Cooperatives, Economic and Empowerment Agenda Status Report briefing

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Trade and Industry

06 November 2007
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
7 November 2007
COOPERATIVES STATUS REPORT: BRIEFING

Chairperson: Mr B Martins (ANC)

Documents handed out:
Status Report on Economic and Empowerment Agenda: Cooperatives 2007/08

Audio recording of meeting

SUMMARY
The Department of Trade and Industry provided a Status Report on its Economic and Empowerment Agenda for Cooperatives. The mandate for cooperatives development was transferred from the Department of Agriculture to the Department of Trade and Industry in December 2001. dti in fulfilment of their mandate had coordinated with the national Departments to ensure design and implementation of support mechanisms for cooperatives.

The Department highlighted the challenges faced which included provincial leadership challenges and the fact that some provinces, national departments and institutions did not have a budget ring-fenced for cooperatives nor programmes dedicated to cooperatives and some national departments did not participate in the intergovernmental committee.

Members were concerned about the impact of the newly promulgated Cooperatives Act regulations. The Department stated that it was too early to tell the impact of the regulations but that through the coordination of the dti with other departments and agencies, cooperatives were benefiting from the strategies implemented.

MINUTES
Prof Turok B (ANC) noted as a matter of agency that the Committee should discuss the issue that had been raised by the Minister of Trade and Industry about the lowering of tariffs and the opening of markets. He noted that the Industry Policy in place provided a position on tariffs and that position should not be altered without consultation. Prof Turok suggested that a task force should be appointed from the members of the Portfolio Committee to engage the Minister and the dti tariffs committee on the Industrial Policy which should not be altered.

The Chairperson noted that the policy in place was good and that it should remain the same until stakeholders had a change of mind. He acknowledged the recommendations of Prof Turok and said that this would be dealt with after the presentation.

Status Report on Economic and Empowerment Agenda: Cooperatives 2007/08
Mr Sipho Zikode (Acting
DDG Enterprise and Industry Development Division, dti) provided the background information, stating that the mandate for cooperatives development had been transferred from the Department of Agriculture to the Department of Trade and Industry in December 2001. The Department of Agriculture had only promoted cooperatives in the agricultural sector. The Cooperatives Act No.14 of 2005 prescribes that dti should facilitate effective coordination and reporting mechanisms across all spheres of government with respect to promotion of cooperatives in the whole economy.

Mr Zikode affirmed that the Cooperatives Act was signed into law in August 2005, repealing the 1981 Cooperatives Act. The Cooperatives Act regulations ensured the proclamation of the Cooperatives Act was finalised on 2 May 2007 to allow effective implementation of the Act. He noted that new systems were launched by the CIPRO for registration of cooperatives and CIPRO was now working on decentralisation for registration of cooperatives.

Mr Jeffrey Ndumo (Chief Director: Cooperatives, dti) outlined the purpose of the Act. He noted that dti had established a Provincial Coordination Committee consisting of all 9 provincial departments of economic development chaired by the dti. All nine provinces attend meetings on a quarterly basis, rotating to ensure that all provinces are covered.

The dti established the inter-departmental committee to coordinate cooperatives development activities and programmes with key national departments. Twenty national departments were invited to participate in the Committee, 18 departments responded to the call. The Departments of Environmental Affairs and Forestry and Statistics SA did not respond.

Mr Ndumo noted that all nine provinces had already started developing strategies for cooperatives. Financial support for cooperatives was disbursed through the South African Micro Apex Fund (SAMAF), Umsobomvu Youth Fund and the National Empowerment Fund. Through the Cooperative Incentive Scheme (CIS) R4 million had been disbursed to 16 cooperatives and 303 members of the cooperatives received jobs. Under the Cooperatives Special Project Fund (CSPF) grants were used to provide start-up and expansion capital assistance. R8 million was disbursed to four small and medium cooperatives.

The Department, through the SMME & Cooperatives Targeted Procurement Programme, had designated ten products for the approval of Cabinet to be rolled out to other departments and provinces. Cabinet had approved the 30 days payment compliance regulation for the payment of goods sold and services rendered by small enterprise businesses. Mr Ndumo stated that non financial support was offered to cooperatives through the Small Enterprise Development Agency (SEDA) and dti’s Cooperatives Unit. This support was in the form of business support services, awareness support services and capacity building. Through the Umsobomvu Youth Fund 447 cooperative members were trained on governance, access to markets, business support services and facilitation of access to finance. Training of trainers was undertaken through a partnership between SEDA and Further Education & Training (FET) colleges.

