Interaction with Department and stakeholders on cooperatives sector; Small Enterprise A/B: Legislative Programme; with Deputy Minister

Meeting report

Mr King Kunene, the Committee Secretary, announced that the Chairperson would not attend this meeting, as her husband passed away earlier in the week. A moment of silence for the Chairperson and her family was observed.

Mr F Jacobs (ANC) was elected Acting Chairperson for this meeting.

The Acting Chairperson said the Small Business Amendment Bill and its progress would be presented in the meeting. He expressed his excitement at the opportunity for the Committee to engage with various groups from within the cooperatives' sector.

Planning for National Small Enterprise Amendment Bill public hearings

Mr Kunene presented the legislative programme for public hearings to take place across the country on the amended National Small Enterprise Amendment Bill [B16-2023]. The process of engaging in public hearings had to take place with the involvement of the Committee at large before it got presented to the National Council of Provinces (NCOP). The proposed programme presented included a road show across various big municipalities in South Africa on weekends between 27 October and 25 January 2024.

Ms Telana Halley, Parliamentary Legal Advisor, provided the Committee with the legal guidance given on the production of this proposal. The Constitutional Court promoted public participation, and the legislation must go through various public hearings processes as mandated by the Constitutional Court. This Bill largely impacted the rural areas and those that had small businesses, and consulting these interest groups must be part of this process. Virtual public hearings were an option still being considered by the Department of Small Business Development (DSBD), or it could be suggested that the Committee attend to different provinces at the same time. She advised that the Committee had been guided by public participation guidelines when drafting this planning proposal.

Mr S Gumede, Committee Staff, said that once this programme was completed in January, the Bill would be presented to the NCOP.

Discussion

Mr H Kruger (DA) assumed that the public considered during this consultation would be small businesses. He suggested the Committee should consider holding the public hearings over weekdays instead of weekends in order to fit better into small businesses’ work schedules.

Mr V Zungula (ATM) queried as to whether this plan would be flexible, to accommodate the nature of Parliament calling various short notice meetings. He agreed with Mr Kruger’s suggestion that these hearings occur over weekdays. He requested that great emphasis be placed on the education of the public, as opposed to open-ended questions.

Mr M Mabika (DA) agreed that political principals would not be happy should some Members be absent during political programmes that occur over the weekends.

Ms L Lubengo (ANC) agreed to the principle of the road show occurring over weekdays, and commented that some Members may be predisposed to other commitments over weekends such as funerals.

The Acting Chairperson echoed the views of the Committee, and stated that the Committee agreed that this Bill must be concluded as a matter of urgency. The Bill must come out of meaningful engagements with the public to ensure that it was in its most effective form.

Ms B Mathulelwa (EFF) requested that the documents, planning, and the final agreed upon dates for these hearings be circulated to Members.

The Acting Chairperson clarified that this plan was the first draft of many that would be presented to Members, and it would be brought back to the Committee in future consultations.

The Secretary requested that the Committee avail themselves for an extraordinary sitting, considering that this meeting was scheduled to be the last [for the term].

Mr Kruger suggested that many Members were busy with political programmes leading up to the elections, so this meeting should occur after hours.

The Acting Chairperson handed over to the DSBD to present their views before the scheduled presentations.

Interaction with Department and stakeholders on cooperatives sector

Deputy Minister’s comments

Ms Dipuo Peters, Deputy Minister of Small Business Development, outlined the importance of supporting cooperatives, a mandate adopted when cooperatives still fell under the Department of Agriculture and the Department of Trade. The DSBD had established various cooperative support mechanisms, including grant and loan schemes, and some recently found themselves under review. The various stakeholders within the cooperatives sector would take Members of the Committee through these reforms, and indicate where the Department finds itself currently.

NCASA presentation

Mr Zacharia Matsela, National Chairperson, National Cooperative Association of South Africa (NCASA), clarified that the Association was founded in 1996, and now successfully covers cooperatives across all sectors of the country. It contributed to legislative change, policy formation and strategy planning, and engaged with various sector-leading organisations.

