ATC120903: Report of the Portfolio Committee on Trade and Industry on the study visit to Kenya from 29 July – 3 August 2012, dated 29 August 2012

Trade and Industry

Report of the Portfolio Committee on Trade and Industry on the study visit to Kenya from 29 July – 3 August 2012, dated 29 August 2012

Report of the Portfolio Committee on Trade and Industry on the study visit to Kenya from 29 July – 3 August 2012, dated 29 August 2012

The Committee, having visited Kenya in relation to its co-operatives legislation and support programmes, reports as follows:

1. Introduction

Co-operatives, in both developed and developing countries have been instrumental in contributing to economic development thereby addressing unemployment and poverty. They have also made a major contribution to sustainable development and the competitiveness of small agricultural producers.

Co-operative development forms an integral part of the Kenyan Government’s strategy for wealth creation and poverty reduction. Government provides an enabling environment for co-operatives through a legislative framework, policy and strategy. Other key factors that contribute to the success of co-operative development in Kenya include a dedicated Ministry that drives the promotion of co-operatives with a substantial budget; strong partnerships between government and the co-operative movement; specialized training and training standards for co-operatives; the provision of financial support for co-operatives through SACCOs and the national Co-operatives Bank of Kenya; a conflict resolution system and decentralized implementation of co-operative legislation that cuts across all levels of government.

The Committee has on several occasions acknowledged the important role that co-operatives could play in the economic development of the country, particularly in rural areas. However, South African co-operatives have in more recent years failed to reach their full potential.

The Department of Trade and Industry developed and reviewed the co-operatives policy and legislation, which was recently tabled in Parliament and referred to the Committee on 25 May 2012 for consideration and report. In light of the above, the Committee decided to investigate the Kenyan model and principles used in developing co-operatives and consider what lessons could be applied within the South African context to promote the sustainable development of co-operatives.

1.1. How does the dialogue relate to the mandate of the committee?

Parliamentarians in South Africa enable the implementation of trade and industrial law through their legislative, oversight, publicising and participatory responsibilities.

The Portfolio Committee on Trade and Industry’s mandate is to process legislation introduced by the corresponding Minister, or referred to it by resolution of the House, and, where necessary, initiate legislation. The Co-operatives Amendment Bill and the Co-operatives Second Amendment Bill, as introduced, is line with government’s strategy to create decent work and sustainable livelihoods. Both Bills introduce measures to support co-operatives as part of strategies for job creation.

Co-operatives could potentially play an important role in economic development of the country, particularly in rural areas. However, South African co-operatives have in more recent years failed to reach their full potential. Therefore, the Committee has visited Kenya to gain insight on the Kenyan model on co-operatives as a contributor to economic development, thereby addressing poverty and reducing inequality.

Furthermore, Members of this Portfolio Committee are particularly obligated and responsible to ensure that the legislative environment is created that would reduce the regulatory burden for co-operatives, enhance compliance, coordination, administration and sustainability of co-operatives.

1.2. Preparation Process for Study Visit

In light of the above and in line with its strategic objectives, the Committee embarked on an extensive engagement with the South African High Mission, through the Department of International Relations and Co-operations, as well as with the Ministry of Co-operative Development and Marketing in Kenya . The study programme was developed in consultation with Mr S Mtwazi, the Councellor (Economic) at the South African High Commission in Kenya , and the Ministry of Co-operative Development and Marketing in Kenya . This study tour was to ensure that Parliament was in a position to play a more active role in developing a position on key areas under discussion. All the engagements were hosted by the Kenyan Ministry of Co-operative Development and Marketing.

The following Members of Parliament and the Secretariat participated in the study tour in Kenya

1. Mr B Radebe (ANC) – Leader of the delegation

2. Mr X Mabasa (ANC)

3. Ms S van de Merwe (ANC)

4. Mr G Hill-Lewis (DA)

5. Mr C Huang (COPE)

6. Mr A Hermans – Committee Secretary

Engagements occurred with various co-operatives and the government department responsible for co-operatives. The report reflects the interactions with the various tiers of the co-operatives movement within Kenya represented by the apex organisation, the national co-operative organisations, secondary and primary organisations. These engagements focused on the development of the co-operative movement in Kenya , the co-operative movement’s impact on the economy, the legislative development of the co-operative movement, the structure of the co-operative movement, and the organisations representing the co-operative movement. A report on the interaction with the various government stakeholders and organisations during our visit follows below.

