Role of Cooperative Banks

Meeting report

The Chairperson announced that the briefings of the day were a follow-up to public hearings on cooperative banking. It had been agreed at the time that all participants would be invited to the follow-up meeting of the day. The Committee report on cooperative banking would be sent to all stakeholders for comment. He welcomed all participants, and invited the Reserve Bank to proceed with its presentation.

South African Reserve Bank: Supporting transformation through cooperative banks

Mr Rob Urry, Supervisor of Cooperative Banks, SA Reserve Bank (SARB) said a cooperative bank was defined as a cooperative registered as a cooperative bank, whose members had a common bond. It was mandated by the Cooperative Banks Act (no. 40 of 2007). The SARB registered and regularly assessed cooperative banks, and ensured protection of depositors’ savings.

The National Treasury (NT) registered Cooperative Financial Institutions (CFIs) under the Cooperatives Act and the Exemption Notice from the Banks Act. The NT was tasked with the development of CFIs in preparation for them becoming cooperative banks. Operations of cooperative banks included accepting savings and deposits from members, paying back on demand, and paying competitive interest. There was lending to members, investment of monies not loaned, financial administration, and regular meetings of members.

Challenges to converting CFIs to cooperative banks included lack of financial, human and operational capacity; ineffective accounting and management information systems; overstatement of financial figures which exaggerated the financial position; and governance deficiencies, including skills shortages.

Cooperative Banks Development Agency (CBDA): Role of cooperative banking in transformation of financial services sector

Ms Nomadelo Sauli, Head of Capacity Building, CBDA, said cooperative banks and cooperative financial institutions had the potential to play a significant role in the transformation of the economy. The previously disadvantaged had been excluded from participating in mainstream banking as owners of financial services institutions. There could be stimulation of township and rural economies through a focus on small, medium and micro enterprise (SMME) financing, incubation and development. The benefits of cooperative banking included investment in local communities, and ownership and control of localised institutions. It encouraged a savings culture, and could enable reinvestment of money back into the community that would mobilise resources. Surplus funds could be ploughed back into the community.

Challenges to growth in the sector included under-capitalisation; a low skills base; lack of banking processes in place; lack of knowledge about cooperative banking, and sophisticated competitors. Requisite building blocks were an adequately capacitated Cooperative Banks Development Agency; multi-stakeholder capacity-building interventions, and enabling legislation and regulation. Support had to include capitalisation of the sector, an incubation programme, a banking system, and branding and marketing. A case study was included in the briefing.

Limpopo CFI Forum

Mr Theophilus Ramashiga said the Limpopo CFI Forum did not wish to direct CFIs on what to do. The aim was to make the CFI model work. They needed help through capacity building interventions. A secondary cooperative had to be built. Standard policies and procedures had to be developed to strengthen CFIs. They had to be assisted to activate “ghost” members. Out of a 1 000 members, it had been found that only 100 would be active members.

There had to be a political marketing campaign that included government assistance. A better model for investment was needed. Business support had to be provided where necessary. Education and training for members had to be promoted. CFIs had to be helped to create a development fund that could be loaned to members. CFIs had to visit and advise each other. There were challenges of slow growth. Members had to understand the benefits of cooperative banking. There were 14 CFIs in Limpopo, of which five were registered with the CBDA. A cooperative bank was needed in Limpopo.

Discussion

Mr D Maynier (DA) asked for more information about the capitalisation of CFIs, and the difficulty in accessing finance available to small businesses.

The Chairperson commented that the Committee had to make decisions. Members were not technical experts. The Standing Committee (SC) had to be able to ask the Executive about the “nitty gritty.” The SC had to recommend, which meant that there could be accountability. The entities also had to exchange information among themselves. He asked if the Reserve Bank could explain the difference between a CFI and a cooperative bank. He asked which regulations were specific to cooperative banks.

His own position was highly subjective. As an ANC member, he supported cooperative banking, like the ANC as a whole. However, his personal experience was not positive. It was horrific how little of the money made avilable was used for the right purpose. He had served in the executive and had worked with cooperative banks, and had seen failure. On the other hand, he would concede that cooperative banking was becoming ever more necessary for radical economic transformation. He had worked with Italians and the outcomes had been pathetic. The government supported cooperative banking, but needs had to be served.

