In this meeting, the Department of Small Business Development briefed the Portfolio Committee on Small Business Development about the memorandum of understanding it had signed with the German Cooperative and Raiffeisen Confederation (DGRV), the apex body for German cooperatives.
The memorandum was signed in August 2022 and would be in effect until December 2024. It did not create any obligations for either party, but it formalised the partnership between the Department and DGRV in seeking to support the development of cooperatives at the municipal level. The Department believed that the agreement presented important opportunities and it recommended that Department officials should have the opportunity to visit Germany to strengthen the bilateral relationship and learn about the German cooperatives model. In addition, the Department believed that it should cooperate with DGRV to support the development of an apex body for South African cooperatives.
Members welcomed the memorandum of understanding and undertook to support its implementation. They asked the Department about the current failure rate of cooperatives and the Department’s plans to improve its presence in rural areas.
The Committee also briefly discussed its plans to undertake a study tour in Germany, which, if approved by Parliament, would take place from 18 to 24 June.
The Chairperson said that the purpose of the meeting was to receive a briefing from the Department of Small Business Development (DSBD) on the memorandum of understanding (MOU) between DSBD and the German Cooperative and Raiffeisen Confederation (DGRV).
The Committee noted apologies from the Minister and Deputy Minister of Small Business Development and the Director-General of DSBD.
DSBD briefing: Memorandum of understanding with DGRV
Mr Vukile Nkabinde, Director: Cooperatives Business Support, DSBD, said that he had been appointed to his current position on 1 April when his directorate was created, but he had worked on cooperatives policy for many years.
He said that DSBD’s current strategy for cooperatives, which had been in effect from 2012 to 2022, required review in preparation for developing a new strategy. DSBD was collaborating with its European Union partners to conduct a gap analysis to enhance its strategy for the next phase.
Content of the MOU
In August 2022, DSBD signed an MOU with DGRV, which formalised the partnership between the two agencies and their shared commitment “to jointly embark on supporting and facilitating the development” of cooperatives at the level of local government. The MOU would be in effect until December 2024, and, through a steering committee, the parties would meet on a quarterly basis during that time.
The MOU set out various shared principles to underpin the partnership and various activities for cooperation. Subject to further planning and the availability of funds, DGRV was prepared to support DSBD’s work through measures including:
- Facilitating and providing training for officials, leaders, and cooperatives;
- Providing technical and non-technical services at the costs of DGRV or on a shared-costs basis;
- Providing the train-the-trainer and mentoring of cooperative representatives;
- Assisting with inputs to newsletters, articles, and reports; and
- Helping facilitate pre-formation workshops with municipalities and identified groups.
DSBD’s own responsibilities were also set out, and would include identifying districts and municipalities for support; coordinating training workshops and logistics; and facilitating data collection and reporting.
The MOU did not create any financial or other obligations for either party.
DSBD recommended that:
- DSBD officials working with cooperatives should visit Germany to gain exposure to the German cooperatives model and strengthen the bilateral relationship;
- DSBD and DGRV should cooperate to support the development of an apex body for cooperatives in South Africa; and
- There should be an urgent meeting on implementing the MOU, including the steering committee.
On the second recommendation, Mr Nkabinde said that DSBD acknowledged that the development of an apex body should occur organically. However, learning from the German experience of encouraging and strengthening its apex body would be useful.
(See presentation for further details.)
Mr H Kruger (DA) was pleased to hear that the agreement existed. Efforts to reach such agreement have been ongoing since 2014, but progress has been slow.
Mr Nkabinde agreed. There had always been a relationship between DGRV and DSBD, although it was not always formalised through an MOU. The parties had formerly participated in joint activities, such as workshops. With the MOU now in place, DSBD would have a clear programme of action for its relationship with DGRV over the next two years.
Mr Kruger said that there was a high failure rate in the early 2000s when cooperatives were still under the Department of Trade and Industry. Approximately 75% to 80% of cooperatives that received government funding failed within their first year. What was the current failure rate for cooperatives under the new strategy? Had the situation improved, or were communities relying on government grants merely to sustain themselves, instead of using them to initiate business ventures?
Mr Nkabinde replied that it had been interesting to follow up on the cooperatives supported by the Cooperative Incentive Scheme (CIS). DSBD had conducted site checks to see whether the cooperatives were operational, and almost 80% remained operational, even if not in peak condition. It had emerged from engagements with the Companies and Intellectual Property Commission that not all of the cooperatives were submitting annual returns, which might give the impression that they were not functioning – but after conducting on-site visits, DSBD had found that most were operational.
He said that the existing cooperatives strategy had been in place from 2012 to 2022, and the aim for the current financial year was to take stock and review how DSBD had fared in implementing that strategy. The strategy had four pillars: access to markets, sustainability, capacity, and finance. The CIS, now called the Cooperatives Development Support Programme, was only one component in implementing such a strategy. Other components also had to be addressed. DSBD had to strengthen its own institutional arrangements and mechanisms. The former cooperatives directorate, located under the Department of Trade and Industry, had had about five directors, with additional staff for the CIS. His directorate at DSBD was newly established and it had to meld policy and practice.