2. The co-operatives movement in Kenya

The principle behind the co-operative movement is to pool the financial resources of members for re-investment into the productive sector of the economy in order to achieve sustainable economic growth. This is facilitated by focusing on the strengthening of the co-operative movement, corporate governance, access to markets and marketing efficiency. Co-operatives are run by members, patronised by members and surplus is equally shared among members. It is an autonomous association of persons to meet their economic, social and cultural needs and aspirations in a jointly-owned and democratically-controlled enterprise.

In 1908, white settlers introduced the co-operative movement, the Lumbwa Co-operative Society, in Kenya . This was borne out of a desire to market members’ produce and obtain capital goods by taking advantage of economies of scale. The importance of co-operatives was recognised by the colonial powers with the enactment of the 1 st Co-operatives Societies Ordinance. This Ordinance was reviewed in 1934 and 1946 which allowed for African participation in the co-operative movement with the first African co-operative registered for cash crops like coffee and pyrethrum in the 1950s. By independence, 1 030 co-operatives societies existed with 655 being active with a total membership of 355 000.

With the enactment of the Co-operatives Society Act in 1966, the independent government identified co-operatives as a key pillar supporting Kenya ’s economic growth. Since 1963, the number of registered co-operatives has grown from 1 030 to 12 500 currently registered in co-operatives society. The co-operative movement provided the vehicle for economic participation and wealth creation for its members contributing to the government’s goals of employment creation and poverty reduction. Membership is over 8 million and has mobilised over domestic savings of over Ksh 200 billion or $2.5 billion.

Government support for co-operatives is based on its influence and contribution on both the formal and informal, micro and macro sectors of the economy. It encouraged the establishment of co-operatives societies at micro-level with government investing at macro-level by establishing of parastatals. Initial support was provided by government who sought development partners to assist its development agenda, through co-operatives. Co-operatives societies were able to invest in processing, real estate, purchasing of land and savings and credit. This increase access to finance enabled them to respond to the development needs of their communities. From a social perspective co-operatives contributed to the spirit of working together, enhancing mutual respect for each other.

The success of the Kenyan co-operatives is largely based on its seven key principles [1] by which they put their values into practice, coupled with visionary leadership and sound management. These are the foundation on which the Kenyan co-operative movement is build on. The seven principles are:

1 st Principle: Voluntary and Open Membership

It is a voluntary organisation, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2 nd Principle: Democratic Member Control

It is controlled by members, who actively participate in setting their policies and making decisions. Elected representatives are accountable to the membership. In primary co-operatives, members have equal rights and co-operatives at other levels are also organised in a democratic manner.

3 rd Principle: Member Economic Participation

Members contribute equitably to and democratically control the capital of the co-operative. At least part of the capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership.

4 th Principle: Autonomy and Independence

Co-operatives are autonomous, self-help organisations controlled by members.

5 th Principle: Education, Training and Information

Co-operatives provide education and training for members, elected representatives, managers, and employees so that they can contribute effectively to the development of their co-operative.

6 th Principle: Co-operation among Co-operatives

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

7 th Principle: Concern for the Community

Co-operatives work for the sustainable development of their communities through policies approved by their members.

The co-operative movement is independent and autonomous, but through the Ministry of Co-operative Development it continues to play a vital role in facilitating and creating an enabling environment for it to become effective and globally competitive. It provides the linkage between the co-operative movements, government and line Ministries and is crucial in achieving its 2030 vision and the Millennium Development Goals. There is an acknowledgment that while the co-operative movement is not the solution to all problems in Kenya it certainly is part of the solution. Kenyans are expected to work together based on the co-operative principles and values such as self-help, self-responsibility, democracy, equality, solidarity, honesty, openness, social responsibility and caring for others.

2.1. The economic contribution to the Kenyan economy

The co-operative movement in Kenya is dominant in the service and productive sectors of the economy. Central to the Kenyan government’s policy of wealth creation and poverty reduction, co-operatives operate in the agriculture, banking, credit, agro-processing, storage, marketing, dairy, fishing, housing and transport sectors. However, co-operatives are mainly active in the financial and agricultural sector.

Co-operatives are responsible for 45% of Gross Domestic Product and 31% of national savings and deposits. They have 70% of the share in the coffee market, 76% in the dairy market, 90% in the pyrethrum market, and 95% in the cotton market.