He asked if there had been any national survey. There was a growth rate of 0.5% predicted for the following three years. There was no money. Members of Parliament were not subject to performance assessment. He himself was not held to account to see if he delivered value for money. Legislative changes were being asked for. It had to be compressed into five lines by the coming Friday. The issue of a tertiary cooperative bank had been raised with government. He asked why the NT had said “no” to that.

Mr D Hanekom (ANC) agreed that there was a high failure rate internationally. It had to be established why some worked and some did not, especially production cooperatives. Market cooperatives worked better, also in SA. The notion of cooperatives was appealing, because they were collectively owned. However, the question was, who was being targeted? SMMEs borrowed for a specific purpose. People found it difficult to find money. SMMEs could not get funding into the hundreds of thousands. A different model was needed. Borrowers were in trouble when they needed money for a funeral, for example.

He did not wish to disparage stokfels, but the question was if a cooperative was the best model to address that need, although it might be a good model. It had to be asked which cooperatives in SA were successful, and what the ingredients of the success were. There were many models. One model was similar to the stokfel, where people who borrowed had a history of saving. People could get money when they needed it.

It was not correct to say that big banks did not give money to the small borrower. The problem was that when money was lent to the small borrower in rural areas, the transaction costs were high. A person could get R100 only by paying a high interest rate. The situation could be turned around, but a local footprint was needed. It was thought that the Post Office could play a role to get loans to people. Low interest rates were a challenge. For the transformation of the financial sector, decisions about the right model were critical. There had to be clarity about what had to be achieved.

The Chairperson remarked that it would not do to make dogmatic decisions. Further discussion was in order, but a framework was needed. It worried him that cooperatives did not succeed internationally, as for example in Italy. Yet 44% of US citizens banked in cooperatives. It could be that the international failure rate was related more to production than to markets.

Mr Urry replied about the difference between cooperative banks and big banks. A cooperative bank was owned by depositors. When one became a depositor and a member, one gained control. It had to be administered correctly, and care had to be taken not to lend to people who could not repay loans. The ability of people to pay back what they borrowed was a credit risk factor. Interest rates were related to risk. The higher the risk, the higher the interest rate charged. It was profitable to charge more for loans. Savings were taken and lent back, and people who borrowed became depositors. High interest rates made it possible to cover administrative costs and to retain some money to grow.

More stringent rules were applied to standard banks than to cooperative banks. Basic rules were not to lend inappropriately. Cooperative banks in the USA failed because when unable to make loans, they had a lot of cash and on the lending side there was investment in rubbish. That had taken down a lot of big banks in the USA.  In SA, there was a small set of principles which were conservative, and the principles to protect depositors were adhered to. Individuals and corporate entities had to be protected. The Reserve Bank supported cooperative banking, but prudent investment was called for. People who administered money on behalf of the community had to do so appropriately.

The Chairperson asked about the difference between CFIs and cooperative banks.

 Mr Urry replied that a cooperative bank was an advanced CFI. Cooperative banks were subject to the Cooperative Banks Act. A depositor could not make up more than 15% of the deposit book, and it was not allowed to lend more than 15% to individuals.

The Chairperson asked if the Reserve Bank had done a study of the strengths and weaknesses of cooperative banks in SA.

Mr Urry replied in the negative. The establishment of a tertiary cooperative bank was legally provided for, but secondary cooperative banks failed. The difference between CFIs and cooperative banks was in the regulations.

Ms Sauli said that CFIs were represented by the CBDA. It provided an entry level into cooperative banking. There had to be a minimum of 200 members, and R100 000 in share capital. The Act prescribed that once a deposit-taking licence had been granted by the CBDA, and R1 million had been accumulated in deposits, there had to be registration and application to become a cooperative bank with the SARB. The 15% external credit rule applied in that regard. The CBDA played an incubating role to get CFIs up to that level.

The Chairperson asked what a CFI could do or not do, compared to a cooperative bank.

Ms Sauli replied that the services were the same, which was to collect deposits from members. A CFI could be viewed as a mini cooperative bank. It could become a cooperative bank when R1 million was reached in deposits. Cooperative banks had access to finance, but CFIs could not get funding in terms of the cooperative incentive scheme, which was meant for cooperative banks. There was a clause in the act that CFIs were not meant to access that funding. Most CFIs died at that stage. After the registration fee of R100 000 had been paid, there was no money left to buy computers, for example.

