ATC240223: Report of the Portfolio Committee on Small Business Development on Its Study Tour to Germany to Learn On Cooperatives Development Experience from 19 - 24 June 2023, Dated 21 February 2024
Small Business Development
Report of the Portfolio Committee on Small Business Development on Its Study Tour to Germany to Learn On Cooperatives Development Experience from 19 - 24 June 2023, Dated 21 February 2024.
The Portfolio Committee on Small Business Development (“the Portfolio Committee”) having embarked on an international study visit to Germany from 19 - 24 June 2023, reports as follows: -
1. INTRODUCTION
The Portfolio Committee on Small Business Development travelled to Berlin in Germany during 19 - 24 June 2023 in partial fulfilment of its strategic objectives relevant to the international study tours, capacity building, training, development, legislative and policy construction as well as sharpening oversight over the executive. The study tour was aimed at providing members of the Portfolio Committee and staff an international viewpoint on cooperatives development, to obtain an in-depth knowledge of the sector, to learn how Germany experience could provide an experimental model for South Africa to emulate in order to amplify its efforts to grow the cooperatives movement, to observe and acquire basic knowledge of a functioning cooperative industry, and to get insight of the past and present legislation and regulatory practices that have effectively generated an ecosystem that allows German cooperatives sector to thrive.
Furthermore, the study tour objectives were also aimed at enhancing knowledge and adaptation of good practices for improved awareness at national level concerning practical measures desirable to create much-needed enabling environment for cooperatives. It was essentially a benchmarking exercise to gauge the level of German’s cooperatives sector contribution to the gross domestic product (GDP) of the country, employment creation, export earnings, new products line development, energy production and development to name the few compared with that of South Africa. This is to ensure that best practices are assimilated or replicated into South Africa’s cooperatives development approach that is owned and controlled by its workers, democratically, from bottom up.
The endemic and obstinate challenges facing the South African economy are high levels of unemployment, low economic growth and worsening income inequalities. World Bank ranks South Africa as the most unequal nation in the world, with race playing a determining factor in a society where 10 percent of the population owns more than 80 percent of the wealth. The aftermath of the covid-19 pandemic exposed the country's economic vulnerability and the underlying structural flaws in the economy – a warning to policy authorities that it cannot be business as usual.
Following its visit to the country in March 2023, the delegation from International Monetary Fund ("IMF") concluded that South Africa's economic and social challenges are mounting. Some of the foremost suggested interventions were for the country to address longstanding structural impediments to growth. The SMME and co-operatives sector holds the potential. A vibrant SMME and co-operatives sector has the prospect of creating more employment opportunities and generating higher production volumes. Many economies have identified the sector as a productive driver of inclusive economic growth and development.
However, compared to its peers in Africa and beyond, South Africa is lagging in this area e.g. the Kenyan SMME and co-operatives sector creates 80 percent of employment while in South Africa the figure dwindles to just below 50 percent. In terms of the sector's contribution to Gross Domestic Product ("GDP"), South Africa is projected at just over 34 percent while Kenyan authorities estimate that SMME and co-operatives sector constitute 40 percent of the country's GDP. According to Organisation for Economic Co-operation and Development ("OECD") SMME and Entrepreneurship Outlook, despite being an industrial country with GDP and exports constituting a large share of industrial production, Germany's SMME sector contributes 59 percent to employment, 11 percent less than OECD average of 68 percent.
Germany's SMME sector, often referred to as 'Mittelstand', is extremely diverse and plays a defining role in the country's economy. The Federal Ministry for Economic Affairs and Climate Action, an equivalent of the Department of Small Business Development, is deliberate in its efforts to support Mittelstand enterprises to continue to play a meaningful role in Germany's economy. The Ministry is pursuing what it calls "a contemporary SME policy that seeks to create a positive start-up and business environment and encourages companies to adopt strategies for long-term success". It is in that respect that the Committee embark on an international benchmarking exercise to gauge the level of Germany's SMME and co-operatives sector in particular, its contribution to the GDP of the country, employment creation, export earnings, new products line development, research and development to name the few compared with that of South Africa. This is to ensure that best practices are replicated into South Africa's SMMEs and co-operatives development approach.
2. BACKGROUND
From its inception in 2014, the Committee had acknowledged that SMME and co-operative enterprises cuts across all sectors of the economy. In an endeavour to assist the Department to find its feet, it had contended with the overriding question of – "where will the jobs come from", especially in an era where the workforce is automating faster than expected and displacing millions of workers. It concluded and took a pragmatic view that from processing, education, health, green energy, infrastructure, and digital sectors, the jobs of tomorrow may emerge in several growing sectors of the global economy. It accordingly recommended to the Department to target research and investments, particularly to sectors and policies that guarantee job creation for youth, women, people leaving with disabilities, and township and rural enterprises.
The Committee itself adopted a sectoral methodology in its approach by giving a considerable amount of time to financial inclusion, agriculture and agro-processing, energy as well as wholesale and retail sectors among others. For instance, the Committee's stance on access to finance has been steadfast. It called for regulatory bias in the allocation of credit to SMMEs and co-operatives, held Development Finance Institutions ("DFI") workshop, advocated for Co-operative Financial Institutions ("CFIs") and Co-operative Banks to be utilised strategically as a conduit to enhance financial inclusion and potential funders for SMMEs and co-operatives, and further recommended the amalgamation of National Treasury Co-operative Banks Development Agency ("CBDA") and Small Enterprise Finance Agency ("Sefa") into a single agency, Small Enterprise Development Agency ("Seda").
While in 2014, and 2015 onwards, the Committee held a series of engagements with the Department of Energy and Eskom to discuss several policy developments emerging at the time e.g. manufacturing, supply and delivery of solar water heaters ("SWH"), Integrated Energy Centre's, Independent Power Producers, electrification program i.e. grid projects and solar home systems. As a result of those interactions the Department of Energy identified these multibillion-rand interventions as projects for potential cooperation and collaboration with the Department of Small Business Development. As the electricity demand continues to outstrip supply, the country's economic prospects look gloomy. The escalating electricity crisis is causing untold devastation across all social and business activities in the country. With the United Nation projections that 90 percent of the world's electricity can and should come from renewable energy by 2050, SA is gradually liberalising the energy sector for small-scale players to come on board. Despite the present challenges, exciting new prospects await the SMME and co-operative enterprises in the generation, storage and distribution of electricity.
