Small enterprise stakeholders engagement session: Informal Traders, Enterprising and Financial Cooperatives Associations

Small Business Development

30 November 2022
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

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The Portfolio Committee of Small Business Development heard from stakeholders in the cooperatives and informal trading sector regarding how these entities are strengthening and safeguarding relevant interests.

The South African National Apex Cooperative (SANACO) is a union of cooperatives, representing cooperatives at the International Cooperative Alliance (ICA). SANACO, as an affiliate of the ICA, continues to foster global solidarity amongst cooperatives. The ICA places Sustainable Development Goals at the centre of its developmental path. SANACO asked Parliament to ensure the Small Business Development Department implemented the Act. It said the Department was focused solely on small businesses and not giving attention to cooperatives.

SANACO noted an interest in meeting with the Small Business Development Portfolio Committee more frequently, so there can be monitoring and intervention where needed, should the Department fail to perform its mandate.

As a cooperative movement, the biggest challenge the National Cooperative Association of South Africa faces is the general lack of understanding of the character, nature, and purpose of cooperatives. The Cooperative has produced a document on formalising the informal sector to ensure enterprise development and to bring more people into the mainstream economy. The Association said it would like to present this document to the Committee in the future.

The formation of the South African Informal Traders Alliance (SAITA) was acknowledged as a great achievement in the self-representation of informal traders, within the scope of legislation which covers the informal sector. The Alliance aligns itself with the motto "nothing about us without us". SAITA has affiliates across the provinces in South Africa and represents all informal traders, irrespective of the trade. The Alliance said bureaucratic processes imposed by government on informal traders serve to discourage informal trading in the country. The current legal environment is not designed to support informal traders fairly and to help informal traders to grow. All unnecessarily obstructive regulations should be eliminated, and the informal traders' organisations must participate in identifying the red-tape regulations.

The Chairperson said cooperatives and informal traders must be supported. The Chairperson of the Committee has the authority and power to call the Department of Small Business Development’s Head of Department and Director-General to ask about solutions to the challenges noted. These challenges were primarily related to implementing the Cooperative Act, and the Cooperative Banking Act. The Department needs to be held accountable, needs to be given timelines to implement the solutions, and must be held accountable in the event of failure to act as mandated. As such, efforts will be made by the Committee to ensure these challenges are addressed.

Aggressive support from government is needed to ensure the growth of the cooperative banking sector.

Meeting report

The South African National Apex Cooperative (SANACO)

Mr Lawrence Bale, President, South African National Apex Cooperative (SANACO), said SANACO is an umbrella body representing cooperatives. As a union of cooperatives, it represents cooperatives at the International Cooperative Alliance (ICA). As an affiliate of the ICA, it continues to foster global solidarity amongst cooperatives of the world. This is in line with the principle of cooperation amongst cooperatives. SANACO is in good standing with the ICA. The movement continues to contribute to B20, which is an event forming part of the G20 Summit engagements, particularly on cooperatives. The ICA places Sustainable Development Goals at the centre of its developmental path.

The geopolitical tensions between Russia and Ukraine have disturbed South Africa’s economy, giving South African cooperatives in the sunflower business a chance at growth. SANACO is asking the Committee, and Parliament at large to play a role in being a voice, which ensures agricultural cooperatives and small businesses are given a growth opportunity. The need for South African cooperatives to be strengthened was further highlighted when poultry imports were stuck on a ship for about three months, resulting in consumers getting sick.

SANACO is part of Brazil, Russia, India, China, and South Africa (BRICS) Cooperative Leaders, and continues to chair this platform for cooperatives, within the BRICS trade block. The COVID-19 pandemic disrupted BRICS Cooperative Leaders meetings. The BRICS Cooperative Leaders provide space for dialogue and trade amongst cooperative movements in the BRICS block.  