Currently, more than 11 000 co-operative societies are registered with the ability to mobilise more than 31 percent of national savings, through the savings and credit co-operative societies (SACCOS). The SACCO societies in Kenya provide easy access to finance for its members compared to commercial banks, with some SACCO societies’ bases being larger that middle-level commercial banks. The turnover of the co-operative movement is more than Ksh 30 billion with more that 63 percent of Kenyans directly or indirectly deriving their livelihood based on co-operative activities. More than 300 000 individuals are directly employed by co-operative societies. Business volume is continuously increasing, creating the vehicle for small-scale producers to access both the local and international markets.

In Kenya , 5 000 of the 14 000 registered co-operatives are savings and credit unions. These are not registered as banks but play a critical role in the financial sector. The impact of donor funding was limited in Kenya due to its strong middle-class and the contribution of the SACCOs. SACCOs are financed through its members’ monthly contributions and members can borrow and provide loans towards development. SACCO deposits are refundable after 60 days excluding the share capital which can be transferred.

The Co-operative Bank of Kenya is owned by the co-operative movement. It was started by farmers as cost of capital from commercial banks was too high. Another source of borrowing is the Co-operative Insurance Company of Kenya . It has assets in the region of R350 billion and is the only insurance co-operative in Kenya . A current challenge facing the primary co-operative is employment opportunities. As membership is shrinking, it had to open the common bond. A strong capital base is required and members are being recruited from the private and public sector.

Through the Kenyan diaspora, SACCOs have been established in the United States of America and in the United Kingdom . These SACCOs mobilize the services of Kenyans abroad to repatriate money for domestic investment. Going forward, SACCOs need to expand their influence, especially in the region, and can assist other countries in establishing a co-operative movement. It further needs to consider mergers, increased collaboration with partners in other sectors of the economy, and adoption of the latest Information and Communication Technology (ICT).

The Kenyan government has recognised the potential of co-operatives to deliver goods and services in areas not ventured into by the public and the private sector. They use the savings and credit co-operatives to channel funds from the Youth Enterprise Development Fund and the Women’s Enterprise Development Fund to implement its poverty eradication programmes.

The contribution of the co-operative movement towards the Kenyan economy cannot be overemphasised. Due to the contribution of the co-operative movement towards the social and economic upliftment of communities, the Kenyan government recognised its important role and provided the necessary enabling and regulatory environment to strengthen the co-operatives.

3. Legislative and Policy Framework and the role of government

In 1966, the independent government enacted the Co-operative Societies Act influenced by the policy paper contained in Sessional Paper No. 10 of 1965 on African socialism and its application to planning in Kenya . This placed the Kenyan government at the centre of co-operative development at the time.

The Kenyan Nordic Co-operative Development Programme with assistance from the global financial institutions provided the necessary funding for the development of co-operatives. Government’s initial support with respect to co-operatives was through the provision of subsidies and free access to government credit and free extension services.

In 1970, a policy document entitled “Co-operative Development Policy for Kenya ” (Sessional Paper No. 8 of 1970) distinctly formulated the role for co-operatives where co-operatives were only encouraged to operate within a specified range of activities. In 1974, a full Ministry was formed to promote a vibrant co-operative sector through an enabling policy and legal framework for sustainable socio-economic development in Kenya . Producer co-operatives were directly linked to parastatals and statutory boards with government protection from competition.

Sessional Paper No. 6 of 1997 provides the current policy framework for co-operative development in Kenya . This paper was formulated in response to the liberalisation policies which removed government control over co-operatives. The former liberalisation policies saw mergers, disputes and break-ups of many co-operative societies into smaller uneconomical units with high prevalence rates of mismanagement. The aim of the new policy was to promote autonomous and commercially viable institutions. Government’s role was redefined to regulate and facilitate the autonomy of co-operatives. This saw the removal of the agricultural sector’s monopoly as the sole marketers of cash crops with open competition for the marketing of agricultural produce. This was a clear attempt to limit state supervision of co-operatives in support of liberalisation of the co-operative movement. Members were empowered to run co-operatives through elected management committees.

Co-operatives were seen as the engine of growth and a vehicle for participation in the economy. The 1967 Act was amended in 1997 to accommodate the liberalization process in Kenya . Co-operatives were encouraged to manage themselves and compete in the open market. Transitional arrangements that would obviate against added responsibilities were absent. The results were that in the absence of non-financial support of government, mismanagement and bad governance were experienced by co-operatives and led to the dissolution of many.