The Committee, in the 5th Parliament, after visited Mondragon Corporation in Basque Country and Spain, recommended further visit to Germany. Germany was opted based on its similarities with South Africa on its historical background. After the second world war, where Germany was crushed, it emerged economically to be the first world, having embraced cooperatives sector as an instrument and strategy to grow their economies, how their cooperative models differ from ours, what are the areas of strength that we can replicate here at home, and implementation of their bottom-up models, being community rather than government driven. The travel approval was therefore subjected to conditionalities that a multi-party delegation of maximum of five (5) members, with one (1) support staff should travel for a period that does not exceed five (5) days excluding travel days.
2.1 Rationale for the Study Tour
The choice of Germany was interesting to the Committee for several reasons relative to its constitutional mandate that is to legislate and oversee the executive. Germany, officially the Federal Republic of Germany, is a country in Central Europe. The Chancellor of Germany, formally the Federal Chancellor of the Federal Republic of Germany, is the head of the federal government and the Commander in Chief of the German armed forces during wartime. The Chancellor is the Chief Executive of the Federal Cabinet and heads the executive branch. The Chancellor is elected by the Bundestag on the proposal of the federal president and without debate. The current officeholder is Mr. Olaf Scholz who was elected in December 2021, succeeding Ms. Angela Merkel. Germany is situated between the Baltic and North Seas to the north, and the Alps to the south. Its 16 constituent states are bordered by Denmark to the north, Poland and the Czech Republic to the east, Austria and Switzerland to the south, and France, Luxembourg, Belgium, and the Netherlands to the west.
The nation's capital and the most populous city is Berlin and its main financial centre in Frankfurt, is the largest urban area in the Ruhr. Germany is a great power with a strong economy. It has the largest economy in Europe, the world's fourth-largest economy by nominal GDP and the fifth largest by Purchasing Power Parity ("PPP"). As a global power in industrial, scientific, and technological sectors, it is both the world's third-largest exporter and importer. With a population of 80 million according to the 2011 German Census, rising to 84 million as of 2022, Germany is the most populous country in the European Union, the second-most populous country in Europe after Russia, and the nineteenth-most populous country in the world. Germany has a social market economy with a highly skilled labour force, low levels of corruption, and a high level of innovation.
Germany is part of the European single market which represents more than 450 million consumers. In 2017, the country accounted for 28 percent of the Eurozone economy according to the International Monetary Fund. Germany introduced the common European currency, the Euro, in 2002. Its monetary policy is set by the European Central Bank, which is headquartered in Frankfurt. The automotive industry in Germany is regarded as one of the most competitive and innovative in the world and is the sixth largest by production as of 2021. The top ten exports of Germany are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, rubber, and plastics.
2.2 BILATERAL RELATIONS WITH SOUTH AFRICA
South Africa is Germany's most important partner in Sub-Saharan Africa ("SSA"). The German-South African Binational Commission, which has met since 1996, provides the framework for bilateral cooperation. Many German companies value South Africa as a gateway to other African markets in the region. South Africa and Germany are both members of the World Trade Organisation (“WTO”) and G20. An Economic Partnership Agreement ("EPA") has been in force between the European Union ("EU") and six states in southern Africa (including South Africa) since October 2016. It offers the countries concerned broader, tariff-free access to European markets. That could further expand trade. Around 74 percent of foreign direct investments into South Africa come from the EU. Germany was South Africa's second biggest bilateral trading partner in 2017 (behind China and ahead of the United States). Presently, Germany is the largest trading partner behind China and the United State.
The Committee's visit to Germany centred on the two key sectors of interest to SMMEs and co-operatives e.g. co-operative banking and energy sectors. On energy, South Africa and Germany are going through a similar or identical transition from coal to clean energy. Germany primarily sources its energy from fossil fuels, wind, nuclear, solar, biomass and hydro. However, the country is embarking on what it calls the "Energiewende", simply meaning, energy transformation and energy turnaround. While co-operatives are the economic form with the most members in Germany and are part of the intangible cultural heritage. The co-operative banking sector is one of the three pillars of the German banking industry alongside the public and private sector banking. For that reason, the Committee planned to visit the following organisations and one Ministry –
- The Federal Ministry for Economic Affairs and Climate Action as well as SME Advisory Board [Mittelstandsrat];
- Federations or Associations of SMMEs [The German Mittelstand];
- Co-operative Apex body viz Deutscher Genossenschafts- und Raiffeisenverband ("DGRV");
- The National Association of German Co-operative Banks [Bundesverband der Deutschen Volksbanken und Raiffeisenbanken ("BVR")];
- The Co-operative Banks [Raiffeisenbanken and Volksbanken];
- Small enterprises and co-operatives supplying energy to the grid (Stadtwerke).
Exports from German to South Africa totalled 0.8 billion euros in 2021. As a result, South Africa is the top-performing African nation in German exports. There are presently 1077 business connections between German and South Africa firms. Automobiles and auto parts, machinery, raw materials, non-ferrous metals, and food made up the bulk of Germany's exports. About 600 German companies have branch offices located in South Africa and projected to be providing employment opportunities to more than 100 000 employees.
2.2 Study Tour Objectives
The primary objectives of the study visit were to:-
- Provide members of the Committee an opportunity to study German model of cooperatives development including but not limited to the formation of cooperative enterprises, importance of training before registration, governance, operational and financing models.
- Acquire better understanding of the German Cooperative ecosystem including types of cooperative enterprises that can be formed.
- Obtain knowledge about legislative prescripts, the current policies, acts and strategies that has helped shaped German burgeoning cooperatives movement.
- Help members of the Committee draw lessons concerning the nature and types of cooperatives i.e. housing, financial, worker and agricultural that can be formed.
- How cooperative enterprises may cushion workers against cyclical retrenchments wherein struggling enterprises avoid layoffs by transferring affected workers to cooperative enterprises that are doing well.
