meet in April 2019 to process the report and make recommendations on what needs to be done to correct the challenges.
The National Apex Cooperative of South Africa (NACSA); South African National Apex Cooperative (SANACO); and National Cooperatives Association of South Africa (NCASA) presented progress reports on structural development and focus areas of cooperatives organisations. NACSA could not present to the Committee because it is waiting to sign a unity agreement with SANACO that will see one umbrella body that will represent and be the voice of cooperatives in South Africa.
SANACO’s presentation focused on its contribution globally, the 88% failure rate which SANACO disputes as not correct, partnerships with municipalities, the Special Investigating Unit (SIU) investigation of SANACO officials, a sample of successful cooperatives, and concrete recommendations for the Cooperatives Summit.
NCASA presented on how it has been responsible for the establishment of national sectoral cooperatives, notably the South African Federation of Burial Societies (SAFOBS), leading the Insurance and Burial cooperatives, the South African Housing Cooperative Association (SAHCA), now known as the Housing and Property Tertiary Cooperative, the South African Credit Cooperative League (SACCOL), now known as NACFISA, and the South African National Apex Tertiary Cooperative (SANACO) to lead many sub-sectors that form the worker sector.
NCASA’s mandate is to continue building national sectors that will respond to the three challenges of poverty, unemployment and inequality in the country. Its focus is to organise cooperative enterprises within the Social and Economic cluster departments to address these challenges.
The Department gave a briefing on the upcoming National Cooperatives Summit.
The Committee agreed to hold the National Cooperatives Summit in September rather than April 2019, as previously planned, because of the looming elections. A Task Team from the department and the cooperatives movement will be tasked to make preparations for provincial summits, which will lead the way to the National Summit.
The Content Advisor took the Committee through its Legacy Report. Members made recommendations which will be included in the final report.
The Chairperson said that towards the end of last year they have started a process of engaging with national structures which represent cooperatives in South Africa. The Committee has been on study tours and done their research and know what is happening in other countries. From the national cooperatives they want to have a common understanding of how cooperatives are structured and what these national structures are doing for the cooperatives they claim to represent and what they are proposing be done to address and curb the 88% failure rate of cooperatives. Therefore, these national structures will indicate what is happening in the cooperatives they represent and what is happening at the secondary and primary cooperative level so the Committee can understand why there is this 88% failure rate of cooperatives. How collectively are they going to respond to that situation?
The Committee must also be briefed by the Auditor-General South Africa (AGSA) on the progress with the Forensic Investigation Report on the Department of Small Business Development (DSBD). There is a misaligned funding model, and it is not known what is happening with tertiary, secondary and primary cooperatives, and what value they are adding. There is no implementation of the provisions of the Cooperatives Act to establish the Cooperatives Development Agency, the Cooperatives Tribunal, and the Cooperatives Training Academy. Since the Committee does not have the powers to do a forensic investigation it requested that the Department asked AGSA to do an investigation. AGSA cannot be appointed by the Committee to do an investigation and so the Department should report to the Committee. What they have not seen are the terms of reference, when the investigation will start, how it will be conducted and when it will be finished. As it is the end of the Fifth Parliament, the Committee wants to include this work in its Legacy Report and so it has invited AGSA to present the terms of reference, the project management plan and when this work will be finished, and how the Sixth Parliament Committee should take the project forward.
Auditor-General South Africa (AGSA) briefing on forensic investigation report
Ms Makopoi Griffiths, AGSA Parliamentary Liaison Officer, said that they received the invitation to brief the Committee on the progress in the forensic investigation. She is here to convey an apology on behalf of the auditors. As Members know, the recently approved Public Administration Amendment Act is due for implementation from 1 April 2019. AGSA is currently running an intense in-house training to equip the auditors for its implementation, which is why they could not honour the invite. It remains their mandate to support the Committee with whatever assistance it requires to fulfil the Committee’s oversight work.
Ms Griffiths referred to the AGSA letter provided to the Committee yesterday on the progress of the Forensic Investigation. On page 2, the letter stated that the investigation field work was executed from April 2018 until February 2019. The field work consisted of the following procedures:
▪ They have analysed the beneficiary payments from 2015/16 to 2016/17 to identify the transactions for further testing. 155 grants applications were selected.