The failure of the co-operatives undermined the economy with government recognising the serious impediment of its non-involvement within the movement . The impact of the liberalization policies was negative especially in relation to primary co-operatives with accusations of gross mismanagement, corruption, and nepotism among other things. This prompted the review of the 1997 Act resulting in the 2004 Co-operative Societies (Amendment) Act which reinforced state regulation of the co-operative movement through the office of the Commissioner for Co-operatives Development. Besides its principal role of registration, the Commissioner’s powers include the promotion, inspection, enquiries, auditing, surcharge, debt collection, liquidation and provision of technical extension services for co-operatives.

The SACCO Societies Act of 2008 was enacted to address the need for a specialized agency to regulate this market, as financial instruments in the co-operative financial sectors rapidly expanded. The SACCO Societies Regulatory Authority (SASRA) was created to regulate deposit-taking entities. The Act provides for the licensing, regulation, supervision and promotion of SACCOs by the SASRA. SACCO societies after obtaining a licence, and after complying with the necessary regulations, would be able to carry out deposit-taking business known as the Front Office Service Activities.

3.1. The structure of the co-operative movement in Kenya

Kenya has a four-tier structure which links the primary co-operative to the national level. The four tiers recognised by the Co-operatives Societies Act are:

· Primary co-operatives

· Secondary co-operatives

· The national co-operative organizations (NACOs)

· The national apex organization

Primary co-operatives, which are the backbone of the co-operative movement in Kenya , consist of individual members within a given locality who have a common interest and have combined their resources to minimise costs. This would enable them to make bulk purchases, and establish marketing outlets to sell their products. Individuals may form SACCO societies enabling them to pool their financial resources, which will enable them to borrow at cheaper rates than what they would obtain from commercial banks.

Secondary co-operatives’ (also known as unions) membership is restricted to primary co-operatives. It acts as a service agency and operates at a district level. It is formed to enhance economies of scale through shared goods and service, bulk purchases and provision of membership credit.

National Co-operative Organizations (NACOs) consist of both primary and secondary co-operatives. It offers specialized services to affiliates such as commercial and financial services, and represents unions and societies at international levels. Currently, there are nine NACOs, namely:

1. The Co-operative Bank of Kenya

2. Kenyan Savings and Credit Co-operative Ltd (KUSCCO)

3. Kenya Rural SACCO Societies

4. National Housing Co-operative Union Ltd (NACHU)

5. Kenya Co-operative Creameries Ltd (KCC)

6. Kenya Planter Co-operatives Union Ltd (KPCU)

7. Kenya Farmers Co-operatives Association Ltd (KFA)

8. Co-operative Data and Information Centre Ltd (CODIC)

9. Co-operative Insurance Company Ltd (CIC)

The Co-operative Alliance of Kenya (CAK) is the national apex organisation, formerly known as the Kenyan National Federation of Co-operatives (KNFC). CAK was formed in 1964 to act as the spokesperson for the movement and as a custodian of co-operatives principles, as well as to promote the development of the movement, and local and international collaboration.

4. The Co-operative Tribunal in Kenya

The Co-operative Tribunal, hereafter referred to as the Tribunal, is one of the departments of the Ministry of Co-operative Development and Marketing. The Tribunal is a quasi-judicial body which operates as a court and has administrative and judicial powers. The Tribunal was established under the Co-operatives Societies Act (No. 12 of 1997) with the sole purpose of hearing and settling co-operatives disputes. The Tribunal comprises of a seven member bench, lawyers and two experts from the co-operative sector.

The Act is clear on the nature of the disputes than can be heard by the Tribunal. The qualifying disputes must concern the business of the society as it relates to elections, governance issues, and the issue of guarantees. Disputes must be among members, past members and persons claiming through members, past members and deceased members, or between members, past members or deceased members; and the society, its committee or any officer of society or between the society and any other co-operative society.

Any person desiring to file a dispute will be required to complete a form and must pay a small administrative fee when submitting this. Assistance to complete the form is available. The Tribunal has decentralized its services by establishing registries across the country which has reduced the congestion at the Nairobi Tribunal.

Previously, many of the settlements were challenged in the High Court due to the quality of judgments and due process not being followed. The establishment of the Tribunal has reduced the challenges to the High Court and provides the necessary finality and stability to the co-operatives. Resolutions of disputes are faster, more accessible and cheaper with the Tribunal than the courts. Although the Tribunal has decentralized its services, its reach remained limited. A further devolution of the Tribunal at county level was required, with regular sittings, thereby shortening the period it takes to resolve disputes. A further challenge faced by the Tribunal is acquiring the necessary skills and funding for its functions. In 2004, the power of the Tribunal was enhanced by empowering it to be able to enforce orders.