- Provide participants with the opportunity to get to know and compare with own experience, the strategies, and practices of developing pulsating cooperatives movement.
- To learn techniques of product and service selection by cooperatives which should ideally be informed by comparative and competitive advantage of each cooperative, exportability, profitability, and productivity.
- Develop new contacts and explore opportunities of cooperation with the German government and the DGRV.
- Jointly and collaboratively develop an institutional adaptation to inculcate cooperative culture into social and community development.
2.3 Organisation of the Study Visit
The visit was a five (5) day study tour held from Monday, 19 to Saturday, 24 June 2023 (excluding travel days) in Berlin, Germany. The Committee interacted with several individuals, stakeholders, institutions and representative from the Committee on Economic Cooperation and Development of German Parliament on different days of the visit. The whole visit was facilitated by both the South African Embassy and Deutscher Genossenschafts- und Raiffeisenverband e. V. / German Cooperative and Raiffeisen Confederation (DGRV).
2.4 Composition of the Delegation
As alluded to hereinabove number of members was limited to five (5). The delegation comprised of members of the Portfolio Committee on Small Business Development, and one Parliamentary Officials as follows:-
2.4.1 Members of the Portfolio Committee on Small Business Development
Ms VS Siwela MP (ANC) Leader of the delegation
Ms KB Tlhomelang MP (ANC)
Mr F Jacobs MP (ANC)
Mr J de Villiers MP (DA)
Ms B Mathulelwa MP (EFF)
2.4.2 Parliamentary Officials
Mr NK Kunene Committee Secretary
2.4.3 DGRV Official
Mr VH Gesenhues DGRV
2.5 Terms of Reference
In accordance to the Terms of Reference (TOR) and previous study tour practice, the study visit had to focus on several areas, however, due to unforeseen circumstances, the following areas were visited:-
- South African Embassy at 18 Tiergertenstrasse, Berlin.
- Deutscher Bundestag (German parliament) in Platz der Republik for Committee on Economic Cooperation Development and Advisory Board (BMWK).
- Deutscher Genossenschafts- und Raiffeisenverband e. V. (DGRV).
- Energicautarkes Dorf Feldheim.
- Mockernkiez Housing Cooperative.
- Windpark in Nordhessen
- Weiberwietschaft e.G. (Women Owned Cooperative) in Berlin.
The two Cooperatives Banks could not be visited as representatives could not make it due to unforeseen circumstance. However, an undertaking was made that a virtual meeting could be facilitated if the Committee wishes to discuss further.
3. OVERVIEW OF MEETINGS
The Committee undertook a series of visits to several different organisations and cooperative enterprises over the course of the week, brief details of each visit along with the insights of the participants is outlined in the following section.
DAY ONE - MONDAY, 19 JUNE
3.1 Visit to the South Africa Embassy
The first day of the visit was dedicated to introductions, and meetings with the South African Embassy and Deutscher Bunderstag Committee on Economic Cooperation Development. Upon arriving at the South African Embassy, jointly the Portfolio Committee on Small Business Development and the Portfolio Committee on Women, Children and Persons with Disabilities, were warmly welcomed by His Excellency, Ambassador Stone Sizani. Joining the meeting were Messrs. JT Kemp, Berlin Fist Secretary Political; W Van der Westhuizen, Counsellor Political; LM Joyce, Berlin Counsellor Political and Mabuza, Secretary Political. The engagements covered introductions by all members of both Committees, various political features of Germany, political parties composing German Parliament and Government, the role of Government in ensuring development of small and medium enterprises and addressing challenges faced by women and persons with disabilities.
In the Ambassador’s courtesy address, he emphasized honouring of appointments made in various organisations, however, raised that, after the end of the second world war, Germans developed a common attitude on economic development. Political coalitions that are formed for running the state are based on developing economy, with political policies that are in the interest of voters. Such attitude created an outcome of creating a stable government with a backing of trusting voters.
On the side of small businesses, the government creates laws that ensures that small businesses are developed, sustained, and protected from collapsing, with an employment of 500 employees. In ensuring that skills are developed, education sector is implementing free education up until accomplishment of first degree. This has resulted into making Germans to be self-reliance, embrace cooperative movement, which resulted into cooperatives that are self-reliance and not depended on government.
Secondly, it has raised that persons living with disabilities are taken seriously and being catered for in various sectors. In summary, the Ambassador indicated that, Germany, has only 3% unemployment rate. He also advised the Committee to visit German Federation of Small and Medium-Sized Enterprises (BVMW Der Mittelstand). The BVMW represents more than 900,000 small and medium-sized enterprises (SMEs) through its “Mittelstandsallianz”, an alliance of 32 SME associations. BVMW offers its members more than 2,000 conferences and seminars every year. BVMW has 340 local representatives in Germany and a network of more than 65 foreign representatives around the world.
Through Mr Werth, BVMW promotes initiatives to enhance investment cooperation between South Africa and Germany, which include events such as a “Foreign Trade Advisory Day”, targeted engagements between BVMW and South African Government agencies, offering a range of services to expand business opportunities between South Africa and Germany, and inbound business delegation visits to South Africa. The Embassy has also collaborated with BVMW on the latest edition of the AfrikaContact magazine with Focus on South Africa. This issue features insightful articles on Green Hydrogen Health, Economy, E-Mobility, Financing and Trade on the African Continent.
Thirdly, he advised of German-South Africa programs implemented and are in the Department of Trade, Industry and Competition, namely Commercial Advancements, Logistics, Mechatronic, Tourism, Management Training Program, and one in the pipeline that is Young Graduates Development. The program will train such graduates to enhance their skills for a period of two years, and later take them to Germany for practical work. Lastly, he encouraged members of parliament to ensure that lesson learnt find ways to be implemented for the development of economy.
3.2 Visit to Deutscher Bundestag (German Parliament) Committee on Economic Cooperation Development
The second visit of the day was to the Deutscher Bundestag (German Parliament) where the Committee met with the Committee of Economic Cooperation Development (BMZ). The three representatives of BMZ, who are also members of Parliament from various political parties, namely, Mr Knut Gerschau, MP and Chairperson of the BMZ from the Liberals Party (FDP); Ms Ina Latendorf, MP from the Left Party (Die Linke) and Dr Ophelia Nick, MP from the Green Party (Bundnis 90) met with the Committee. After being welcomed by the Chairperson, Mr Gerschau, all members took turns to introduce themselves.