There was a community in Matubatuba who wanted to establish a CFI. The initial R100 000 had been scraped together, and R1 million had been raised after five years. The law prescribed that it could not raise more than 15% in external credit. 15% of R1 million was R150 000. The question was how much could be extended to small businesses around them with that amount. There was a taxi drivers’ association that wanted to start a CFI, and wanted to buy their own taxis, but they could not get more than 15% external credit. Not even one taxi could be bought from R150 000.

The capitalisation of CFIs had to be reviewed. The Small Enterprise Finance Agency (SEFA) could provide a loan, but it could not be more than 15%. Government departments were not talking to each other. She would share the relevant clause in the Act. The CBDA had engaged the Department of Small Business.

Mr Hanekom asked what their response had been.

Ms Sauli replied that they had said they would look into it. They did not understand where the limitation came from. The matter was currently with the Department of Small Business, as it had been moved from the Department of Trade and Industry (DTI). Her colleagues could deal with the changes that had to be made, regarding the 15% external credit and the R30 million limit. There had to be concessions to tertiary cooperatives. CFIs could decide on interest rates -- it depended on savings deposited. Some CFIs had decided to have interest free loans, but did not pay dividends.

The Chairperson asked why there had been no study on strengths and weaknesses.

Ms Sauli replied that the CBDA would embark on that.

The Chairperson noted that it would be recommended in the Committee report that a study had to be done.

Mr David De Jong, Supervisor: CFIs, responded that a regulatory impact assessment would commence in October. The international credit union regulator would come to SA to assist. There would be an impact assessment of current legislation and regulation. There were regulations specific to CFIs and cooperative banks. The assessment was designed to take into account international best practice of credit unions, and would be informed by the World Council of Credit Union’s recommendations. The regulations were not of the Basel One type. Regulations were very simple, and designed to make CFIs safe.

Regarding capitalisation, he commented that his colleagues were on the regulatory side, and he was on the supervisory side. External credit into CFIs raised questions. People paid back loans because they owed money. The minute external credit was put in, the question arose how it would be repaid.  Members of a cooperative bank had to have control. External money had an effect on ownership and control, hence the 15% external credit rule. It could be extended to 30%,  but members of a cooperative had to retain control. Globally, cooperatives did not depend on external credit. Internationally, banking cooperatives had not been worse off after 2009. In fact financial cooperatives had performed better than commercial banks, and there were studies attesting to that. There had been a backlash against commercial banks because of profit maximisation. There was a movement to regional and local banks, which was a trend among younger people in Europe and the USA.

Mr Hanekom asked about the developing countries.

Mr De Jong replied that cooperatives were very successful in Kenya. Legislation had been put in place, and the movement had grown by leaps and bounds because members had confidence in the safety of their money. In SA, the Act spoke of deposit insurance for members of cooperative banks, but it had never been implemented for investors in small cooperative banks. The NT had taken the route of working with big deposit insurance, set up for commercial banks. It should have been up and running for cooperatives in SA.

The Chairperson told the entities that the Standing Committee could not be expected to endorse amendments. The Committee wanted summaries of half a page on capitalisation. External credit had to be subject to strict conditions, but 15% was ridiculously low. The Committee would state that this matter had been presented and would receive serious consideration. Other submissions would be recommended.

The Chairperson asked the Limpopo Forum what it wanted. He asked if the MEC for Economic Development in the province had been engaged with, and what the response of the MEC and other departments had been.

Mr Ramashiga replied that previously it had stated that the CFIs were struggling. Subsequently the situation had worsened, as it was no longer even possible to borrow from SEFA.

The Chairperson asked if there had been a meeting with the Department of Finance.

Mr Ramashiga replied in the negative. SEFA did not want to assist, even though in the past money borrowed from it had been paid back.

The Chairperson told him that the national Parliament was willing to assist, but the Council also had to be lobbied, as well as municipalities. The situation with regard to cooperative banks was more complex. The MEC for Finance had to be worked with, and provincial departments had to be lobbied. Increased awareness could be promoted through radio stations and local newspapers. He himself could write to MECs, but it had to be borne in mind that the MEC or municipalities could not be forced.

Mr Ramashiga replied that the Department had been approached to ask for training on policies and a constitution.