5. The Co-operative College of Kenya

The Co-operative College was established in terms of an Act of the Kenyan Parliament in 1952. It is tasked to provide the necessary training to members of co-operatives to ensure the sustainability of the co-operative movement. The Co-operative College offers training on co-operative principles and values as well as technical and management training. The College also develops curricula for co-operatives and sets standards for co-operative education in Kenya .

Since 1976, the College has been operating as a department under the Ministry of Co-operative Development and Marketing until its establishment as a Body Corporate. The broad aim of the College is to equip the staff of the co-operative movement and those from the government of Kenya with the appropriate managerial and supervisory skills that would enable them to contribute more effectively to the development of co-operatives in Kenya .

It offers a number of courses at diploma and certificate level. The minimum entry requirement is a high school qualification. The following courses are on offer:

· Bachelor of Co-operative Business

· Diploma in Co-operative Management

· Diploma in Co-operative Banking

· Diploma in Micro-Finance

· Certificate in Co-operative Business Administration

· Certificate in Co-operative Administration

· Certificate in Co-operative Banking

· Certificate in Bridging Mathematics

The College receives 30 percent of its funding from government and generates the remaining 70 percent. Currently, the College does not offer any vocational courses and are heavily focused on management courses. Although the education system is designed to provide technical training and there are other relevant institutions, the model may require a reassessment to focus on the inclusion of vocational training within the College.

In 2011, the Co-operative College of Kenya is set to introduce post-graduate courses after being made a university college to supply the growing movement with the necessary skills at managerial level. These post-graduate courses are targeted at providing the necessary expertise targeted at the savings and credit co-operatives societies.

6. The Co-operative Insurance Company Group Ltd

The Co-operative Insurance Company Group Ltd (CIC) was established 33 years ago and plays a significant role as it provides the necessary independence and empowerment in terms of insurance for the co-operative movement in Kenya . It is owned by 1 562 co-operatives societies and has around 38 875 individual co-operative members with the Co-operative Bank of Kenya holding a 26 percent stake. It delivers insurance services to the low income population group in line with the co-operative structure and philosophy of a flexible model for channelling insurance products to the disadvantaged. It is the market leader in the provision of insurance products for co-operatives and low-income sectors of Kenyan society. It offers a wide range of products which includes general insurance, life insurance, pension, medical aid and asset management services.

In Kenya , CIC is the second largest insurance company and is the largest provider of micro-finance. Its membership demographics predominantly consist of youth in Kenya . It developed key strategic partnerships which enabled the company to customise is products to service the needs of the different market segments. Its strategic alliance with the Co-operative Bank of Kenya saw the development of insurance packages that would cover the Bank’s credit services. Using the same model, products have been developed for SACCOs and the micro-finance sector.

CIC run various seminars, workshops and training programmes to educate the co-operative movement on good practice and corporate governance. This is in line with the co-operative principle of education and training. The CIC actively pursues the provision of low ticket insurance packages and services to low-income households which are becoming a major source of business for the CIC.

7. Kenyan Union of Savings and Credit Co-operatives Ltd

Kenyan Union of Savings and Credit Co-operatives Ltd (KUSCCO) acts as the umbrella body, the voice and lobbyist of the Savings and Credit Co-operative Societies in Kenya . It focuses mainly on advocacy, and representation and the provision of financial and technical assistance to middle and low-income households. This is a significant portion of Kenyan society that drives the country’s economy through small and medium enterprises.

KUSCCO provides a number of services to the SACCOs in Kenya . These include lobbying to reduce the impact of competition with commercial banks, addressing SACCOs’ low capital base, contributing to development and adoption of information technology, and reducing the impact of the pricing strategies of loans issued by commercial banks.

Members benefit from KUSCCO Housing Fund through the provision of loans to purchase or renovate homes. In order to benefit from the scheme, individuals are required to be a member of a local SACCO branch that is affiliated to the KUSCCO. Through its education and training programmes KUSCCO contributes to the development of management skills of co-operatives, through focusing on basic rights and obligations and on governance issues.