NCASA also worked with various partners:

• The disabled people of South Africa, training disabled people in the hair and beauty sector.
• National Women’s Coalition.
• The Traditional Authority - to incorporate rural youth in national programmes.
• The Institute for Cooperatives and Community Economic Development (ICCED), provides training in agriculture and housing.

It provides five pillars of support for cooperatives -- feasibility studies, training and development, a central cooperative fund, financial, administrative services, and technical expertise.

Current programmes underway include:

• Housing - establishing a needs assessment for housing projects in the country.
• Spaza shops - identifying 25 000 South African-owned spaza shops.
• Unemployment - NCASA was part of establishing the first township industrial container mall to facilitate economic opportunities in non-industrialised areas.
• Energy - NCASA participated in the Presidential Climate Change Commission (PCCC) Just Energy Transition dialogue to establish the role of the cooperative sector in the energy sector.
• Sustainability of the cooperatives - creating a digital database for cooperatives.
• Foster food security - it was in the process of launching the first national agricultural tertiary cooperative.

See attached for full presentation

Cooperative Banking Steering Committee presentation

Mr Sihle Ngubane, Treasurer, Savings and Credit Cooperative (SACCO), presented the findings of the Cooperative Banking Steering Committee.

He said the Steering Committee comprised representatives from 13 cooperative banking institutions (CBIs). Cooperative banks were a collectively owned and democratically controlled banking system. They were regulated under the Cooperative Banks Act, the Co-ops Act, and the National Credit Act, to name a few. A Co-op Bank requires a minimum of 200 members, with a minimum of R100 000 to form a common bond.

A strategy was formed in 2021 to encourage developmental growth in this sector. The co-op banking sector was currently in its nascent developmental stages roughly 15 years after its inception.

Challenges facing the sector included:

• The term co-op banking was used interchangeably and incorrectly. The name of institutions belonging under this sector was not clearly established.
• The Cabinet decision to merge the Cooperative Development Bank Agency (CBDA) with other entities in the Ministry of Small Business Development without consultation led to disputes.
• Development growth challenge - the sector has seen a relatively flat growth rate of 0.7% over the past decade.
• Slow membership growth.

The organisation's strategy was to serve 400 000 workers and mixed-income communities by 2030 through products and information technology(IT) systems, robust sources of funds, and digital delivery channels.

The strategy identifies the following as enablers to ensure a successful outcome:

• A secondary coop bank for scale;
• Access to financial infrastructures;
• Support for advocacy and training;
• Tiered licensing and proportional supervision.

See attached for full presentation

NSCB strategic plan

Mr Ngubane presented the National Small Business Chamber's (NSCB's) strategic plan.

Services offered by the NSCB included payment. investment and insurance brokerage services. It was currently following a four-stage work plan with the goal of proposing a national secondary cooperative bank. The Chamber was set to enter phase three of its work plan by the end of October. This phase included holding a formation meeting to elect board members and their committees, and registering the co-op with the necessary authorities. The NSCB had also committed itself to conduct training of board and committee members, and would continue to raise capital for this project between October and December.

German Cooperative and Raiffeisen Confederation

Mr Veit Gesenhues, Regional Programme Director of Southern Africa: DGRV, gave the Committee a short briefing on the work of the Confederation, and presented his recommendations to the Department to improve the effectiveness and sustainability of the cooperative sector.

The DGRV was an organisation funded by the German government working in Southern African countries alongside partners to develop the cooperatives sector. It works with various partners, but emphasises the work they do alongside traditional and Khoisan leaders, who often get side-lined in these processes.

DGRV works with a budget of €2.5 million, to be shared across multiple countries in Southern Africa, including Mozambique and Eswatini. It facilitates training and peer learning internationally and domestically, and identifies and works with vulnerable groups, including women, youth, and traditional structures.

Mr Gesenhues said data collection and interpretation were lacking within the sector. The latest numbers available within the sector were from 2008. There was a need for coordinated and unified support for the cooperative sector,  as cooperatives in South Africa were spread across multiple sectors. To ensure effective and necessary coordination, the sector required one dedicated department which could guide all cooperatives. The establishment of such should be led and informed by the leading cooperatives.