The directorate planned to strengthen its internal capacity while reviewing the success of the existing cooperatives strategy. DSBD was initiating a strategic development process for cooperatives, which would enable it to improve its delivery model in the next financial year. It had engaged with some progressive and developmental non-profit community organisations, focused on such matters as youth development and cooperative support, and it followed up on that work. By late July or August, DSBD planned to complete a draft review paper or stakeholder dialogue with some of the provisional conclusions from its strategic review to facilitate consultation toward developing a concept document and, ultimately, a new strategy for cooperatives.
Ms B Mathulela (EFF) said that many cooperatives faced challenges in acquiring funds, particularly in regions such as Limpopo and KwaZulu-Natal, where there was a lack of relevant offices to provide assistance. The Committee had also heard about problems with red tape. Were there any plans to visit such areas physically to reinvigorate the spirit of existing cooperatives and offer financial support to those that needed it? What did DSBD plan to do to support cooperatives? She was concerned about the deterioration of existing cooperatives due to insufficient resources and inadequate government support.
Mr Nkabinde replied that one of the challenges contributing to the failure rate of cooperatives was that successful cooperatives required energy and entrepreneurship that had to arise organically, even if various external funding sources were available. However, he agreed that DSBD had to support existing cooperatives that were struggling. He requested that Members inform the DSBD if they became aware of any cooperatives struggling to function and needed support.
On DSBD’s plan for supporting cooperatives, he said that DSBD’s targets in the annual performance plan included the goal of providing financial and non-financial support to 250 cooperatives. In addition, outside of the annual performance plan, DSBD had developed a plan of action for an awareness campaign, in terms of which DSBD intended to visit all nine provinces, in collaboration with the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency.
As Members were aware, DSBD was structured such that it was highly reliant on provincial departments for its presence in the provinces, and it was important to strengthen that interface. Through its interface with SEDA, DSBD had a presence in most districts, and it hoped to establish a presence at the municipal level through information offices and so on. Members were also aware of DSBD’s plan to assign district coordinators, who SEDA would host in municipalities without the capacity to establish a designated DSBD office.
He said that DSBD welcomed the Committee’s input on all of these matters. DSBD was willing and eager to expedite the implementation of its MOU with DGRV. The MOU was not just a matter of a handful of training workshops – it carried broader opportunities. A lack of capacity at the municipal level was a major challenge, since national plans were often devised under the assumption that municipalities would have the capacity to implement those plans. The partnership with DGRV could help close that gap.
The Chairperson asked Members to consider DSBD’s recommendations carefully. The MOU needed the Committee’s support, and the Committee could effectively convey a message about the importance of accelerating implementation and encouraging the development of an apex body.
Mr Kruger said he would like to have a one-on-one discussion during the upcoming constituency period to discuss DSBD’s program, especially its program in rural areas. Like him, the Chairperson was from Mpumalanga, and they both understood the need to serve rural communities, so he would like to strategise about how to do so.
The Chairperson said that she was optimistic about DSBD’s endeavour to ensure the survival of cooperatives. She wished DSBD good luck and urged it to act swiftly. The Committee’s proposed benchmarking research would also assist DSBD.
Mr Nkabinde asked whether the Committee could share further information about its benchmarking plans. He understood that the Committee planned to take a study tour. When would the study tour take place?
Mr Sibusiso Gumede, Committee Content Advisor, confirmed that the Committee planned to undertake a study tour in Germany. Discussion of the tour was the next item on the agenda.
Committee matters: Study tour and Committee minutes
Mr King Kunene, Committee Secretary, said there was a plan for the Committee’s proposed study tour. The Committee had initially received assistance from the Department of International Relations and Cooperation (DIRCO), but it had learned at the end of April that DIRCO would no longer facilitate study tours for other government institutions. Fortunately, due to the MOU between DGRV and DBSD, the Committee was able to approach DGRV for assistance in developing the programme and facilitating the study tour. According to parliamentary procedure, the Committee had to submit two applications – the political application and the funding application – and it was still awaiting approval of the former.
The tour was scheduled from 18 to 24 June, which was the first week of the constituency period. The Committee could invite DSBD officials who worked in the relevant areas. As soon as the tour was approved, the Committee would invite DSBD to join the delegation, though DSBD would have to fund its own participation – Parliament would only provide funding for Committee Members.
Mr Nkabinde said he would follow up with Mr Kunene about DSBD’s participation in the tour.
The Committee adopted the minutes of its meetings on 24 May and 31 May, with minor corrections.
Mr Kruger asked about the Chairperson's effort to enable more Members to accompany the delegation to Germany.
The Chairperson replied that the Committee had made the request but was awaiting approval from the Speaker. Both applications had been submitted.
Mr G Hendricks (Al Jama-ah) was concerned that Members might not have sufficient time to obtain visas if the trip was approved.
The Chairperson agreed it was a concern. The Committee followed protocol and, if necessary, would develop alternative strategies once the trip was approved.
The meeting was adjourned.
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