The Chairperson said he could phone the content adviser, who would write up what he said. The national Parliament would assist. He asked what tools the Forum needed assistance with.

Mr Ramashiga replied that the CBDA had been approached for training, but it had been too much for them. Training for CFI members was necessary, as only 100 members out of 1 000 were active.  A start could be made by looking at policies, a constitution and a business plan.

The Chairperson asked why the CBDA could not go out and render assistance. The Committee Members were not experts. Movement and action was needed.

Ms Sauli replied that the CBDA did work with the CFIs.

Mr Ramashiga countered that this had been a long time ago.

The Chairperson asked that the CBDA engage with Limpopo. There had to be workshops in consultation with municipalities and relevant departments. It had to report back in writing to the SC within three months. He could not prescribe to the CBDA, but he could contact the Minister. He could harass her, as that was his job. If a report was not received within three months, he would harass the Minister and the DG.

National Association for Cooperative Financial Institutions (Nacfisa)

Mr Mzwakhe Sikhosana, Managing Director: Nacfisa, said the Association was a member of the National Association of Conservancies (NACSA), which was an apex body for cooperatives. Nacfisa had been established by the CBDA, and wanted cooperative banks in every municipality. It wanted to share capacity building with the CBDA. It was in favour of using the word “bank”, rather than CFI.

Nacfisa would lobby to open up laws that limited investment. The Reserve Bank was opposed to securities and investment for cooperative banks. After six years, there were only two cooperative banks, while there were over 60 CFIs. Nacfisa was committed to studies that could benchmark, in order to create a new development strategy. It had shared auditing statistics with the CBDA, to acquire accurate data from members. Nacfisa wanted official status from the CBDA, to be in line with the Cooperative Banks Act.

Mr Hanekom remarked that as only two cooperative banks had been formed, something had to be wrong.

Mr Sikhosana responded that the 15% external credit limit was a challenge. It limited credit so that there could not be an aggressive entry into the market. There was no incentive. Only 5% could be spent to buy property. Banking was also a question of image, and that limitation did not permit image creation. There had been an appeal to the Department of Small Business Development. There was no national development strategy, and no policy direction. Banking systems and a national incubation model were needed, as well as enterprise development. There was one partner in Germany. There had to be a national branding and a marketing campaign. Support had to be based on cost sharing for sector independence.

It was not advisable to lobby for government money, as this would create a handout situation. Cooperative banks had to be linked to the local economy. Education was important for the sector. There was a need to create a cooperative register, and to create monthly reporting tools. A model from India could be looked at, to create a cooperative banking credit rating system. Cooperative banking was the most radical approach to address poverty and inequality.

Wealth Creation Global
Ms Phoebe Malebane, Director: Wealth Creation Global (WCG), said the cooperative was committed to alleviating poverty in Africa. People in the rural areas suffered especially from a lack of banking services. They were often classified as “unbankable” and economically inactive. WCG believed that the Reserve Bank and the CBDA had failed in their roles, and commercial banks were inhibiting the growth of cooperative banks. Legislation had failed to achieve the original goal. The R30 million ceiling and 200 member minimum requirements were inhibiting factors.

The CBDA was not playing its intended role, and it was positioned under the wrong Ministry. The WCG would submit that it had to be placed in the Economic Development Department. Cooperative banking legislation had delivered a still body. The CBDA had to get involved in sectors like agriculture and mining, and had to provide skills and support for business management and administration. The WCG did not agree with the principle of mentoring by commercial banks, as mentors did not know what people needed. Cooperative banks should not restrict their operations to savings, but had to contribute to economic development.

Discussion

The Chairperson commented that the Committee needed a written submission from Nacfisa and the Limpopo Forum.. The Standing Committee was not a super committee. It decided on policy, and the entities had to decide on the budget. He asked for an input on the national payment system.

Mr Kobus van Niekerk, Head of Central Support Services, CBDA, responded that he would take a step back. The CBDA had a business unit called general support services. Held share services were a solution to the banking platform. It was in play, and was used by nine CFIs with 15 000 members in it, and 24 000 accounts. The National Payment System (NPS) was a painful process, as banks did not want to participate, and was slighted because of not being profitable and because of anti-laundering requirements.