▪ They have compacted the grants applications according to programme guidelines and standard operating procedure to identify non-compliance or possible irregularities.
▪ Based on the results they initially selected 10 applications to perform site visits.
▪ However, due to the results of the sector side visits, they agreed with the previous Director General to extend the sample for site visits to 60. They also performed additional procedures in an attempt to contact grant applicants and verify their statutory existence.
Ms Griffiths said a draft management report listing AGSA findings has been compiled and issued to the accounting officer on 22 February 2019. AGSA held discussions with the accounting officer and the executive authority on 28 February 2019. The Auditor-General met with the Minister on 28 February 2019, and, on request of Minister Zulu, it has been agreed that the department management will have until 31 March 2019 to provide responses to the findings and recommendations. That is how far the process is and she hoped that this is satisfactory to the Committee.
Ms Griffiths said she will note all questions from Members and convey them to the Auditor-General.
Mr R Chance (DA) said that his wish is that the Committee could have commissioned the report itself rather than allowing the Department to take the initiative. It is now quite obvious that the Committee will not see the report, which is a big problem. It is obviously clear that DSBD has been dragging its feet as well as Minister. For understandable reasons it is quite keen for this report not to emerge before the elections.
Mr Chance said it is not believable that the DSBD IT system was down for a month, and would like the Acting DG to comment how that is possible, and what the impact of the down time on the functioning of DSBD was as a whole, not just the aspects covered by this report.
Mr Chance proposed that the Committee insist that the report be tabled before the end of the Fifth Parliament. Although Parliament is rising on 21 March 2019, they still have jurisdiction and are functioning until the day before the election. It is absolutely vital that this Committee has the opportunity to read the full report and should ask the Minister to fulfil the obligation, which she has to the Committee and the country, and to the poor beneficiaries that have been compromised by the corruption evident in DSBD.
Mr T Mulaudzi (EFF) said that if the AGSA is talking about the 2016/17 audit outcomes, he would like to know about the audit outcomes of 2017/18 also. He asked which findings the Minister has to respond to before 31 March 2019, because the Committee has picked up corrupt activities during their oversight, and it was this Committee which extend its hand to involve AGSA and to audit what is happening in DSBD when the Committee suspected matters were not right within DSBD.
Mr X Mabasa (ANC) seconded both proposals from Mr Chance and Mr Mulaudzi, stressing how crucial it is that as a Committee they are able to receive and process the report and prepare it for the next team that will be coming in after elections.
The Chairperson said that there is a perception out there that there is a corrupt political party in South Africa and that corrupt political party is the ANC, which she represents in this Committee. There are parties that are campaigning and telling people that the ANC Government is corrupt and it should be taken out of power, and that is a serious matter. She wishes the Committee could have been more insistent on having the appointment of the AG reside with the Committee to assist the Committee to do its oversight. They did what they could because they went to the House Chairperson who agreed to this. That changed when DSBD also initiated the same by approaching AGSA to investigate this matter.
The Chairperson said the report process will be completed on 31 March 2019. After 21 March 2019 when Parliament rises, that does not mean the Committee will not continue its work because the scope of work for the Committee is until the day before the election. This meant that they can resolve in this meeting that they apply to the Speaker to have special meetings to deal with this important report. It is an important report because it is part of what the ANC promised to do to uproot corruption. It is part of what the President has committed to do in this country to and they cannot leave that hanging.
Mr S Bekwa (ANC) asked if according to AGSA everything has been done on its side, but it is only the Minister who requested the 31 March 2019 date. He agreed with the Chairperson that this report is very important to the Committee. It is the Committee who identified these matters when doing oversight, and they said the Auditor-General must assist them with this. Therefore, they must deal with the report up until the day of the election.
Mr Chance agreed with Mr Bekwa and the Chairperson that it is essential that they do that. But they must make it very clear to the Minister that she has to uphold that deadline of 31 March 2019, and the AG forensic audit report must be completed within a week of that consultation. That meant that in April they will have to convene and consider this report.