The Chairperson of the Portfolio Committee Ms. Violet Siwela made introductory remarks covering a wide spectrum of social and economic challenges presently bedevilling South Africa and issues currently on the public domain i.e. youth unemployment, overview of the cooperative sector in South Africa, perceived role of the sector which is seen as a poverty alleviation intervention, government bureaucracy and the fragmented nature of support given to cooperatives. South Africa appears to be struggling to raise its growth rate beyond the five (5) percent mark as forecasted in the National Development Plan (NDP). The Chairperson’s introduction offered high-level outline of unemployment rate in South Africa averaging 27 percent.
3.2.1 Problem Statement
The triple challenge of poverty, unemployment and high inequality remain the uppermost priorities of the government since 1994. To tackle these challenges, the democratic government implemented various policies and programmes aimed at job creation, wealth redistribution, and poverty alleviation. Cooperatives development was identified as one of the significant instrument at the government disposal to tackling these and other transformational imperatives. For instance, the Cooperative Development Policy for South Africa of 2004 reiterated the call for economic transformation. The ANC-led government’s promotion and support of cooperatives was thus premised on the conviction that cooperatives are strategically placed to create income-generating opportunities for communities in rural areas far removed from the formal economy. Nevertheless, cooperatives mortality rate remains at an average of 88 percent owing to a number of weaknesses in the government’s approach to cooperatives development. There is a general lack of appreciation and narrow perspective of cooperatives with respect to the role they are supposed to play towards socio-economic development of the country.
Contrary to Germany, South Africa’s establishment of Workers Owned Enterprises and Community Owned Enterprises using the concept of cooperatives and instilling principles and values of solidarity at community level is below average. The top-down government driven and grant-based approach towards the sector’s development has not paid any dividends. Instead, it has deepened and enticed rent-seeking enterprises. Accordingly, success is measured based on the number of cooperatives funded vis-à-vis social and economic impacts. In addition, disjointed support services and uncontrolled involvement of all government departments in development of cooperatives, without a national strategy spelling out complimentary roles played by each department, results in duplication of activities and create confusion at community level. The insinuation in the Department of Small Business Development that small, micro and medium enterprises (capitalists in character and form) and cooperative enterprises (socialists in character and form) are the same and therefore require identical type of support services and legislative framework confounds the role of the Department and implementation.
3.3 Overview of the Committee on Economic Cooperation Development (BMZ)
The BMZ is a multi-party economic Committee with a responsibility of holding the government accountable on policies that enhance the interest of voters in economic and enterprises development. The approach replicates policies of political parties, with emphasis on the interest of development. As the country has embraced cooperatives approach for development of small and medium enterprises, a bottom-up approach with less support from the government is implemented. However, Parliament ensures that legislations that promotes start-ups, their sustainment, ensuring easy of making business, provide programs for training and development, and provision of loans, are in place. In rural areas, as North of Germany is more rural and have a smaller number of population, legislation that ensures provision of training and skills development programs and easy of obtaining loans for enterprise development are enforced.
The education sector is also monitored to ensure that it provides economy-based education and entrepreneurship. Provision of subjects and trainings offered at school level should be relevant to skills development and innovation so that it meets economical needs. In ensuring literacy, Germany is implementing a free education up until to obtaining first degree. This approach enhances literacy and innovative methodologies in enterprise development and self-reliance. Universities have support systems provided for vocational training through companies that are legally forced to provide such systems and to pay funds for start-ups, in return, companies receive subsidies on certain products. Banks are also be involved, especially, cooperatives banks, in providing loans for cooperatives. Lastly, debates are always ensued in Parliament for involvement of state companies, entrepreneurs’ associations, trade unions, schools and universities in the provision of systems that ensures development of small and medium enterprises, as well as cooperatives.
DAY TWO - TUESDAY, 20 JUNE 2023
4. Visit to The German Cooperative and Raiffeisen Confederation or the Deutsche Genossenschafts-Und Raiffeisenverband e.V. (DGRV)
The Committee visited DGRV headquarters in Berlin. DGRV played a prominent role in assisting the Committee to make its study visit to Germany a success through the help of Mr Veit Gesenhues, Programme Director, Southern Africa. Furthermore, it has a memorandum of understanding with the Department of Small Business Development.
4.1 DGRV at Glance
The German Cooperative and Raiffeisen Confederation or the Deutsche Genossenschafts-Und Raiffeisenverband e.V. (DGRV) was founded in 1972. It is the national apex organisation and top-level auditing confederation of the cooperative sector in Germany. DGRV has nearly 20 million members in 5,400 co-operatives and is located in more than 30 countries, where it provides consultancy and support to develop the cooperative systems and structures for sustainable development mainly on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) and on the Federal Ministry of Food and Agriculture (BMEL). DGRV has 14 project offices in Asia, Africa and Latin-America and employs more than 100 local and expatriate staff.[1]
Vision: To ensure that the entrepreneurial cooperative idea is being used more intensively by broad sections of the population worldwide and contributes to an improvement of the local living conditions.
Mission: It is to realise its vision through consultancy and active cooperation with our partners. DVRV focuses on the principle of economic, social, and ecological sustainability.
Objective: DGRV’s objective is to contribute through:
- The promotion of the know-how transfer vis-à-vis the establishment of cooperative structures in partner countries, particularly for improving the provision of services of such structures (consultancy and advisory, training and further (vocational) education, auditing and verification, representation of interests).
- The establishment of contacts between the partner organisations and our own cooperative organisations as well as to cooperative partners in other countries through the assistance of our international associations.[2]
The DGRV adapts its approach to the specific local needs and conditions of its partners. DGRV draws on the resources of German and international donors.[3] DGRV has 14 project offices in Asia, Africa and Latin-America and employs more than 100 local and expatriate staff.