See attached for full presentation

NACSA and  SANTACO CO-OP

Mr Ashley Paulse, Managing Director, South African National Taxi Council (SANTACO) Co-op, National Association for Cooperatives of South Africa (NACSA, briefly addressed the Committee on the work being done within the taxi industry by the SANTACO Co-op, and the collaborative efforts of the NACSA.

He said that NACSA had used the opportunity provided by the DBSA when organising the cooperative conference in August, to make a formal submission to the Department with their own recommendations and demands. The cooperative movement as a collective, in reference to the Small Enterprise Amendment Bill, had identified certain gaps in the amended Bill. The cooperative movement needed to take a sector-based approach.

In a collaborative effort, NACSA, the South African National Association of Cooperatives (SANACO) and NCASA approached a key sector, the taxi industry, through SANTACO to use the cooperative movement to formalise the taxi industry. The collaborative organisation had sourced funding from overseas to facilitate this process, which was presented to the Minister and Deputy Minister. During October, there would be an extra R500 million budgeted for the SANTACO Co-op to begin launching pilot programmes, such as a new ticketing system.

Mr Paulse said the Bill refers to the cooperative movement as a small sector of the economy, and the cooperative movement wished to be considered a bigger priority within the economy. The Bill should acknowledge the work of the cooperative movement, which believes that the old Bill has not reached its full potential. 

He ended his presentation by commenting on the importance of establishing a cooperatives department under the ministry. He stressed the importance of coordination within the sector and ensuring that the sector was not undermined.

SANACO

Mr Lawrence Bale, President, SANACO, gave the Committee an impassioned speech, which included a list of requests directed towards the Department. He presented the work that the SANACO had been able to do, and mentioned a variety of international engagements that SANACO was represented at, including in Botswana and Russia.

He expressed his distaste at the involvement of the DGRV and other international organisations, saying they were interfering in the business of South African cooperatives, and described their interference as divisive.

He urged the DSBD to recognise the work SANACO had done to be self-sufficient and grow without much assistance. The Department’s role should be to consult cooperatives when issues arise, and call collective meetings, as opposed to drawing conclusions on the state of the cooperatives, as this further perpetuates divisiveness within the sector.

DSBD report-back on Cooperatives Policy Dialogue

Mr Vukile Nkabinde, Director: Cooperatives Business Support, DSBD, shared with the Committee the findings collected during the Cooperatives Policy Dialogue hosted by the Department from 30 to 31 August. The report-back presented the ten-year review of the integrated strategy, which had found an increase in international best practice and experience opportunities. Support programmes included:

• An increased supply of financial and non-financial support services.
• Creation of demand for small enterprise products and services.
• Improvement in the sustainability of cooperatives.

The Department of Small Business Development had agreed to produce the report on the Policy Dialogue, which should be completed by the end of September, as should the report on the ten-year review and the strategic framework for the reformulated cooperative strategy.

See attached for full presentation

Discussion

Mr G Hendricks (Al Jama-Ah) acknowledged the passion many of the presenters exerted, and thanked all the stakeholders for being present. He acknowledged that there were high expectations for the sector from the President of the country. He noted the slow progress of the cooperative banking sector, and stressed the importance of the cooperative banking system as a feature. He queried whether Islamic banking was an option to be brought on board by this sector. Would it be open to a no-interest feature within cooperative banking, because many small businesses found it very difficult to get out of debt while facing constantly growing interest rates?

Ms Lubengo referred to Mr Matsela’s presentation on the work of NCASA, which had claimed to have visited only Gauteng province. Would work be done to benchmark other provinces?

Ms Mathulelwa emphasised the need to prioritise cooperatives mainly to develop the small business sector. She acknowledged the words of Ms Lubengo, and requested that the Department ensure that they were gathering input from rural areas.

She also asked the Department and other governmental stakeholders to share in pushing the development of the cooperative banking sector. She acknowledged the words shared by Mr Paulse, and the work that NACSA was doing to incorporate the taxi industry into the formal cooperative model.