Ms N Mthembu (ANC) seconded this and said they will be available because this is not about them but about the commitment they made to the people of South Africa that as Members of the Committee they will do oversight and ensure justice is done and matters will be corrected in terms of this report.
The Chairperson said they are closing this matter with the following understanding:
- They will afford AGSA and the Minister to go through the report and meet the deadline of 31 March 2019.
- They will afford AGSA a week after the 31 March 2019 to produce a final report.
- They will ask the Speaker to afford the Portfolio Committee an opportunity to meet in April 2019 to process the report and make recommendations of what needs to be done to correct this situation as the Portfolio Committee in charge of oversight over DSBD and its entities.
The Chairperson said she will write a letter to AGSA indicating what the Committee has agreed to. She will write a letter to DSBD informing both the accounting officer and the Minister how the Committee has concluded on this matter.
Ms Griffiths thanked the Committee for the opportunity and promised to convey all the Committee questions and concerns to the Auditor General.
Committee Legacy Report
Mr Sibusiso Gumede, Content Advisor, took the Committee through the draft report page by page
Mr Chance welcomed the report. He asked why the Business Licensing Bill was brought into this report because it belonged to the Department of Trade and Industry (DTI).
Mr Mabasa appreciated the report which is a job well done. They will study the report.
Mr Kruger thanked the writer of the report for the good work he has produced. He proposed that the strategic plan should form part of this report so that the new Committee can familiarise itself with it.
Mr Mulaudzi said the report must also include the failure of DSBD over the last five years because it should be remembered that when DSBD was under the DTI, cooperatives never registered such high failure rate. In the last five years DSBD had failed as the mortality rate of cooperatives increased to 88%. He suggested that DSBD should be scrapped because it has failed to carry out its mandate and it has wasted time and money at the expense of the people of South Africa.
Mr Chance suggested that an updated tracking tool for cooperatives and small enterprises must be included in the report.
Mr Mncube thanked Mr Gumede for the report, which is a true reflection of the work of the Committee. He suggested that the Cooperative Bank matter should be made clear in the report. Transversal agreements must be consistently monitored and stipulated in the report.
Ms Mthembu said that LED offices must be active in municipalities so they can be utilised by cooperatives and small businesses.
Mr Bekwa appreciated the report. He recommended that all those officials who did wrong in DSBD must be taken out rather than say DSBD must die as suggested by Mr Mulaudzi.
The Chairperson said the report must highlight the need for a skills audit in DSBD as there is lack of capacity and this is very important. DSBD must develop a program to capacitate departmental officials to perform their duties efficiently and effectively going forward.
The Chairperson said these recommendations will be included in the report before it is adopted next week.
National Apex Cooperative of South Africa (NACSA) briefing
Mr Ashley Paluse, NACSA Chairperson, said the role of NACSA is to create decent employment for all; eliminate poverty; democratise ownership and control of the economy; and restructure the economy to meet the basic human needs for all. He said that through the advice of this Committee to have one body representing all cooperatives in South Africa, NACSA and SANACO have met and had discussions on forming one umbrella body. He asked the Committee to bear with them until 13 April 2019, when NACSA and SANACO will sign the unity agreement forming one organisation representing all cooperatives. A clear and informative presentation will then be presented to the Committee on paving the way for one progressive cooperatives organisation that will be the voice of all cooperatives in the country.
South African National Apex Cooperative (SANACO) briefing
Mr Lawrence Bale, SANACO President, said that SANACO is guided by the developmental targets of the United Nations Sustainable Development Goals (SDGs), the Africa 2063 Agenda and the National Development Plan (NDP). The cooperatives movement has a critical role to play in realising the goals in these three most critical documents. The focus of SANACO in the past five years has been on skills development of cooperative members to increase the chances of sustainability of cooperatives. This is in line with the SDGs, Africa 2063 Agenda and the NDP which talks about an “inclusive rural economy” and about employment. SANACO has mounted its interventions to address these two critical goals of the NDP.