On arrival, the Committee was warmly received by Mr Gesenhues, Programme Director in Southern Africa and Dr Benjamin Dannemann, Communication Officer for DGRV. He made a presentation which depicted historical roots of cooperatives in Germany, the origin of entrepreneurial cooperative idea, German cooperatives pioneers with principles of self-help, self-responsibility, and self-administration, as well as German cooperatives milestones since 1864 to 2016 when the United Nations Educational Scientific and Cultural Organization (UNESCO) included the cooperative idea in the list of cultural heritage.
4.1.1 DGRV and the German Cooperative System
Germany superface 357 168 km with inhabitants of 83,02 million. It has Gross Domestic Product turnover of 3.677 billion USD, with 3,47 million of small and medium enterprises. Number of SMMEs enterprises is about 99, 5%, contributing 53% of GDP and 58% number of employees.
4.1.2 Cooperatives as Economic Factor in Germany
The composition of economic activities that all belong to cooperatives are as follows:98% of farmers, 60% of craftsmen, 75% of retailers, 90% of bakers and butchers, 65% of accountants. Cooperatives have an employment of 1million people with 45 000 apprentice positions. DGRV as a national apex body with its auditing federation for cooperatives have 5000 cooperatives that have created 1 million jobs and a membership of 19.6 million.
4.1.3 German Cooperative Sectors
Germany Cooperatives are in various sectors, namely finance, energy, agriculture, trade/science and industry, housing and consumer sector. Housing cooperatives are 1801 with 2.9 million members and have created employment of 23 002 employees. Whilst cooperatives sectors in the DGRV are 772 cooperatives banks with membership of 18 200 000 and balance sheet of EUR 1145 billion; 1729 agricultural cooperatives with 1 500 000 membership and balance sheet of EUR 68 billion; 1462 trade and marketing cooperatives with 400 000 membership and balance sheet of EUR 175.1 billion; 847 energy cooperatives with 220 000 membership and balance sheet of EUR 1 billion and 458 consumer and service cooperatives with 300 000 membership and balance sheet of EUR 1 billion. The Cooperative Financial Group have 772 self-reliant regional banks, around 18.2 million members, around 30 million customers, 8 074 branch banks with 172 334 employees.
4.1.4 National Federations of Cooperatives
Germany comprises of the following national federations of cooperatives:
- DGRV – German Cooperative and Raiffeisen Confederation.
- BVR – National Association of German Cooperative Banks.
- DRV – German Raiffeisen Federation.
- ZGV – German Federation of Buying and Marketing Groups.
- Zdk – Central Federation of Consumer Cooperatives.
However there are new sectors informed by new fields activities that could be implemented in flexible cooperative approach, that is in renewable energy, IT, laboratory operations, education and training, disposables, recycling and environment protection.
4.2 Cooperatives Principles
Structured citizen participation enhances development and success, and be profitable, competitive, and able to meet the challenges of changing markets.
- Cooperatives and the State
The State creates the framework (law, taxes, support); treats all legal forms the same; don‘t interfere in the inner organisation of cooperatives, and Cooperatives fullfill no public/governmental task and are not influenced by the state but only by legal regulations and auditing authorities
DAY THREE - WEDNESDAY, 21 JUNE 2023
5. Visit to Energicautarkes Dorf Feldheim
5.1 Feldheim
Feldheim is a small village of approximately 130 kilometres southwest of Berlin. It claimed its fame from its huge investment in energy infrastructure, as well as the wind turbines. The village also has its own biogas plant, a wood-chip burner, a battery storage system, and a solar power plant.[4]
The whole idea of Feldheim's energy transformation started in the 1990s, and the project paid off during the recent energy crisis sparked by Russia's invasion of Ukraine. Its electricity bills are four times lower than the national average and the community has the freedom of not relying on Russian fossil fuels for electricity.[5]
The project started in 1993, by Michael Raschemann, who was an engineering student, and he was searching for a place to build wind turbines in the region. Feldheim, as being flat and windswept, struck him as ideal. After consultations with locals, the first four wind turbines were built two years later in the land owned by local farmers' association.
Raschemann, invited residents to invest in additional wind turbines, and at least 10 residents participated. Together with Energiequelle, which now has over 400 employees, the village gradually expanded the wind park to 55 turbines, generating enough electricity to supply some 65,000 households. Feldheim only takes 1 percent of that energy, with the rest being fed into the national grid.[6]
The village took the final step toward a decentralized energy supply in 2010, when it built its own electricity and heating grids, fed by the wind park and the biogas plant. Homeowners in Feldheim pay €3,000 to be connected to the local grids. Today, Feldheim’s residents pay 12 cents per kilowatt hour for electricity which is a quarter of the average price in Germany and 7.5 cents per kWh for heating, which is two to three times lower than the national average.[7]
Individual households in Feldheim, Treuenbrietzen, are supplied with heat and power from renewable energy power plants at their own doorstep via local grids. There are separate grids for district heating and electricity supplies through which the heat and electricity produced locally are fed straight to consumers. This saves costs and achieves independence from the grids of conventional power utility companies.[8]
6. Visit to Mockernkiez Housing Cooperative
The Möckernkiez is the result of an initiative by citizens of Berlin. After the founding of the Möckernkiez cooperative in 2009, the construction of the cooperative flats was planned in a participatory process. The apartments border the Gleisdreieckpark in the southeast and have direct access to the park. The construction of the 14 apartment buildings had to be interrupted after about a year due to unsecured financing but was continued in 2016.
The area is now inhabited by 900 people with 471 flats. All residents are members of the cooperative and must purchase cooperative shares and pay a one-time joining fee at the beginning. In return, rents are secured for the long term. Supplementary living space is offered in the form of rentable studios, workshops and communal areas. In addition, the Möckernkiez association is committed to social cohesion and a lively neighbourhood. The Möckernkiez is planned to be car- and barrier-free.[9]
Methodology and model
In initiating the project, a cooperative was formed and members had to put together an amount of EUR 92. Money raised amounted to 37% of the total project cost. The balance to kick starts the had to be loaned from a cooperative bank. To sustain the cooperative and the project, houses are rented out and funds collected are used to service the loan, services and maintenance. Energy is sourced from one of the buildings that is rented out to generate energy and heat. Some of flats are also rented out for social gatherings and shops.
