Cooperatives Act Regulations: briefing

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
14 June 2006
COOPERATIVES ACT REGULATIONS: BRIEFING

Acting Chairperson: Mr S Njikelana (ANC)

Documents handed out:
Department of Trade and Industry 0presentation
CIPRO presentation

SUMMARY
The Department of Trade and Industry and the Companies and Intellectual Property Registration Office met with the Committee to discuss aspects of the Cooperatives Act regulations. The legislation aimed to promote co-operative enterprises in all economic sectors. The registration process would be enhanced to facilitate accessibility and faster turn-around time. Information Technology would be incorporated to improve the system.

Members asked various questions including the links to the Small Enterprise Development Agency, support structures for cooperatives, the focus in the regulations on Black co-operatives only, the involvement of the rural poor in the process, the omission of juristic persons from the regulations, the type of voting system to be introduced, the combination of paper registration processes with the electronic version, the amount to be saved by each co-operative, the deadline for submissions and the benefits of reducing the registration fee.

MINUTES
Department of Trade and Industry (DTI) presentation
Ms Nweti Maluleke (DTI Chief Director) stated that the intention of the legislation was to promote co-operative enterprises in all sectors of the economy. Support measures would be installed across government under the co-ordination of the Department. The Department would ensure understanding of the legal framework at the local level. The registration process would be improved. All co-operatives would be audited after a three-year exemption period. An auditing capacity-building programme would be introduced.

Companies and Intellectual Property Registration Office (CIPRO) presentation
Mr C Nakedi (Information Officer) explained the co-operative application process. The model had been adapted from the Agriculture system. A key objective was to reduce the amount of paper by increasing electronic access. Local Government officials had been trained to implement the model. The Post Office network would be harnessed to improve accessibility. Deputy-Registrars had been appointed to facilitate decentralisation. Client services functions and the distribution systems were explained.

Discussion
Mr S Rasmeni (ANC) sought clarity on the lengthy time span to produce the regulations. He asked whether the Co-operative Unit established in the Department would operate in tandem with the Small Enterprise Development Agency (SEDA) at a regional level. A debate within the National Economic Development and Labour Council (NEDLAC) was necessary to guide the cooperatives development process. Co-operatives should receive support prior to registration. The Department would require an effective structure to co-ordinate implementation across government and support had to be maintained. The lengthy registration process had to be addressed. He asked how the fee system had been formulated.

Mr S Tsenoli (ANC) asked whether the registration process had been communicated to the National Co-operatives Association of South Africa. He asked whether support would include rescue missions where necessary. The specific reference in the regulations to Black people only could be construed as unconstitutional. Communication material had to be available in all languages.

Ms Maluleke responded that the issue of Black cooperatives only had been debated within the Committee and adopted previously. The regulation process was lengthy and capacity was needed to drive the process. The Department placed great emphasis on wide consultation and the developmental component. The relationship between the Unit and the SEDA would be strengthened and current structures would be realigned. The SEDA supported small-business development. The Committee should investigate what the SEDA had produced up to now. An incentive scheme in the business development unit was in place to promote the establishment of cooperatives. Ten cooperatives had presently been funded and Members would be invited to the launch. A pre-registration information manual was available and 2000 copies would be distributed. Other agencies would be asked to assist due to an explosion of registration requests. The Department did not have the capacity to co-ordinate the entire process and the cooperation of line function departments was crucial to the success of the project. The Department would report to Parliament on progress achieved. Capacity-building programmes were in place to build skills within the finance sector and promote micro-financing. Certain secondary structures within the system wanted to dictate terms to the Department and the issue would be addressed. Cooperatives would be supported for a certain period of time but support could not be permanent. Regulations had been communicated at NEDLAC.

Mr R Rapoo (CIPRO Registrar) declared that submissions had been received from various commercial cooperatives that expressed concern with the voting process and membership. The new voting system was one vote-one member that some cooperatives found problematic. The registration process within the financial sector was slow. A new Cooperatives Bank Act was required to allow financial cooperatives to loan money. Fees had been increased on an annual basis but the prevailing view was that R224 was prohibitive for small businesses. National Treasury would be approached to seek approval for a reduction in the fee.

Mr Nakedi added that an integrated voice recorder had been installed to provide information in all languages to would-be beneficiaries. The cost of the service provided would be analysed to ascertain a reasonable fee. 

Mr F Dwinger (CIPRO Legal Director) stated that new electronic systems were being tested to reduce the timeframe of the registration process. Information on the regulation of logos and intellectual property was mentioned on the CIPRO website and the present regulations would be added in due course. Support would be provided to cooperatives when in difficulty.

Ms D Ramodibe (ANC) noted that the registration system appeared inaccessible to the poor. The client services process was complicated and effective mechanisms were needed to reach the targeted groups.