SANACO is about the future of poorest of the poor of our country. SANACO is a solution to challenges of poverty and unemployment. Foreign nationals use a consumer and wholesale coop approach hence they are very successful. SANACO can help address the challenge of youth unemployment through training and skills development. Parliament has a duty to lobby the relevant department to fund SANACO. It is painful to see money returned to National Treasury from the Department responsible for cooperatives in your presence as parliamentarians. We are challenging all of you to visit our cooperatives and see the great work that cooperatives are doing. We are giving hope to our people. Government cannot employ everyone, it is important for government to create conducive environment for business to thrive. Our people should participate in the production of food and agro-processing. We should be creative and do work for ourselves. We talk about Proudly South Africa, but we do not implement that.
The SANACO briefing covered responses to questions posed by the Committee in the previous session, its contribution globally, the 88% failure rate and proposals to mitigate that challenge, partnerships with municipalities, the Special Investigating Unit (SIU) investigation which has been used to drive a smear campaign against SANACO; successful cooperatives, and recommendations for the Cooperatives Summit. A push for cooperatives to supply chain stores has resulted in the exploitation of cooperatives. SANACO has enjoyed overwhelming support and partnerships with local and district municipalities. SANACO is using a sector approach plan to strengthen the cooperatives movement.
Addressing 88% failure rate of cooperatives
SANACO is of the view that quantitative research needs to be undertaken between the cooperative movement and DSBD to unearth the status of cooperatives in South Africa. Currently the data available is sketchy and unreliable. The independence of cooperatives is compromised by some government officials who want to own cooperatives. Autonomy of cooperatives should be maintained at all cost. The intervention or support of government should be aimed at sustainability of cooperatives. There is a need to raise awareness with the supply chain divisions in all spheres of government to prioritise cooperatives in their procurement. This will allow cooperatives to grow. There is a need to build strong and viable financial services cooperatives. By extension, these cooperatives in the long run will be able to provide loans to its members thus reducing dependency on government. The financial sector has been left in the hands of a few mainstream banks and they have now become oligopolies. They even make it difficult for new entrants in the market. The cooperatives movement should focus on establishing consumer cooperatives that will provide an opportunity for bulk buying. This will help in reducing the price of goods and services.
Number of cooperatives supplying chain stores
There have been up-swing and then downturn in the number of cooperatives supplying chain stores. One of the biggest challenge sis the price these chain stores are willing to pay to cooperatives. These chain stores make 100% profit with the cooperatives carrying all the production costs. It is against this background that an alternative market needs to be created outside chain stores.
Relationship between SANACO and Municipalities
SANACO has cemented strong ties with different municipalities throughout the country. SANACO structures at municipal level engage with the local and district municipalities to form strategic partnerships. Cooperatives are invited to the LED forums of municipalities and participate in shaping LED strategies.
The minutes of the Committee were wrongly captured. The SIU investigation was about COGTA officials for the tender awarded to SANACO. The Presidency issued a proclamation on 6 February 2014 which clearly stated that it was against COGTA. SANACO cooperated fully with the SIU investigation. The SIU issued its 2017 interim report. The report state that a final report was submitted to the Presidency on 12 September 2017. SANACO therefore recommends that Parliament through the Portfolio Committee should use its fiduciary authority to request the report from the Presidency for further clarity on the matter. The report was not made available to SANACO because the proclamation was not against SANACO but against COGTA.
SANACO cooperatives development status
Cooperatives affiliated to SANACO are at different stages of development. The cooperatives have been categorised into successful cooperatives; average performing and struggling or failing cooperatives. For the cooperatives affiliated to SANACO, our database show 40% success rate of primary cooperatives (see spreadsheet sampling the successful and average performing cooperatives.
SANACO sector approach plan
The 2018 International Cooperatives Day (ICD) celebration was coupled with a colloquium. The colloquium declared 2019 as the year to build strong economic sectors. SANACO has started in Gauteng to consolidate the textile industry. It has brought together 250 cooperatives in the textile industry. As part of ensuring sustainability, some of these cooperatives have been linked with Productivity SA to strengthen their productivity whilst minimising waste. This approach will be applied in all the sectors.
2019 Cooperatives Summit
The summit is a strategic platform to raise awareness on the amendments to the Cooperatives Act which include the introduction of the Apex cooperative as a fourth tier, the establishment of the Cooperatives Development Agency and the Cooperatives Tribunal. The summit should also put emphasis on concrete steps to be taken by both DSBD and the cooperatives movement to support cooperatives to comply with the registrar of cooperatives. One of the gaps in South Africa is that the majority of the cooperatives are not sending reports to the CIPC. The long-term effect is government will not have a basis for developing a cooperatives friendly legislation. It is critical to develop an amicable solution to curb this damning concern.