DAY FOUR - THURSDAY, 22 JUNE 2023
6. Visit to Windpark in Nordhessen
Windfarm is a development that was created in Kassel by a Cooperative Windfarm to generate energy from wind. Kassel is a city in central Germany. It's known for its Documenta art exhibition. Bergpark Wilhelmshöhe is a sprawling park dating back to the 18th century. It's home to Wilhelmshöhe Palace and its Old Masters Picture Gallery. The neo-Gothic Löwenburg castle displays 16th- and 17th-century weapons. The Herkules Monument offers city views from atop the baroque Wasserspiele water features, which cascade down a hill.
Cooperative Windfarm together with Stadtwerke Kassel and SUN Stadtwerke Union Nordhessen as stated by Mr Matthias Jahnke, Director for Decentralized Energy Technology who welcomed the Committee and make a presentation on the technological procedures and operation of wind energy sourced through turbines. His presentation outlined why the place was identified, wind speed in forests, choice and sizes of turbine, operation of turbines and their outputs in generating energy, and lastly areas neighbouring Kassel that are supplied with energy and the grid.
Dr Lars Rotzsche proceeded with the presentation which outlined on how working together add value for benefits of public, municipalities and cooperatives. The model used is participation of citizens by forming and become members of various energy cooperatives, participation of municipalities and other municipalities’ utilities and work together with a cooperative in generating energy supply. The structural model of shareholding comprises of 12 shareholders, broken down as six (6) citizen energy cooperatives with approximately 3000 members, two (2) neighbouring municipalities and four (4) regional public or communal utilities. He further presented an example of milestone energy supply throughout participated neighbouring municipalities working with Stadtische Werke AG Kassel, whereby, in 2013 Sohrewald was receiving 15 MW; 2014 Niestetal was receiving 6 MW; in 2015 Rohrberg was receiving 24 MW; 2016 Stiftwald was receiving 27 MW; 2017 Kreuzstein was receiving 24 MW; in 2022 Reinhardswald was receiving 100 MW, all from the Windfarm Energy supply. within a district.
The model of Windpark energy supply creates 4 € additional rent-based income as compared to regional project developer who at the same time causes loss of about 51 million € regional added value. Whilst in the Windpark, the is a variant of a regional added value of 58 million created. So, each installed MW creates a regional added value of 2,76 million € (including multiplicator-effects), and in the “WP-SUN”-variant about 59% of the overall payments (Total) can be created regionally, respectively they can be created as regional added value including multiplicator-effects.
DAY FIVE - FRIDAY, 23 JUNE 2023
7. Visit to WeiberWietschaftschat e.G.
The very last meeting of the Committee was a visit to the WeiberWirtschaft eG, which is Europe's largest women's owned cooperative. Business centre, which was founded in 1989 by 17 university graduates and now has 1,750 members, it operates a 7,100 square metre business centre, and provides workspace for 65 women running businesses in the service, manufacturing, crafts, gastronomy, culture, education and non-profit areas. They benefit from a nursery, mentoring, monthly networking meetings, seminars and workshops, a cafeteria and meeting rooms. The building also contains 13 social housing units. [10]
The women’s co-operative WeiberWirtschaft eG in central Berlin was established in 1992 to support women in green businesses. The ecofriendly renovation of the site, financially supported by public funds from the Berlin state, concentrated on reducing energy consumption and harmful emissions. Due to their ecologically responsible overall concept, the co-operative won several national and European awards for their ecological concept and innovation.[11]
The €18.6 million ecological renovation of the building, in central Berlin, was financed through subscriptions from WeiberWirtschaft’s members, support from Berlin’s urban regeneration budget, and bank loans. WeiberWirtschaft is a company and gains revenue only from letting commercial spaces.[12] The building houses various enterprises namely, Stone Architecture Offices; Women for Climate Justice; T-shirt Pressing Enterprise; Hairdressers; Online Marketing Offices; Communication for Brands; Euro-China Development Agencies; Finance Consulting; Day-Care Centre for children and Female Green Law Association, a Non-Governmental Organisation. The building also generates its power energy supply for electricity and heating
The centres principle is to support gender equality in the social life and employment through a better labour market integration and respect of diversity trough tailored services for different women groups. This is in line with the policy priorities of the Senat for Work, Integration and Women of Berlin, that aims to support the equality of women and men in the labour market and improvement of the reconciliation of work and family life, including the provision of adequate training opportunities.[13]
In cooperation with Goldrausch, WeiberWirtschaft offers microcredits to cooperative members.[14] The target group are founders and entrepreneurs who are cooperative members of WeiberWirtschaft eG.[15] Currently a cooperative comprises of 2100 female shareholders with 4000 shares which are not transferable. Dividends are used to service a six year loan and other injections are put in the fund for any future shares challenges with a cooperative. However, it does get some support from governmental programmes.
8. OBSERVATIONS
8.1 The Portfolio Committee noted with keen interest presenter’s emphasis and prominence attributed to education, skilling, training, continuous learning including vocational training as an instrument for creating a productive and knowledgeable workforce. At any rate, the group’s arsenal is its workforce. It was clear from presentations that the success of Germany is intertwined with the sort of grooming, mentoring, education, and training offered by various institutions.
8.2 Members of the Portfolio Committee learnt that after the Second World War, Germany concentrated on economic development. A coalition government formed is based on the interest of the people and with an objective of economic development. Hence the current coalition government embraces policies that are people centered. Each political party within the coalition ensures implementation of its policies. Such an approach enhances trust and sustainability to both voters and government.
8.3 The cooperatives high levels of profit reinvestment into the business guarantees that the group generates adequate reserves to cushion it during turbulent times.
8.4 The Portfolio Committee noted that during foundational years of cooperatives, there was an apparent requirement of a financial institution to bankroll some of the projects and cooperatives, which owing to weak balance sheet, could not access trading finance from traditional commercial banks. This gave birth to a group’s cooperative banks, like BVR, a National Association of German Cooperatives Banks that offers support to cooperatives at a reasonable cost.
8.5 The DGRV and WeiberWirtschaft e.G. has a Consulting Business Management that operates at international level providing training and management services to cooperatives training institutions and cooperative enterprises.