Mr L Laubschagne (DA) noted that only natural persons could form cooperatives and asked why juristic persons could not be included.

Dr P Rabie (DA) declared that the weighted voting system was a concern as some components of a cooperative produced more than others.

Ms N Khunou (ANC) sought clarity on the registration system and asked when the system would be ready to operate. She asked whether registrars in the provinces would be monitored. The objectives of the Bill spelt out the need to promote the previously-disadvantaged sectors of society. 

Mr D Olifant (ANC) stated that the Act appeared unconstitutional in terms of the emphasis on Black cooperatives and the issue had to be revisited. The paper registration system remained vital for those individuals unable to access the electronic version.

Mr J Maake (ANC) stated that the Registrar in a province had to achieve a balance between being too restrictive or too permissive in order to prevent a surfeit of cooperatives.

The Chairperson asked whether the accounting system for cooperatives would be a customised system. He asked whether the Department of Communication would be included in the drive to improve accessibility. Clarity was sought on the term “hybrid mail”. He asked whether CIPRO would help to prevent the intervention of unscrupulous agencies in the registration process. Detail was sought on the role of government agencies at the municipal level and the total cost of registration. He asked for further information on the amount to be saved by each cooperative.

Mr Nakedi reiterated that the cooperative definition excluded juristic persons.

Mr Laubschagne asked why this was the case as closed corporations and other entities were prevented from forming cooperatives.

The Chairperson asserted that the Act had been promulgated and Members should now focus on the regulations.

Mr Nakedi stated that the one member–one voting principal would apply at the primary level. The stipulated 5% savings rate for cooperatives was the minimum and could be increased. The amount would be based on the surplus generated. The intention was to encourage savings within cooperatives to finance development initiatives such as capacity-building.

Mr Maake pointed out that state agencies had agreed to assist cooperatives while requesting that a portion of their surplus be set aside for development initiatives.

Ms Maluleke stated that cooperatives had a distinct way of operating and auditing would be conducted in accordance with a developmental auditing agenda.

Mr Dwinger declared that the accounting standards applied would be in accordance with the nature of the business.

Mr Nakedi stated that specialised staff would be recruited to train state agencies at regional level to assist with the registration process. The training manual was available on the website and a 24 hour call facility was in place. Application forms could be acquired on the Internet and the process could be completed in five hours. The status of a particular registration application could be assessed on a cell phone handset. ‘Hybrid mail” referred to bulk mail disseminated to an individual. A contract was in place with Metrofile to ensure management of paper documentation.

The Chairperson asked how long the registration process would take once the applicant had completed application forms in a CIPRO office.

Mr Olifant sought clarity on the registration time period in rural areas.

Mr Rapoo replied that access to the Internet would speed up the process. Access could be acquired in municipal offices and Post Offices.

Mr Olifant asked whether new facilities would be established in rural areas to assist the process.

The Chairperson sought clarity on the distinction between municipalities and agencies in terms of participation in the implementation process and asked whether a paypoint could be used.

Mr Rapoo stated that a relationship had developed with the SA Revenue Services and CIPRO agents would be included on site to provide assistance. Skilled staff would also be sent to rural areas to guide clients in the application process.

Mr Laubschagne asked whether rural inhabitants could still post an application form to CIPRO and receive a certificate in the post.

Mr Rapoo confirmed that the postal service would remain.

Mr Nakedi stated that fraud was a key concern of CIPRO and revenue stamp usage was abolished in 2004 to combat incidences of illegal activity. The removal of intermediaries in the process would help to reduce levels of fraud. The new Information Technology system would also be of benefit. Interaction with Local Government would contribute to enhanced accessibility. Approximately 68% of lodgements were via the electronic route. 

Mr Dwinger declared that market forces should determine the number of cooperatives in existence and no attempt should be made to limit the number. The 24^th June 2006 was the cut-off date for submissions. Cooperatives had three years to conform to the new regulations. Amendments to the Act could be proposed if problems persisted.

Mr Maake noted that the restriction to Black cooperatives only appeared in the regulations and not in the Act. He proposed that the definition be removed from the regulations.

Ms Maluleke stated that the deadline for submissions was flexible and could be extended if necessary. A Sectoral Associations meeting would be held next week where the deadline would be discussed.

Mr Rasmeni asked whether extra time could be granted to accommodate organisations and cooperatives that had not been reached up to now.

Dr M Sefularo (ANC) advocated that implementation of the regulations should not be delayed to allow for the benefits of the legislation to be conveyed to the targeted groups.

The Chairperson suggested that the present cut-off date for submissions should remain and the Department should explain the roll-out plan to Members in due course. Consultation with National Treasury was important to facilitate a reduction in the fee structure. Intergovernmental cooperation would assist in speeding up implementation.

The meeting was adjourned.