There were several stages to the Financial Services Provider (FSP) process. Two of the big four banks had bid, but it was not a full solution, although it had been a move in the right direction. The CBDA had tried to be registered as a designated participant. There were legal grounds that opposed that, and a set of discussions around the issue. Participants in the NPS could alleviate that pressure. The CBDA had to register cooperative banks that could go into the NPS.

The CBDA had a banking system that could enable banks to interact with each other. It did not own the system, as it was a software system that provided a service to players, which was used by five banks. It could enable cooperative banks to achieve parity with commercial banks, both in processing and access to the NPS.

The Chairperson asked if there was movement towards cooperative banks reaching the NPS. He asked what the CBDA wanted.

Mr Van Niekerk replied that there was a process in place, but it was not a final solution.

The Chairperson asked what a final solution would be.

Mr Van Niekerk replied that it would be direct participation in the NPS.

The Chairperson asked how long the process would take -- whether it would be two or five years.

Mr Van Niekerk replied that it could possibly take five years for cooperative banks to become direct participants.

The Chairperson asked if cooperative banks were satisfied with that.

Mr Van Niekerk replied that he did not think they would be. The solution could be rolled out in the following year.

The Chairperson asked about the NT decision on the matter.

Mr Van Niekerk replied that it was currently in the Treasury supply chain management (SCM) process.

The Chairperson said that the Committee could do something about that. It could be stated in the Committee’s report that regular reports on the matter were desired.

Mr Van Niekerk replied that the matter was going to the bid adjudication committee.

Ms Sauli replied about CBDA resourcing. The CBDA was under-resourced. The budget had been R6 million at first, then increased to R9 million, and currently stood at R16 million. The CBDA went out to the market for a solution to the banking platform. R30 million was needed for the banking platform. Funds were raised from stakeholders so that banks could be engaged with. The new Ministry understood the role of cooperative banks, and directed the CBDA to units that could help resource it better. The establishment of a tertiary cooperative bank could assist CFIs to enter the NPS as cooperative banking systems on their own. Registration could be in terms of conditions related to prudential and capital requirements that could be met.

The Chairperson said that not everything the entities were saying could be included in the Committee report, not even the things that the Committee agreed with. The Committee could not tell the Small Business Development Portfolio Committee what to do, but could merely state its own views. The entities had to lobby, and a framework of action had to be provided. The SC was not ambitious. An immediate, medium and long term programme had to be set out. The entities had to lobby local politicians. Local MPs in their constituencies had to be harassed.

Mr Maynier told the Reserve Bank and the CBDA representatives that the government was hostile to the private sector. The solution for the “unbanked” was to set up a state bank for bank services to the poor. The state bank would squeeze out cooperative banks and CFIs, as it would be in competition with them. Risks would be incurred through the state bank.

The Chairperson referred to double taxation. The Committee had to be sent two sentences about that. He asked about the use of the term “banks”, and if it would not be advisable to drop the term “cooperative”. Who funded Nacfisa? A national cooperative bank strategy was reasonable.

He asked about a relationship with the Financial Charter Review, and whether the entities were involved in it. He asked about progress with the deposit insurance scheme. “Pie in the sky” proposals would not be supported. Realistic proposals had to be made. It had to be known what was possible. There were constraints in the political sphere. The country as a whole was economically and politically challenged. Both the ANC and civil society could be held accountable for that.  

He asked when the entities proposed to tell Parliament what was most achievable. There had to be a distinction between what was currently possible, and what was possible over the medium and the long term. It had to be compressed into a single page. It could help the Committee to be realistic and to hold the Executive to account.

He referred to the banking platform software. He asked what happened to CFIs that were not registered, and how they functioned. 46% of Africans in the country were poor, and earned below R534 per month. It was shocking. He asked Ms Malebane how Wealth Creation Global functioned. She was clear about what she wanted, but the question was who she was and who she really represented, and how many members there were.

He asked about the suggested moving of the CBDA to the Economic Development Department. Cooperative banks resided under the Treasury, yet were crucial to economic development. It was said that the Financial Sector Regulation (FSR) Bill created problems. The question was, how? There were aspects that belonged to small business, finance and economic development. He could not see the NT giving the CBDA up. He asked what the relationship between stokfels and cooperatives was.