Mr Ndumo noted that support was given to other national departments. In the Agriculture Department, 28 cooperatives and self-help groups were supported financially. Under the Housing Department 42 cooperatives were supported financially and non-financially (4 371 women, 2 729 men and 270 people with disabilities). Under Social Development Department 645 poverty relief projects owned by women had been supported financially and were about to be turned into fully fledged cooperatives. Mr Ndumo also gave a breakdown of support given to provinces. The only provinces that had not been provided with support as yet were North West and Eastern Cape.

Mr Ndumo highlighted the challenges faced by the Department with respect to coordination of cooperatives. These include:
- some provinces, national departments and institutions do not have a budget dedicated or ring-fenced for cooperatives,
- they also do not have programmes dedicated to cooperatives,
- some national departments such as the Labour Department, do not participate in the intergovernmental committee,
- provincial leadership challenges.

Mr Ndumo concluded by stating that the way forward was strengthening of existing coordination committees, establishment of coordination committees with all development institutions, assisting provinces to establish their coordination committees and finalisation of the national cooperatives strategy and implementation of proposed programmes.

Discussion
Ms M Ntuli (ANC) noted that the
Micro Agricultural Finance Institutions for South Africa (MAFISA) was being administered by Nedbank and that a moratorium had been put on MAFISA. She asked whether MAFISA was in a position to fund the Agriculture Department cooperative initiatives as alluded to in the presentation.

Mr Ndumo confirmed that there was a moratorium on MAFISA. He noted however that MAFISA was still in a position to advance loans. The Department was keeping track of the loans that it had advanced.

Ms Ntuli asked whether the R10 million loaned to the 42 cooperatives under the Housing Department had been loaned to individual members of the cooperatives or as a whole.

Mr Ndumo noted that the loans were loaned to cooperatives as juristic persons for the benefit of all the members of the cooperative.

Mr L Labuschagne (DA) asked why the government funded organisations that duplicated each others’ activities; examples being the Umsobomvu Youth Fund and Small Enterprise Development Agency.

The Chairperson stated that the application of policies laid out by the government for different organisations might have the same impact on the same market. However the benefits derived from these organisations were different.

Mr Sipho Zikode stated that these organisations complement each others’ services. SEDA gives non-financial support to the youth, in addition the Umsobomvu Youth Fund uses the SEDA provincial offices to reach out to the youth regionally.

Mr Labuschagne stated that it was worrying that some of the departments did not cooperate with the Department of Trade and Industry in the coordination of cooperatives, for example, the Labour Department.

Mr Zikode replied that the Department was not in a position to direct instructions to other department heads; it depended on the goodwill of these departments to cooperate in coordination. The Department had requested the Minister to engage ministers of other departments to ensure coordination of cooperatives within their departments.

Mr S Rasmeni (ANC) commended institutions like SEDA and Umsobomvu for working together to facilitate business support services for women, the youth and people with disabilities. The work of the Umsobomvu Youth Fund is parallel to that of SEDA since the Youth Fund uses SEDA offices which are rolled out in all the provinces.

Mr Rasmeni noted that the government was faced with challenges when it changed the policy of coordination of cooperatives by promulgation of a new law. Many members of cooperatives were looking for financial and non-financial support. The dti did not have enough power to coordinate cooperatives in the respective national departments. He requested a breakdown of the number of cooperatives to which funds were allocated.

Mr Ndumo stated that the Department’s Annual Report had given a breakdown of cooperatives that had benefited from the various schemes. If need be, the Department would send a more detailed report on this.

Mr Rasmeni stated that the support of cooperatives in Limpopo by the Department of Public Works (DPW) was another example of departments gearing towards big provinces. He asked what was the purpose of the research carried out on the DPW projects in that area.

Mr Ndumo noted that the research was carried out to identify which particular sectors had developed cooperatives that needed assistance from the Department.

Mr Rasmeni asked dti to outline how the Department of Agriculture (DOA) approached the issue of cooperatives. He had been informed that DOA did not give further assistance once they coordinated cooperatives to buy land using money collected from them.

Mr Ndumo stated that the cooperatives were assisted by providing both financial and non-financial support to them. Cooperatives were given start-up capital to start businesses and also trained on management, access to markets and other areas to enhance their capacity to do business.

Ms D Ramodibe (ANC) stated that local government was closest to the people and that dti should use local government to reach out to people. She asked how many people had benefited from the collaboration between local government and the dti.