Build-up events should be held in all the nine provinces to afford as many cooperatives as possible to contribute to the broader summit resolutions. This will assist in building the critical mass of the views of cooperatives in different spheres. A focal point of the summit should be to share good practices. DSBD should give cooperatives an insight into the new Cooperatives Incentive Scheme guidelines.
SANACO remains committed to its mandate of advocating and lobbying for cooperatives development as 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 cooperatives.
National Cooperatives Association of South Africa (NCASA) briefing
Mr Zacharia Matsela, National Chairperson: NCASA, said that service delivery in South Africa still remains a challenge despite existing aggressive policies and administrative reforms. Historically, cooperatives exist to respond to the harsh realities of the second economy which is characterised by abject poverty, unemployment and the burden of disease. Cooperative are developmentally focused and match the developmental context of local government and the aspirations of the developmental state. Cooperatives are seriously faced with ideological, organisational 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 organisations, projects, self-help groups or associations. These paradoxical interpretations pose a problem.
Mr Matsela said cooperatives do have a competitive edge for job creation 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.
In terms of challenges, the 2005 Act set NCASA as technically moribund, because the emphasis was now on incorporating 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 Amendment 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 DSBD 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. The membership of many cooperatives exist on paper but are in practice dysfunctional, and without the comprehensive list, it is difficult to point to how cooperatives have created employment, improved community livelihoods or improved quality of lives and contribution to GDP. DSBD chose to award SANACO, a tertiary co-op, and NACSA, an NGO, the Apex status to be leaders of the movement.
Mr Matsela said NCASA is the pioneer of cooperatives in South Africa in the dawn of new democracy. NCASA is the national association of various forms of cooperatives in their various sectors in the economy and is also responsible for the setting up of a number of these in the country. Incorporated in 1996 as a cooperative under the then Cooperatives Act of 1981, NCASA took up the challenge of not only breaking the dominance of the white cooperative movement which was mainly from the Agricultural and Financial sector, but also introducing the international trends that can build the economy when coordinated well. This initiative culminated in its inclusion at Nedlac to represent the economic sector of the Community Constituency and that brought about new landscapes in the cooperative movement whereby the registration and regulation of cooperatives was moved from the Department of Agriculture to the Department of Trade and Industry. This opened a new chapter of cooperatives through the new Cooperatives Act of 2005 which NCASA spearheaded, and later the Amendment Act of 2013.
NCASA is responsible for the establishment of national sectoral cooperatives, notably the South African Federation of Burial Societies (SAFOBS), leading the Insurance and Burial cooperatives, the South African Housing Cooperative Association (SAHCA), now known as the Housing and Property Tertiary Cooperative, the South African Credit Cooperative League (SACCOL), now known as NACFISA, and the South African National Apex Tertiary Cooperative (SANACO) to lead many sub-sectors that form the worker sector.
The plan and mandate of NCASA is to continue building national sectors that will respond to the challenges of poverty, unemployment and inequality. The focus is to organise cooperative enterprises within the Social and Economic cluster departments to address challenges.
• 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.
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.
Mr Mulaudzi said the first presentation from NACSA had no documents. There was nothing he heard that will help the cooperatives and he does know what this institution is doing on the ground for cooperatives development. Perhaps next time NACSA should bring more information to the Committee. He asked NACSA if it is registered as a cooperative with a registration number and papers because the Committee would not want to entertain people that are not registered as cooperative.
Mr Mulaudzi said the second report from SANACO was full of suspicions and the presenter seems like an angry man towards DSBD. Mr Bale has a point but he is angry with DSBD and his focus is only on DSBD, which is not doing enough according to Mr Bale. For example, he said a lot of unused money the cooperatives was returned to National Treasury, but he does not specify how much.