8.6 To stimulate German’s social economy cooperative enterprises are incentivised differently from capitalist type of enterprises, for instance, companies are forced to contribute to Vocational Fund for student’s apprenticeship and training. Cooperative are rewarded by government for continuous investment on job creation and social development at community level.
8.7 German approach to cooperatives development puts lot of emphasis on cohesiveness of the cooperatives within the group, inter-cooperation between/among cooperatives, cooperation among members, strength of scale as German’s group is a collection of cooperatives. It was equally interesting to observe that there is no ideology behind the success of cooperatives other than quest to create economy and wealth.
8.8 Members of the Portfolio Committee were not aware of their assumptions about cooperatives until they arrived and found themselves surprised by lot of things. For instance, cooperatives create a different paradigm based on workers’ cooperatives. To some extent, the German cooperatives have tried to tackle the issue of the lack of worker control over a business, and they have done it in the following fashion: (1) by creating workers ownership over a business, thus transforming the historical relationship of antagonism between the workers and management by creating a joint decision-making process. This has been put into practice through the one worker, one vote policy and by establishing workers’ representation at all decision-making levels. (2) They have created wealth in their community by creating and keeping local jobs. (3) They have created a local economy that is unavoidably connected to international competition, but based on a deeper commitment to their values, and their way of being in the world as workers’ owned businesses.
8.9 Members of the Committee were pleasantly surprised, to learn that a small enterprise in Germany, is a business with minimum of 500 employees, and on how working together can yield equality and self-reliance. The experience was rare considering that back home, we are used to individualism and competition for profit making which does not take into account human values, since it always put profits as a priority.
8.10 For too long, and perhaps to its detriment, South Africa’s conservative approach to improving human welfare and social conditions through, among others, optimum distribution of wealth, the relief or reduction of unemployment has actually assumed a straightjacketed approach of dipping into fiscus as opposed to creating self-sustaining enterprises that contribute to the economy. The social economy policy in South Africa is on the cards. It is expected to provide a consistent and coherent framework for support to social economy enterprises and organisations including cooperatives, mutual societies, voluntary and community organisations which are involved in economic activities and direct their surpluses in pursuit of social, environmental and community goals at the course of their existence.
8.11 The German Cooperatives model is self-sustaining and independent in every aspects. For instance, here at home social grants are used as a perpetual poverty alleviation strategy, whereas in Germany, through cooperatives in particular, social relief is considered a temporary provision of assistance.
8.12 In South Africa, the decision to develop cooperatives as a pillar for economic transformation was taken by the ANC in 1969. After 1994, the Department of Trade and Industry (the dti) was mandated to develop cooperatives. In 2009, the dti produced a report indicating that cooperatives mortality rate was sitting at 88 percent. In 2014, the DSBD was established and mandated to develop cooperatives. In 2016 the Portfolio Committee asked the DSBD to present a development status of cooperatives assisted by DSBD, the DSBD struggled to find those cooperatives, to date DSBD has not presented to the PC a report of cooperatives with tangible results. Although government has spent millions of rands on cooperatives, but there are still no positive results.
8.13 Interesting to note also, was the fact that cooperatives are practically immersed in the world of business, where they have to produce and compete like any other business for survival. Cooperatives from Germany are very much alive to the fact that they are operating in the world of capitalism. They, therefore, like any other business, strive for new business deals and to always remain innovative.
8.14 Members of the Committee felt cared for. The organiser, particularly Mr Veit Gesenhues from DGRV, was extremely friendly and helpful. He guided Members of the Committee everywhere, gave them useful clues on sights to visit, places to visits and people to get acquainted with.
8.16 Members appreciated the use of power point presentations, slides on overhead projectors and handouts with presentations. The excellent use of English of the speakers or the translations into English made the visit an extraordinary experience.
8.17 Altogether, the study tour provided participants with an intense, but balanced overview of the German economic and political systems, and that of the DGRV.
9. RECOMMENDATIONS
9.1 There are a number of aspects of German political and economic systems such
as ‘decentralization’ of policy making that can be replicated or serve as an inspiration for cooperatives. There is therefore a need to overhaul the entire system designed post 1994, act, strategy and incentives, for development of cooperatives as the system has proved to be a huge failure leading to 88 percent failure rate of cooperatives. Assuming these were results of the Department of Health, the outcomes would have been regarded as a national catastrophe. The same should be attributed to these results in terms of community socio-economic development, poverty reduction and the NDP goal of creating 9.9 million new jobs through small businesses by 2030;
9.2 South Africa needs to broaden its perspective about the concept of cooperatives and the need to position cooperatives as effective instruments for changing ownership and the structure of the economy to bring about a Mixed Economic System in South Africa;
9.3 There is a need for the Portfolio Committee to re-assess proposals made by the Department of Small Business Development on Programme Review regarding the Cooperatives Development Programme in DSBD including delegation of functions to establish the Cooperatives Development Agency (CDA) to Small Enterprise Development Agency.
9.4 The role of the Prudential Authority, a division of South African Reserve (SARB) overseeing co-operative banks needs to be revisited. It should be more developmental than regulatory.
9.5 The role of a government owned National Cooperatives Training Academy as envisaged in the Act also needs to be examined.
9.6 There are more than one organisations claiming to be Apex bodies of cooperatives in South Africa competing amongst themselves, e.g. SANACO, NCASA, NACSA and NACFISA. The Department must brief the Portfolio Committee on how it plans to assist the cooperatives movement in South Africa to establish one Apex body.
9.7 The Portfolio Committee must continuously engage structures of cooperatives including SANACO, NCASA, NACSA and NACFISA as all these are national organisations who are positioned as representatives of cooperatives. The engagement with them shall be aimed at understanding how the cooperatives movement is structured in South Africa and how existing national structures add value to their members as well as how they relate to each other.
9.8 The role and impact of incubators in South Africa providing services to cooperatives instead of a government owned agency needs interrogation.
9.9 The Department needs to present to the Portfolio Committee the total investment made by the South African government on cooperatives (Total package of services provide to cooperatives by DSBD and other departments detailing the success rate of cooperatives including members = workers = owners of cooperatives assisted by DSBD and other departments). All this needs to be assessed against the background of the 88 percent mortality rate.