The movement in South Africa is part of the Southern African Development Community (SADC) based federations of cooperatives. The primary intent is to facilitate trade between and among the cooperatives in the SADC region. The government of Botswana has provided an office for the International Cooperative Alliance (ICA) Southern African region. It also seconded staff members who are going to fix the office, until the movement in the sub-region is self-sufficient. President Lawrence Bale is the Interim Chairperson of the sub-regional office. A meeting of the sub-region will be held in Lesotho from 14 to 16 December 2022.

It is disheartening to say SANACO gets no support from ministers and Parliament, when the Confederation attends the International Cooperatives Summit, while other countries are present and supported by the ministries.

The President of SANACO pleaded with Parliament for the implementation of the Act by the Small Business Development Department. The Department solely focuses on small businesses and no attention is given to cooperatives. Moreover, SANACO would like more frequent meetings with the Small Business Development Portfolio Committee, so it may have access to monitoring and intervention where needed, should the Department fail to perform its mandate.

National Cooperative Association of South Africa (NCASA)

As a cooperative movement, the biggest challenge the National Cooperative Association of South Africa (NCASA) experiences, is the general lack of understanding of the character, nature, and purpose of cooperatives. For the longest time in South Africa, the dominant business legal entities have always been closed corporations and private companies. This resulted in legislation sitting alongside the National Cooperatives Strategy for over ten years, without being implemented.

Therefore, people, members, and government officials tasked with the support of cooperatives, and even leaders of cooperatives, have not been transformed to think cooperatively and collectively for the mutual benefit of everybody.

Along with this challenge, there is also a challenge regarding the perpetual use of private service providers supporting and establishing cooperatives. This results from these service providers not having an interest in the growth and development of the cooperative movement in the country, other than pocketing the money for the services it rendered, albeit inadequate. It lacks an understanding of the nature, the character, the purpose, and the culture of cooperation/cooperatives. The lack of support for cooperatives makes it difficult for cooperatives to be competitive against big private companies.

NCASA has prepared documentation which looks at formalising the informal sector, ensuring enterprise development, and to bring more people into the mainstream economy. The Association would like to present this to the Committee in the future.

Cooperative Banking Sector Strategy

Mr Tebogo Phadu, Implementation Steering Committee, Co-op Banking Sector Strategy, said the Steering Committee comprises volunteer representatives from 13 registered Cooperative Banking Institutions (CBIs). Its task is to ensure the implementation of the Co-Op Banking Sector Development Strategy for South Africa, namely, the Sector Strategy Implementation Steering Committee (SISC). The work of the Steering Committee is technically supported by experts from the Co-op Development Bank Agency, the World Bank, and the Dora Tamana Cooperative Agency.

These cooperative banks are financial cooperatives which are collectively owned and democratically controlled by their members. Members save together and lend to each other. Cooperative banks exist only to serve their members, not profit from their needs. It is regulated under the Co-ops Banks Act, the Co-ops Act, the National Credit Act, the National Credit Regulation, and others.

Cooperative legislation was passed in the year 2007, but a strategy for cooperatives, driven by the sector, is only being seen now.

To date, the cooperative sector represents 30 000 members, and together it mobilised over R400 million in savings, offering basic savings products. The total assets in the sector are over R500 million. Although cooperative banks can be found in all provinces, Gauteng and KwaZulu Natal have the highest concentration of cooperative banks.

Cooperative banking identity is a factor in South Africa. There is a need to raise awareness, as this is part of protecting the sector’s identity and strengthening government’s efforts to promote banking cooperatives.

The legal, regulatory, and supportive environment also proves to be challenging for the sector. The recent Cabinet decision to merge the Cooperative Development Bank Agency (CBDA) with other entities in the Ministry of Small Business Development, was done without any consultation or engagement in the sector.

This new function ought to be adequately resourced and strengthened to ensure it includes:

  • promotion, registration, and regulation of representative bodies; and facilitation, promotion and funding education and training to enhance the work of cooperative financial institutions
  • the accreditation and regulation of support organisations
  • provision of liquidity support to registered cooperative banks through loans or grants

These envisaged amendments in the Cooperative Banks Act, on the Cooperative Banks Development Agency (CBDA), must be aligned with the amended Cooperatives Act of 2013, which also refers to the National Cooperative Development Agency (NCDA) and other support institutions.