SANACO disagreed with the figure of 88% failure rate for cooperatives. But the 88% failure rate came from research made when this department was established. It came from an ANC 2012 Mangaung resolution when the ANC saw that cooperatives were dying and through this percentage they thought that the hands of the DTI are full, hence they created this department. He asked Mr Bale to clarify his disagreement with this 88% mortality rate of cooperatives.
On the SIU investigation report, Mr Bale said he is trying to clear SANACO and it is about COGTA. Perhaps they should wait for the report itself. If the SIU report is there, it will be made public and they will see whether SANACO or whoever is involved in the report.
On the Cooperatives Amendment Act of 1913, which is not operational, perhaps DSBD can answer in this regard. And also answer about the CIS where Mr Bale has indicated that he wrote to DSBD but there was no response. Therefore, DSBD or the Ministry must clarify that. DSBD must also clarify the point that the database is sketchy. Mr Bale has said that there are government officials that want to own cooperatives. Who are those government officials? In which way is DSBD failing the cooperatives because it was established especially to assist small businesses and cooperatives?
Mr Mulaudzi said Mr Bale has indicated that DSBD should give them the new Cooperatives Incentive Scheme Guidelines. He asked if DSBD has new guidelines which are going to operate on 1 April 2019.
Mr Mulaudzi said the NCASA report is very clear and proactive, however, questions must be asked. He asked who is funding NCASA. He asked for clarity on the organogram of NCASA, the board and administration. What are the terms of the general managers in charge? Who are the members of the board and who is the president or chairperson of the organisation?
Mr Mulaudzi said the NCASA report is very informative and progressive. Although NCASA’s focus is on housing cooperatives, is it possible to extend or expand to other sectors? These are the people that are needed in DSBD in terms of skills and the Minister as political head must give political will within DSBD, and that will cannot work if there are people who do not have will to work or who cannot carry out the mandate of DSBD. In the whole five years of DSBD existence, if they had the mentality of the last presenter from NCASA they will be far by now because NCASA is not trying to focus only on the revenue from DSBD but also looks at other departments and the private sector.
Mr Chance agreed with most of what Mr Mulaudzi said. These are three very interesting presentations and actually very different presentations. In summary, the first presentation from NACSA was like giving an olive branch to SANACO. The second presentation did not even mention the discussions between NACSA and SANACO. And the third presentation did not care, it just gets on with it and had a clear vision on what should happen in cooperatives and ensure that there should be right relationships in order for the job to be done.
Therefore, where they are now, they need to reflect on how the cooperatives sector has developed and advanced in the last five years. It has and it has not, but what is clear is that the cooperatives sector remains fragmented, lacking leadership, lacking direction from government departments starting from DSBD. The other departments which have some oversight on cooperatives are Social Development, Agriculture, and Housing. And as a result, there are continuing turf wars between organisations claiming to represent the cooperatives sector. This is unfortunate because the role for cooperatives in this country is being hampered by all these factions. One of the points mentioned by one of the presenters is that in Germany or America the energy sector, in particular at local level, is run by cooperatives, local communities own the energy companies. They generate electricity, they distribute it, they sell it and make money out of it, and they employ hundreds of thousand people. Why do they not have a sector driven cooperatives strategy in this country?
Mr Chance said NCASA explained the housing cooperatives are working but they do not get attraction from the Department of Human Settlement (DHS) in provinces because DHS disregards them on the whole. If they have a sector based idea of a cooperative strategy then they would say demand driven, not supply driven. Demand driven will deal with the access to markets problem, which cooperatives complain about. If they read through the list of cooperatives, so many of these cooperatives are registered but dying within a short space of time because they did not have a proper business plan and have no access to markets.
Mr Chance said he is looking forward to the presentation on the Cooperatives Summit because DSBD has a real tough job on its hands, otherwise the Summit will turn into a huge bun fight, but he would not pre-empt that presentation.
Mr Chance said it an interesting comment was made about dumping small businesses with cooperatives. It will be very interesting to get an indication from all three presenters on the numbers - not only qualitative information but also quantitative information - for turnover, profitability, assets, as would be presented in any other business report, so as to see what this cooperative sector looks like.
Mr Chance asked how these national bodies generate their income. Do they charge membership fees, are members paying fees because any membership-based organisation that does not charge fees has no right to exist. That is why so many business forums in the townships collapse. They claim to represent businesses but they do not because they do not take any fees. In that case they do not provide good value because if they provide good value to their members, they should charge fees.