Mr H April (ANC) expressed his wish to see cooperatives grow, and acknowledged the ten years of work and progress achieved. This sector was particularly aimed at strengthening opportunities for the impoverished and marginalised communities. He assured the meeting of his commitment to ensuring that the high levels of inequality in South Africa were diminished.

The Acting Chairperson acknowledged that the Committee had not previously engaged often with the cooperative sector, and expressed his appreciation for the opportunity to lead this engagement. The identity crisis within the cooperative sector remained a prevalent challenge, and the DSBD must create a welcoming and enabling environment within which people could come together under the umbrella of the cooperative sector.

He requested that all presenters send in their presentations and written inputs on the concerns and issues raised in this meeting, so they could be circulated to Members of the Committee.

He acknowledged his concern at the slow growth present in the cooperative banking sector, and asked Mr Ngubane if the steering committee had identified the reasons for this. Why were cooperative financial banking institutions not growing and acquiring higher levels of membership?

He reminded the Committee, in response to Mr Gesenhues, of the opportunity the Committee had to visit Germany and view the sustainable cooperative model that was employed in that country. He stressed the importance of a self-sustaining business model, rather than treating the small business sector as a welfare-focused component of the economy. He acknowledged the inputs and recommendations given by Mr Gesenhues, and the call for more international and domestic benchmarking and sharing of best practices.

He responded to the words shared by Mr Paulse, and said that as the transport industry was largely black-owned, it needed to be formalised and be part of the economy to ensure its overall success.

Lastly, he declared that it was within the Committee’s mandate to ensure that it hears all the contributions given by stakeholders in the sector to foster and facilitate an environment of cooperation amongst cooperatives.

He gave the floor to the presenters to answer questions and give their closing remarks.

Stakeholders responses

DSBD

Mr Matsela stated in response to Ms Lubengo, Ms Mathulelwa and Mr Hendricks, that the Department would be visiting all the provinces. He acknowledged that in order to mirror the sustainability of the German cooperative sector, the DSBD had to develop better systems to sustain itself.

NSBC

Mr Sandile Ntshangase, Chairperson, NSBC, described his experience within the sector, and acknowledged that his experience on the ground spoke to how many small businesses and cooperatives did not know that cooperative banking existed as a resource available to them. He emphasised the role that the Department should play to aid the NSCB and other stakeholders in spreading awareness and promoting the opportunities and resources available to cooperatives.

DGRV

Mr Gesenhues thanked the Committee for the opportunity to share the work of the DGRV. He echoed other Members’ comments on sharing best practices, not only nationally and internationally, but also domestically.

NACSA

Mr Paulse declared NACSA’s openness to sharing much of its resources and contacts amongst other sectors and departments. Cooperatives and stakeholders should share and gain from each other as much as possible. NACSA was also in the process of launching their bank licence, to redirect foreign investments into the sector. He acknowledged how important the practice of sharing and learning from each other was, and thanked the Committee for opening their platform and facilitating this meeting.

SANACO

Mr Bale assured the Committee of his commitment to lobbying for, and sharing the work done within the sector. He confirmed that SANACO had its own share of loans for small businesses that were faster, and at lower interest rates than banks. He called upon the Department and the national government to consider the important work that SANACO was doing, and requested that the Department play a supportive and oversight role.

The Acting Chairperson invited the Deputy Minister to give some concluding remarks, as well as acknowledge the discussion that had taken place.

Deputy Minister’s closing remarks

Deputy Minister Peters noted the issue raised regarding the slow growth and progress of the cooperative banking sector, and called for the DSBD to support and lobby for existing structures, such as those within the cooperatives sector. She committed to having engagements in the future with the cooperatives that had not yet had personal engagements with the executive of the Department.

She acknowledged the suggestion by Mr Hendricks on the inclusion of the Islamic Bank within the cooperative banking system, and said this would be considered in future engagements.

Access to financial resources and markets continued to be a major challenge for all small enterprises and cooperatives, but the new strategy being developed by the Department would include all the concerns raised by Members.

The Acting Chairperson thanked Members of the Committee and the cooperative coordinating structures for having availed themselves for the meeting.

The meeting was adjourned.