As a champion, the cooperative banking sector needs the government to champion and promote cooperative banking identity, especially with the identity of ownership and control it provides to its members. 

The South African Informal Trades Alliance

Mr Michael Mokgoja, Secretary General, South African Informal Trades Alliance, said the formation of the South African Informal Traders Alliance (SAITA) is a great achievement regarding the self-representation of informal traders, created within legislation which covers the informal sector industry. SAITA aligns itself with the motto “nothing about us without us". SAITA has affiliates across the provinces in South Africa and represents all informal traders, irrespective of the nature of the trade.

The main objectives of the Alliance include: (i) unionising the informal sector to speak with one voice; (ii) protecting the rights of informal traders; (iii) lobbying for resources and capacity building; (iv) protecting informal traders against harassment; and (v) bargaining on behalf of informal traders.

Some of the many challenges the sector faces, include social protection; harassment by law enforcement; access to infrastructure and storage; and red tape.

Street traders are constantly exposed to crimes such as abuse of regulations by officials, for example, bribery, harassment, and extortion in the form of demands for protection payments, confiscating informal traders’ stock without proper processes which follow the Promotion of Administrative Justice Act, business acts, and even street trading by-laws.

Moreover, the country’s regulatory environment is strict. The issue is not regulation per se, but rather the lack of official assistance, clarity, and coordination between government agencies and departments to assist informal traders.

These frustrating bureaucratic processes serve to discourage informal trading in the country. The current legal environment is not designed to support informal traders fairly and help them to grow, and all unnecessarily obstructive regulations should be eliminated. The informal traders’ organisations must participate in this to identify the red-tape regulations.

The relationship between informal traders and the Department of Small Business must be maintained and strengthened. The Department’s refusal to let SAITA represent a large number of informal traders at the Informal Economy Symposium for Small, Medium, and Macro Enterprises, which is a summit and awards event, communicates the Department has no mandate to work with informal traders. 

The national informal trader’s strategy needs urgent attention, especially since the plight of the Covid-19 pandemic saw many people lose jobs, resulting in many flocking into the informal trading system to survive.

Informal Economy Development Forum (IEDF)

Ms Rosheda Muller, IEDF, said the Informal Economy Development Forum (IEDF) bridges the gap between South Africa's informal economy and the formal economy, to transform the informal economy into the mainstream economy of South Africa. The leaders of the Forum have first-hand experience with the inequalities associated with the informal business sector. It has gauged the attitudes of authorities, and the IEDF recognised the need to remedy and improve the status quo.

By establishing a Council incorporating the presidents and/or chairpersons of all the informal business sub-sectors, the IEDF has managed to do what might previously have been impossible. The Forum can act legitimately and argue on behalf of the entire sector.

The services offered by the Forum include, but are not limited to:

  • Business development support services for Informal Trader Associations (ITA) and its members.
  • Coaching and mentoring in business growth, sustainability, and profitability.
  • Assisting businesses, non-profit organisations, and compliance.
  • Structure and governance training for the ITA.
  • Assistance with the implementation of financial management systems for ITA.
  • Financial education training for the ITA and its members.
  • Assisting with funding and lending of products.

Moreover, the Forum has a college that offers a wide range of skills programmes geared to fit the needs of the informal and formal economy alike.

The Forum has activities across South Africa, designed to try and change the economy as a whole.

The Forum appeals to government to implement policies and strategies at the heart of economic growth and are aimed at strengthening the informal trading sector. Recommendation R204 was adopted by the International Labour Organisation (ILO) in 2015, and it has been seven years since its adoption, yet the leadership of the informal economy in South Africa still has to teach municipal officials about the R204. This recommendation is related to the formalisation of the informal economy, which can be achieved by creating an enabling environment, social protection measures, and access to funding. 

Government programmes are too bureaucratic; the IEDF has a department which seeks to deal with the township and rural entrepreneurial programme. The findings show that even though informal businesses have complied with requirements, government still creates unreasonable red tape.