KUSCCO offers a number of products designed specifically for cooperatives in Kenya . These products include the Central Finance Fund, risk management services, the Housing Fund, information technology, field services and advocacy, education and training, and consultancy and compliance.

8. National Co-operative Housing Union (NACHU)

The NACHU formed in 1979 with the purpose to provide affordable and decent homes within low and modest income communities. It is member driven and is a leading organisation in the provision of housing finance, capacity building and technical services. Currently, 390 housing co-operatives are registered with the NACHU. Originally, it was set up as a technical service organisation but it became member driven, controlled with democratic governance structures. It focuses on community mobilisation and training, on the provision of technical support, the provision of financial services, on lobbying, advocacy and networking and the provision of NACHU loans.

The Kenyan Constitution guarantees housing to all its citizens, therefore, the provision of housing is critical for the NACHU. The annual demand for housing in Kenya is 200 000 units and 350 000 units in the urban and rural areas respectively. Out of this demand, the Co-operative Movement is expected to deliver 25% of the housing units with NACHU taking a leading role in realising this demand. Currently, more than 80 percent of houses produced are for high and upper middle-income earners, yet the greatest demand is for low-cost housing. The medium term goal is to increase the annual production of mainly low cost housing units in urban areas from the current 35 000 units to over 200 000 units. The co-operatives will therefore be responsible for building 50 000 housing units.

9. Kenya Co-operative Creameries

The Kenya Cooperative Creameries (KCC) was established in 1925 to address the supply of milk throughout the year by processing seasonal raw milk from small farmers. KCC therefore provided a sustainable or financially viable opportunity for small farmers to process milk. In order to stabilise the market, powdered milk could then be sold in the absence of fresh milk. Small farmers therefore required a central point for the processing of milk. However, in 2000, KCC ceased to exist but has subsequently been revived by government with the re-registration of the New Kenya Co-operative Creameries Ltd in 2003.

KCC works with primary level co-operatives to transport the milk for processing. It therefore deals with the co-operatives rather than individual farmers. Health inspection occurs at source and during transit and if milk does not meet health standards it is destroyed. During slow seasons, milk is processed into butter. Local farmers deposit milk for local consumption at the primary co-operative with the surplus going to KCC. Farmers are given incentives to deliver milk. In order to ensure the quality of the milk, KCC installed coolers at the co-operatives that still use milk cans. Most co-operatives use tankers to maintain the temperature.

KCC exports to a number of countries such as Tanzania , Uganda , Rwanda , Burundi , South Sudan, and Somalia . Through the United National Organisation (UNO), KCC exports to Syria and Malaysia and are in the process of exploring Mozambique as a market destination.

10. Issues raised

10.1. With regard to the capitalisation of co-operatives, the delegation was informed that members access funds through loans from the KUSCCO where terms are more favourable than that offered by commercial banks. Co-operatives attend to their members’ needs by providing the necessary funds at favourable terms.

10.2. The sustainability of co-operatives remains a challenge in South Africa with 80 percent of co-operatives failing. Pre-education, as well as continued support by the government, on the real purpose of co-operatives was essential to ensure sustainability. Government has a responsibility towards its citizens and through appropriate partnerships should incubate and help the growth of co-operatives. Co-operatives did not need the support of government all the time, but initial support was critical. It needed an integrated support system under the auspices of one directorate.

10.3. The absence of financial support from the Kenyan government with respect to co-operatives was evident. The success of co-operatives is attributed to effective marketing and the political will, as financial support by the state is not viable in the long-run. A total mindshift is required in South Africa to reduce the reliance on government assistance. Views expressed by the Kenyans were that public funds do not contribute to the development of co-operatives. Instead systems were needed that would connect co-operatives to the formal economy through the management of politics and education.

10.4. Starting a co-operative in Kenya is relatively easy as it is dependent on how soon the co-operative can comply with all requirements in law for its establishment. Co-operatives can be registered in one day or the maximum period of three months.

10.5. The Tribunal is not a final arbiter as applicants can appeal to higher courts for a review of the decision.

11. Concluding remarks and findings

11.1. The co-operative movement incorporates all facets of Kenyan life, as people in high office, such as the President of Kenya, as well as ordinary people belong to at least one co-operative. The broad-based success of co-operatives in Kenya has much to do with a prevailing attitude that favours co-operation, mutual responsibility, and financial prudence to reach a common goal. This attitude towards co-operatives is commendable. However, this attitude is not as prevalent in South Africa , and will need to be cultivated over time. The motto “Harambee” meaning to all pull together, similar to our phrase, “Ubuntu”, should be the foundation for co-operative development in South Africa .