Mr Ndumo replied that dti worked in collaboration with local government through forums to coordinate support services for cooperatives. Local government provided infrastructure for these cooperatives to conduct their businesses and assisted in the implementation of the Industrial Development Policy.

Ms Ramodibe asked for clarification on how money was allocated to each cooperative.

In response to Mr Rasmeni and Ms Ramodibe asking which cooperatives benefited from dti’s strategy, Mr Ndumo stated that dti was in the process of developing a web page which would show the figures representing the number of people and the cooperatives benefiting from the funds channelled through agencies and local government. The web page would link all national departments and agencies working with cooperatives.

Ms Ramodibe noted that two departments had not responded to the call to attend Interdepartmental Committee meetings. Did dti know the reasons for non-attendance?

Mr Ndumo replied that he could not identify reasons for the non-response of some departments. The issue of non-participants was taken on by the Minister for Trade and Industry at ministerial level. Through the Interdepartmental Committee, the Department would coordinate the implementation of support measures for cooperatives.

Ms Ramodibe asked whether the Department monitored how individuals funded through cooperatives applied the money, given that they had no business experience.

Mr Ndumo confirmed that the Department had various monitoring mechanisms to ensure the achievement of the objectives it had set out. The Department had designed various programmes to enhance their coordination with different agencies who were required to give non-financial support to cooperatives such as business support. The Department received reports and feedback from these agencies on how the funds were being implemented.

Ms Ramodibe asked for the list of the ten products approved by Cabinet.

Mr Ndumo gave examples of the products which included clothing, food and catering. He stated that the Department’s aim was to enhance the procurement of these products by creating markets for the cooperatives.

Ms Ramodibe asked what the composition of the 645 projects owned by women was.

Ms Patience Cidongo (Director; Cooperatives, dti) confirmed that the 645 projects owned by women were developed under the Department of Social Development to assist women in raising their households and these projects were to be converted to cooperatives. The Department of Social Development could provide more information on these projects.

In reply to Ms Ramodibe asking why some provinces were behind in the implementation of strategies on cooperatives, Mr Ndumo said that some provinces were slow with implementation of their strategies, however he did not have the reasons why this was so.

Mr S Njikelana (ANC) stated that history had determined that cooperatives were the best generators of jobs in an economy. He asked if dti involved municipalities and the South African Local Government Association (SALGA) in coordinating the establishment of cooperatives.

Ms Cidongo replied that the dti had partnerships with agencies such as SALGA to assist in the implementation of the support systems put in place for cooperatives.

Mr Njikelana was concerned that the National Empowerment Fund gave loans to cooperatives at prime rate.

Mr Ndumo replied that at the moment it was correct that the NEF charged prime rates on loans. The Department was engaged in discussions with the NEF on how to reduce the rates to be affordable to cooperatives.

Mr Njikelana stated that the R8 million disbursed through the Cooperative Special Project Fund was a small amount. He asked what approaches the Department had taken to ensure that other provinces rolled out comprehensive training like the KZN province.

Mr Ndumo replied that a number of FET colleges through SEDA had trained trainers. These trainers would be training people on cooperatives in the various provinces other than KZN.

Mr Njikelana stated that it would be helpful if dti identified the departments that had not taken up the development of cooperatives. He was concerned that there was no support for cooperatives in the North West and Eastern Cape provinces.

Ms Cidongo replied that the Department of Transport and National Treasury as sectors where the strategies for the coordination of cooperatives were at an infancy stage. It was true that the departments and provinces were slow on the implementation of these strategies, however, the momentum was picking up.

Mr Njikelana noted that there was no mention in the presentation of the role of the private sector in the development of cooperatives.

Mr Ndumo replied that the promulgation of the Cooperatives Banks legislation would ensure the involvement of the private sector in support of cooperatives.

Mr Njikelana asked whether the issue of cooperatives was included in the Economic Cluster decisions in Cabinet.

Mr Zikode noted that dti had recognised the importance of cooperatives in the Economic Cluster and as a result it was elevated to the Chief Directorate level. The dti had requested the Minister of Trade and Industry to engage other ministers in the various sectors to coordinate the support mechanisms in place for cooperatives.

Prof B Turok (ANC) stated that the promulgation of the new Cooperatives legislation took a lot of persuasion. He noted that there was a need for a culture of change for the development of cooperatives in the country. He stated that the Department should use the constituency offices to create this culture.

Mr Zikode reaffirmed the sentiments of both Prof Turok and Mr Njikelana that cooperatives were very important to the growth of the state’s economy. However one of the difficulties faced was that the Department was dealing with a sector that had the greatest number of uneducated members of the public. The Department needed support from all government departments.