9.10 There is a need for the Department to do skills audit to assess the knowledge of the concept of cooperatives by officials within the Department who are tasked to facilitate development of cooperatives and to also assess how that knowledge is applied to enable communities to establish Community Owned Enterprises and transform the economy in South Africa to bring about a mixed economic system. If it is found that there is knowledge deficit, those officials in the Department should either be provided with necessary training or be deployed in programmes which match their training background and skills level.
9.11 South Africa must move swiftly on social economy. The Department of Small Business Development needs to form part of the steering committee in order to guarantee that the voice and interest of social enterprises is heard and protected. The tripartite project on the development of country’s social policy seeks to take advantage of the favourable conditions for developing a social economy policy for South Africa,
following the implementation of a range of projects that have enhanced existing knowledge and built a community of actors and agencies committed to growing and developing this sector.
10. CONCLUSION
The Committee expresses its sincere appreciation to our hosts in Germany, DGRV and South African Embassy, who made time to meet and had an extensive interaction with the Portfolio Committee.
Report to be considered.
ANNEXURE A
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Saturday, 17 June 2023 Departure from Constituencies |
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Sunday, 18 June 2023 |
Arrival in Berlin Hotel, Germany 25 km (40min) form airport to hotel |
19:00 Joint Dinner |
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Appointment |
Distance |
Content of the program |
Contact Person |
Venue |
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Day 1: Monday, 19 June 2023 Parliamentary Committee of German Parliament / Policy and Legislative Sector |
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13:30 – 13:45
14:00 – 15:00
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Transfer from hotel to South African Embassy in Berlin.
South African Embassy in Berlin.
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2km/4min
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Meeting with His Excellency Ambassador Stone Sizani. |
Willie van der Westhuizen: +49 1608406813 |
South African Embassy, Tiergartenstrasse 18, 10785 Berlin
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18:00 – 18:45
19:00 – 21:00
21:00 |
Transfer to Deutscher Bundestag (German Parliament)
Deutscher Bundestag (German Parliament)
Transfer to Hotel |
6km/15min
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Meeting with MPs of the Committee on Economic Cooperation Development (BMZ) & MPs of the Economic Committee (BMWK) on BMWK Advisory Board issues. |
Ms Verheyen: +49 30 22732716
Portfolio Committee
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Deutscher Bundestag, Platz der Republik 1, 11011, Berlin
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Day 2: Tuesday, 20 June 2023 Visiting DGVR & Cooperatives in Energy Sector |
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08:00 – 09:00
09:00 - 12:00
12:00 - 13:00
13:30 – 15:30
15:30 – 18:00
18:30 |
Transfer from hotel to DGRV HQ in Berlin
Meeting with DGRV
Lunch
Introduction to the German Cooperative Banking Sector at the DGRV HQ Meeting with Federal Office for Energy Cooperatives
Dinner: Hotel |
4 km/10min
100m/1min
100m/1min
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General overview of the German Coop Sector
Presentation to the Financial Local Cooperative Bank.
Introduction to the Energy Coop Sector
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DGRV – Mr. Benjamin Dannemann
Portfolio Committee
DGRV – Veit Gesenhues
DGRV – Dr. Andreas Wieg
Portfolio Committee |
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Day 3: Wednesday, 21 June 2023 Visit to Cooperatives Sector Operations |
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08:00 – 10:00
10:00 – 12:30
12:30 – 14:00
14:00 – 14:30
14:30 – 17:30
18:00 |
Transfer from Hotel
Visit in Energieautarkes Dorf Feldheim.
Lunch
Transfer to Housing Cooperative
Visit in Mockernkiez Housing Cooperative.
Dinner: Hotel |
77km/75min
90km/90min
4km/15min |
Energy independent Village (Costs associated)
Management of Housing Cooperative
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Portfolio Committee
DGRV – Ms. Raschemann
Portfolio Committee
Portfolio Committee
DGRV – Ursula |
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Day 4: Thursday, 22 June 2023 Solar/Wind Energy Generation Plants Cooperatives |
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08:00 – 11:30
11:30 – 14:30
14:30 – 17:30
17:30 |
Transfer from Hotel
Visit of Local Windpark in the Region of Nordhessen.
Transfer back to Berlin.
Arrival at the hotel. |
375km/4h20
393km/4h20
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Motivation for the construction of a wind park: Financing of the project & Experience with legal framework
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Portfolio Committee
Dr. Matthias Jahnke Portfolio Committee |
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Day 5: Friday, 23 June 2023 Cooperatives Banking Sector |
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9:30 – 10:00
10:30 – 12:00
12:00 – 13:30
13:30 – 15:30
18:30 |
Transfer from Hotel
Visit at Weiberwirtschaft e.G.
Lunch
Wrap Up and Feedback
Dinner at the Hotel. |
6km/15min
2.5km/10min
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The role of women entrepreneurs and of cooperation among women in Cooperatives
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Portfolio Committee
DGRV – Veit
DGRV – Veit
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Day 6: Saturday, 24 June 2023 Wrapping up: Findings & Way Forward |
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10:00 – 12:00 |
Wrapping and Way Forward |
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12:00 – 18:00 |
Free time |
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Sightseeing, shopping etc. |
Portfolio Committee |
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[1][1] DGRV | Cooperatives in Development (coopseurope.coop)
[4] Energieautarkes Dorf Feldheim | DStGB
[5] Energieautarkes Dorf Feldheim | DStGB
[6] Energieautarkes Dorf Feldheim | DStGB
[7] Energieautarkes Dorf Feldheim | DStGB
[8] Energieautarkes Dorf Feldheim | DStGB
[9] Möckernkiez - Building Social Ecology
[10] Cooperative builds a women’s economy | European Institute for Gender Equality (europa.eu)
[11]https://www.researchgate.net/publication/309779447_Co-operatives_and_climate_protection_Housing_co-operatives_in_Germany [accessed Jun 19 2023].
[12] Cooperative builds a women’s economy | European Institute for Gender Equality (europa.eu)
[13] Cooperative builds a women’s economy | European Institute for Gender Equality (europa.eu)