11.2. The SACCO Societies dominate the co-operatives movement and is established solely for savings, and the provision of loans and credit lines. Individuals cannot be members of two SACCOS but can belong to more than one co-operative.

11.3. Evident from our interaction was the strong savings culture of the Kenyans, which is sadly absent from the South African society. The absence of government support in terms of social pensions and housing for the poor provides the necessary incentive for individuals and households to save for the provision of housing, education and retirement.

11.4. Co-operatives are found in a number of sectors of the Kenyan economy which include housing, and agricultural products such as milk, tea and coffee.

11.5. The banking sector in Kenya is skewed towards providing access to finance to big business. The high interest rate of 22 percent forces Kenyans to seek alternative avenues to gain access to finance. The volatility with regard to interest rate development does not provide the necessary certainty required when making loans.

11.6. The clear thread which ran through nearly all of the presentations was that government should not provide financial support for the establishment of co-operatives. The role of the state should rather be to provide the enabling environment by establishing a sound regulatory environment, a functioning dispute resolution mechanism, and non-financial support programmes including education and training.

11.7. Limited discussions on worker and consumer co-operatives prevented extensive engagement on the matter which could have contributed to our understanding as it relates to regulations and governance structures.

11.8. An analysis of the appropriate legislation as it relates to the Kenyan co-operative movement is required to understand government’s initial and ongoing assistance to the co-operative movement.

11.9. The establishment of an effective Tribunal would facilitate the resolution of disputes faster and cheaper than courts.

11.10. Field officers must be in the municipalities to specifically train co-operatives and provide them with the necessary services.

11.11. Field officers must have the necessary expertise within the co-operative sector that would enable them to deal with matters as they arise.

11.12. The Government must look beyond providing direct financial support for co-operatives but rather support co-operatives through non-financial means to ensure the survival and growth of the co-operatives movement in South Africa .

11.13. The DTI should explore the possibility of establishing a closer relationship with its counterpart in Kenya , the Ministry of Co-operatives and Marketing, to ensure continued policy development with the co-operatives sector.

11.14. With regard to skills development, the DTI should establish a mutually beneficial exchange programme with the Co-operative University College of Kenya that would enhance the skills levels of persons working in the co-operative sector in South Africa .

11.15. The allocated funds should focus on education and training, and the development of managerial capacity, as well as administrative capacity and information technology systems.

12. Acknowledgements

The delegation of the Portfolio Committee on Trade and Industry wishes to thank Mr N N Ntshinga, the High Commissioner, and his staff, especially Mr S Mtwazi, the Counsellor (Economic), for being instrumental in ensuring that the Committee engage with important key stakeholders during this visit.

The Committee wants to express its deep appreciation to the Hon J W N Naygah, the Minister of Co-operatives and Marketing in Kenya , and his deputy, the Hon Dr L J Kilimi, Assistant Minister of Co-operative Development and Marketing, for hosting the Committee.

Furthermore, the delegation wishes to thank Mr S Naykanyana, the Permanent Secretary in the Ministry of Co-operative Development and Marketing, Ms E Gatuguta, the Director of Administration, Dr J M Nyatichi, the Deputy Commissioner, Mr G Karuku, the Deputy Commissioner, Ms M Wanyonyi, the Senior Assistant Commissioner for Co-operative Development, and Dr M Waema, the Regional Director for the International Co-operative Alliance, for their valuable contribution in developing a successful programme.

Visits to the Co-operative University College of Kenya, CIC, KUSCCO, NACHU, and the KCC contributed in broadening the understanding of Members with respect to the co-operative movement.

The Chairperson of the delegation thanks all Members for their active participation during the process of engagement and deliberations and their constructive recommendations made in this report.

13. Recommendations:

Based on the engagement with the Ministry of Co-operative Development and Marketing, as well as the organisations representing the co-operative movement, the delegation would like to recommend that:

13.1. The Committee should consider inviting Dr M Waema, Regional Director of the International Co-operative Alliance, to advise it on the Co-operatives Amendment Bills.

13.2. The DTI should develop a campaign and motto for the promotion of the co-operative movement in South Africa for wealth creation and poverty reduction.



[1] First Co-operative Society established in Rochdale in 1834 – Called the Rochdale Pioneers, who drew up the 7 principles use by co-operatives worldwide.

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