The Chairperson said they would receive a briefing and hear DSBD’s response to the Cooperatives Summit.
National Cooperatives Summit: DSBD briefing
Mr Lindokuhle Mkhumane, DSBD Acting Director-General, said that President Cyril Ramaphosa, in his State of the Nation Address on 7 February 2019, emphasised the significance of placing the country into a trajectory of inclusive economic growth, high investment and job creation. The President acknowledged the role that social partners (i.e. government, labour, business, civil society and communities) play in the task of removing the constraints. The cooperatives model has been recognised across the world and by the South African government as an effective social and economic inclusion instrument that builds community resilience, self-help and sustainable communities. The South African government is committed to developing a policy framework aimed at supporting the distinct and vibrant social and solidarity economy which is based on addressing social needs rather than profit maximisation. The social economy entail cooperatives, community-based enterprises, trade union based enterprises, informal enterprises and non-profit organisations.
The Portfolio Committee undertook an international study tour to Spain in 2018 to study the Mondragon Cooperative. In addition, the Portfolio Committee invited presentations from both international and local cooperatives development organisations and representative tertiary and apex cooperatives. DSBD hosted two workshops on 27 September and 29 November 2018 to engage the sector on evaluating the existing strategy on cooperative development. These engagements foregrounded the need for greater and wider engagement with all social partners through the hosting of the National Cooperative Summit aimed at identifying and closing the gaps in cooperatives development.
Mr Mkhumane said the purpose of the Summit is influenced by the President’s call for inclusive economic growth and encouraged by the Portfolio Committee’s call for the review and strengthening of cooperatives policy and strategy instruments to enhance implementation. DSBD, as the custodian of cooperatives policy and legislation, is hosting an inaugural National Cooperatives Summit.
The aim of the summit is to bring together government and social partners to take stock of the status of the cooperative sector by reviewing, redeveloping, reconfirming and up scaling the implementation of the Cooperatives Policy, Act, Strategy and programmes.
In a nutshell, the National Cooperatives Summit is to create a platform where cooperatives stakeholders will review the state of cooperatives in South Africa leading to the adoption of a clear growth path for cooperatives development. The Summit will discuss the role of various stakeholders and role players particularly tertiary cooperatives and the envisaged single apex body in the development of the cooperative sector in South Africa.
The Cooperative Summit will consider developments and best practice from other countries; review and discuss co-ordinated implementation of the Cooperatives policy and legislation. The Summit will consider a number of research papers on cooperatives development. It is envisaged that the summit will take place on 25 – 26 April 2019, at Saint George Hotel, Gauteng with the theme: “Positioning Cooperatives as critical player in Inclusive Economic Growth and Social Development in South Africa”. He noted the topics of the presentations and discussions, including the recently proclaimed Cooperatives Amendment Act and the
revised Cooperative Incentive Scheme (CIS), the participants and the expected outcomes (see document).
Mr Mabasa said that what is critically lacking and which they must address is that they must target about three other African countries. They should have Kenya and two other countries.
Mr Chance said the Cooperatives Summit is around the corner, six weeks away. This will be a big job to be done in a short time and he asked DSBD if preparations are well underway.
Secondly, it will be very important that DSBD does not have an event where the cooperative movement is talking to itself because that is not going to achieve much. They have to look at the cooperative movement within the context of the broader economy. They must get National Treasury and Provincial Treasuries to come to this summit because ultimately they have to be convinced that money is put there and this needs to be done. They must also get the business community to come and invite Business Unity South Africa (BUSA) and Business Leadership South Africa (BLSA). If they did not do that the summit is going to be just a talk shop and it will not take them anywhere. Also one of the presentations at the summit must highlight the history of the cooperative movement dating back to the late 1800s and how the Afrikaner cooperatives contributed to the economy and built their communities, and how now they fit into the economy.
Mr Mulaudzi asked DSBD what model is to be used to inform all cooperatives and those in the rural areas about this summit as this might be the one chance for everybody to participate meaningfully in this summit.