This is followed by a certification which government requires from informal traders to access funding programmes. It costs R3500. An informal trading startup will likely not be able to afford this, and it may feel despondent by the red tape associated with access to finance in government programmes.

The Small Business Development Portfolio Committee was urged to collectively engage the Department to unpack the red tape blocking the Forum’s access to finance, as it is becoming increasingly clear government cannot work in silos, and there is an ever-present need for government to engage organisations such as the IEDF.

Discussion

The Committee unanimously expressed appreciation for the presentations as they shed light on the different entities which exist to develop, strengthen, and support small businesses, informal traders, and cooperatives in the country. The Members admitted to having no adequate prior knowledge of these entities' endeavours and challenges.

Mr H Kruger (DA) noted concern regarding the Committee not being invited to meetings and indabas, to gain a better understanding of the informal trading sector, and to enable the Committee to engage and offer possible solutions to the informal sector and cooperatives. Freedom of trade is at the heart of economic growth.

Mr F Jacobs (ANC) acknowledged the importance of the cooperative and informal trading sectors. The ANC, which is the governing party, believes in a mixed economy, while acknowledging the impact of the state.

Cooperatives can help people create jobs as part of a complementary process. The South African government is a mixed market which allows for self-regulation, however, government has the role of creating an enabling environment which will ensure the success of cooperatives.

An example of how this was successfully done was during the apartheid era in South Africa, where the Afrikaaner community had thriving cooperatives. 

The Chairperson noted the need to support cooperatives, and informal traders, and commended all presenters for educating the Committee on the intricacies surrounding their work, challenges, and the recommendations which will see small businesses, cooperatives, and informal traders succeed in the South African economy. 

Responses

Informal Economy Development Forum

Ms Muller said the Forum focused on setting time segments of engagement and tasks with the Committee. This will assist with monitoring and evaluation of pressing Forum matters, as well as guide the challenges which have been highlighted. The relationship between the informal economy workers and the cooperatives needs to be formalised and made regularly. The proposal was for meetings and interactions to happen on a quarterly basis.

National Cooperative Association of South Africa

The National Cooperative Association of South Africa said the proposals submitted to the Committee were quite urgent, particularly the merger of cooperatives with other entities, as it may require amendments to the Cooperatives Bank Act and Cooperatives Act.

Moreover, there was an emphasis on many cooperatives in the banking sector which have received no government funding. In the past 14 years, all the progress made by these entities was from people's savings to develop their products, support their organisation, democratic governance, and so on.

There is little to show for the support stated in the Cooperative Banking Act, except for areas of training and education.

Aggressive support from government is needed to ensure the growth of the cooperative banking sector. This will see millions of South Africans, communities, and workers, own the banks. Uganda, Poland, the United States of America, and Kenya are key examples of countries which display the use and need for aggressive government support for cooperatives.

Cooperatives are a multi-sectoral endeavour that not only belongs to the Department of Small Business Development, but the entity has also engaged the Presidency to ensure support of cooperatives across the board. 

South African National Apex Cooperative

Mr Bale commended and agreed with the colleagues who made presentations noting it was an urgent issue for the Department to support the cooperatives.

The Chairperson of the Committee has the authority and power to call the Department of Small Business Development’s Head of Department and Director-General to get a solution to the highlighted challenges; chiefly the implementation of the Cooperative Act, and the Cooperative Banking Act. The Department needs to be held accountable, given timelines to implement the solutions, and be held accountable in the event of failure to act as mandated.

There is an urgent need for all entities to work together and to propel the works of the cooperatives forward and ensure their success.

The Chairperson noted disappointment in the Department's failure to implement legislation. She further echoed sentiments on the importance of unity to create a prosperous economy in South Africa.

The international efforts and alignment of the work of cooperatives and informal trading entities show the entities are alive. 

The Committee ensured the entities' efforts would be made to ensure regular meetings, improve collaborative work, and improve the effectiveness of the Department.

The minutes from the previous meeting on 16 November were adopted.

The meeting was adjourned.

 

 

 

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