Prof Turok stated that the Department should work together as a unit with other departments and agencies to enhance the establishment of cooperatives instead of working individually. He asked what impact the new Cooperatives Banks legislation would have.

Mr Ndumo replied that the Cooperatives Banks Bill was drafted by National Treasury and provided the framework for the registration and formulation of cooperative banks.

Dr P Rabie (DA) noted that the Committee needed more information on the reasons that departments such as Environmental Affairs did not respond. He noted that there were profound problems faced by people who tried to contact the Department of Environmental Affairs with respect to cooperatives. He asked what support was given to upcoming cooperatives by the Department.

Mr Ndumo noted that the Department assisted new cooperatives through two schemes: the Cooperative Incentive Scheme and the Cooperative Special Project Fund. Under the CIS small cooperatives would be given start up capital from R10 000 up to R300 000. Under the CSPF, small and medium-sized cooperatives would be given start-up and expansion capital from R300 000 up to R2 500 000. Of these figures, 60% would be in form of loans.

Mr M Bhengu (Inkatha Freedom Party) asked what the overall impact of cooperatives in the economy was.

Mr Ndumo replied that the impact of the new Cooperatives legislation could not be determined as the policies being implemented were still in their early phases. About 15 000 cooperatives had been registered and the Department was mobilising people to register more cooperatives.

Mr Bhengu asked if dti ensured that the trainers had a certain standard level of information that had to be communicated to members of cooperatives.

Ms Cidongo replied that general uniform documents were used by the trainers to educate members of cooperatives on how to comply with the Cooperatives Act.

Ms F Mohamed (ANC) asked how far Mpumalanga had gone with the drafting of its cooperatives strategy. She asked the Department to identify which women composed the 2 136 women granted loans by the South African Micro Apex Fund.

Mr Ndumo replied that the Department would provide the information at a later date as that data was not available at the meeting.

Ms Mohammed stated that there seemed to be a demand gap from sectors such as tourism. She was of the view that dti should advocate for development of cooperatives in such sectors.

Mr Rasmeni was concerned about the lending of funds by the
Savings and Credit Cooperative League of South Africa (SACCOL). He stated that SACCOL did not have lending capacity and asked why loans were not advanced directly by Umsobomvu Youth Fund.

Mr Ndumo replied that the Umsobomvu Youth Fund applied two mechanisms for the advancement of funds. The Fund would advance loans directly to
Savings and Credit Cooperatives and also use intermediaries such as SACCOL to advance loans.

Mr Rasmeni asked when the 30 days payment compliance for small business enterprises came was approved.

Ms Ramodibe noted that the 30 days wait for payment was too long a period for owners of small business enterprises.

Mr Zikode replied that the dti had requested the Economic Cluster committee to present the 30 days payment design to Cabinet. It was approved by Cabinet on 25 October 2007 and it was meant to benefit small enterprises who had to receive payment from departmental heads within 30 days. This was better than the periods these enterprises would have to wait prior to this policy. This compliance requirement would be included in the performance contracts of departmental heads.

Ms Rasmeni asked what the impact of the partnership between the Department of Trade and Industry and Department of Housing was.

Mr Ndumo replied that dti was coordinating the support of housing cooperatives through the Department of Housing. A strategy had been put in place for coordinating support mechanisms for housing cooperatives. Previously coordination was not systematic and partnering with the Housing Department ensured that the strategy was implemented effectively.

Mr Njikelana stated that the Department’s strategy was working. He advised the Department to encourage integration to ensure the value of cooperatives is shared, for instance, the Sector Education and Training Authority (SETA) training programme should be integrated into the strategy. He noted that the Provincial Constituency Offices (PCO) should be allowed to assist in coordination of the support mechanism for cooperatives. Through the PCO they were able to pull out 16 cooperatives to register themselves. The Department should involve several players in its strategy.

Ms Ntuli asked if dti had the capacity to coordinate other departments in cooperatives development and if they were in a position to monitor the support given by these departments.

Mr Ndumo replied that the Department had capacity to effectively monitor these departments. The dti had created cooperative advisory boards to advice the minister and departmental heads on the implementation of development mechanisms for cooperatives. Committees had been established which were used as platforms to monitor programmes undertaken by the various departments.

Ms Ramodibe stated that it would be helpful to the Committee if the dti would give a breakdown on the 270 Community Development Workers trained in the various provinces. This would assist them to monitor the efficiency of this training in their various constituencies.

The meeting was adjourned.

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