Mr Mkhumane said they have noted the comments and suggestions from Members about inviting Treasury and relevant organisations. The model they are going to use in popularising this summit is to engage municipalities and provinces. They are will engage the cooperative movement which will be helping them to mobilise and identify who the cooperatives are that must know about the summit, and who they have to invite to the summit itself, and who is going to be a representative of the cooperative community.
They are going to advertise the summit on community radio stations for every South African to know about the summit. So, efforts will be made for everyone to know this event. They are going to consider inviting African countries to be part of the summit and some of are already on the list, and Kenya is one of them. They are going to invite Rwanda which has developed cooperatives on the continent. Zimbabwe will also be considered as part of the summit.
The Chairperson said she is happy that they have the dates, but she does not know how DSBD is communicating with the cooperative movement. She does know that social media is the best platform to disseminate information and DSBD should consider that platform.
Ms Lindiwe Zulu, Minister of Small Business Development, thanked the DSBD for the presentation. It had been sent through to her earlier and she considered this platform of the Summit as a serious step towards finding a structure, a model for everything that is related to cooperatives. The only concern she had raised as a constraint is the timing because the Fifth Administration is ending and the Sixth Administration is kicking in. She was struggling with the preparations and the final product which has to be a good product. Yes, the April dates are there but she had indicated that this should not be seen just an action of the Fifth Administration, but to see it as a future for cooperatives.
She and the Deputy Minister want to put it on record that whilst the dates are there, the way they are looking at this Summit, it is not just for the purposes of bringing people together. That is why she indicated that they need to think very hard on whether the time they have, will enable them to ultimately come up with what they need. The point was made by Mr Chance and Mr Mabasa that they must ensure that they invite the right people to the summit. She was looking at the dates and to invite international guests, they need advance warning. She is not saying those April dates might not work, but honestly she is saying they must be convince about the final product, which will still depend on the conversation they have as a department.
Mr Chance agreed with the Minister and suggested that they must not have the summit in April because it is only a week and a half before the elections and people will not be focus on this summit. The summit is a very important event and the Sixth Administration and Parliament will have to figure out this summit in terms of how government will then be structured. Therefore, his suggestion is to put this summit in the third or fourth quarter of the year, and by that time the new structure of Government would have settled down. Some of them might not be here but will honour an invite to the summit.
Mr Mabasa seconded both inputs from the Minister and Mr Chance.
The Chairperson said if they are working towards a national summit and discussing such an important matter, they must first have provincial summits leading to the national summit. The people that would come from the provinces will be those that have been in the provincial summits who will engage on issues that have been debated in that particular province, and that cannot happen by April. Also the work done by NCASA pointed them in the direction of the summit because it will be the cooperatives that are talking and about how government will respond.
Therefore, the summit should not be seen as a government initiative, but as an initiative based on where they are as a country in terms of the social solidarity economy. And if they look back and reflect on the 1969 Morogoro resolution of a mixed economy, would they stand up and say they have a mixed economy, and would they say cooperatives in South Africa are there for the purpose of transforming South Africa into a mixed economy. For example, this may not be the case in Rwanda. Rwanda may have cooperatives but their objective may not to transform the economy to a mixed economy.
The Chairperson said they cannot have the summit in April but perhaps in September 2019, when they have the new government structure and will know who is responsible for cooperatives in South Africa. They must have a task team to prepare for the summit, which will include structures that represent the cooperatives. They will first have provincial summits before the national summit. Due to time constraints, she noted there as no time to engage on the questions posed by Members. She thanked the Minister, DSBD and the organisations that presented to the Committee.
- Report on SANACO Active, Average Perfoming and Strugling/Failing Cooperative 2019
- SANACO report to Parliament
- SUI proclamation
- AGSA response
- NCASA - Co-operatives Progress Report
- National Cooperatives Association of South Africa (NCASA) profile
- Department of Small Business Development - Towards the National Co-operatives Summit -2019
Bhengu, Ms NR
Bekwa, Mr S
Chance, Mr R
Kruger, Mr HC
Mabasa, Mr X
Mathale, Mr C
Mncwabe, Mr SC
Mulaudzi, Adv TE
Xaba, Mr N
Zulu, Ms LD
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