Mr Sikhosana replied about double taxation. Individuals were already taxed at work, and when the cooperative was taxed, their savings were taxed. There had to be an opportunity to get cooperative banks in the corporate eye. He suggested a moratorium on taxing for a number of years.

The Chairperson told him that the ANC would agree with that, but the question was if it was achievable. When less interest was raised, there could be less tax. The World Bank had stated that SA taxation was extremely redistributive. The matter of double taxation would be put down in the report as noted.

Mr De Jong also responded about double taxation, saying that cooperatives around the world were not taxed, because they serviced members of a financial cooperative. Financial cooperatives were taxed only on a surplus made because members had been overcharged. To reduce interest charged to members was unique to SA. In the USA, credit unions and cooperative banks did not pay tax, because it was members-only based, and there was a common bond -- members traded with each other. When there was trade with non-members, the argument fell apart. The NT had been asked about taxation, and had agreed that member-only cooperatives were not to be taxed, only when there was trade with non-members.

Mr Hanekom asked if cooperatives were not taxed on returns from their own members.

Mr De Jong replied that there was a valid discussion about the five percent, because the cooperative model was ideally a financial intermediary model.

Mr Hanekom commented that internationally there was no taxation on returns, even if massive amounts of money were involved.

Mr Sikhosana responded about the use of the term “bank”. Nacfisa wanted the use of the term “bank,” as it wanted normalcy. The term CFI created confusion. CFIs were called “sacos”, for savings and credit organisations. It was not good for branding. It was preferable to use the term “cooperative banks”.

Mr Urry said that anything defined as a “bank” would fall into the Reserve Bank’s ambit. The Reserve Bank did not allow illegal deposit taking, hence “bank” meant that there was an ability to pay back depositors. The state stepped in as last resort when registered deposit takers could not pay back. If the word “bank” was used, there was an obligation on the state. If there was no control, the state could not represent depositors. The question was whether the state could assert whether institutions were valid deposit taking institutions or not.

Mr Sikhosana responded that the Nacfisa position was that everyone had to be regulated. Regulation had to be expanded to wherever people deposited money and traded. If necessary, tiers could be created to distinguish between different levels. Whatever was unregulated posed a risk.

The Chairperson noted that Nacfisa saw no need for the category of CFIs. He asked why the category could not be dropped, with only the term “bank” used.

Mr Urry reiterated that the use of the term “bank” would make an institution fall under the law, which meant that there had to be compliance with simple regulatory standards.

The Chairperson opined that CFIs seemed to be a stepladder, but Nacfisa thought that it was a meaningless category. He asked if it could be termed a “minibank” or an “emerging bank.” He asked why there could not be a single category, namely that of “cooperative bank”.

Mr Urry responded that it could create confusion among the public. The use of the term “bank” implied regulatory oversight, and implied that the state was looking after you. The impression should not be created that people were not being looked after.

Mr Sikhosana said that Nacfisa was not saying that CFIs did not want to be regulated. Mr Urry was citing that as a reason why the Reserve Bank did not want to use the term “bank”.

The Chairperson said that they were called CFIs because they were not regulated like a cooperative bank. Yet if a CFI decided to be a cooperative bank, it would be regulated. He asked if changes in legislation were called for.

Mr Urry responded that he was not so sure. The legislation was simple -- there had to be compliance with standards.

Ms Sauli said that Mr Urry’s problem was addressed through the “Twin Peaks” legislation. The CBDA’s regulatory arm had gone to the Reserve Bank. The CFI term could be dropped on the following day.

Mr De Jong responded that amendment to the Financial Sector Regulation Bill placed CFIs under the Cooperative Banks Act. The CBDA supervision unit would go to the SARB, and the matter would be resolved by the move to the Cooperative Banks Act.

Mr Sikhosana said that Nacfisa would develop a national strategy for cooperative banks.

The Chairperson opined that Nacfisa was not a statutory body, so the CBDA would have to deal with the national structure.

Ms Sauli responded that the Minister had made a statement on inclusive growth action. The CBDA would develop a cooperative banking strategy for the country. A small team in the Ministry of Finance had been assigned to that. It would be presented to identified stakeholders.

The Chairperson told Nacfisa that nothing prevented it from giving its draft to the CBDA. He recommended that the CBDA be mandated to prepare the national strategy.

Mr Sikhosana replied about funding to Nacfisa, saying that Nacfisa was not state funded. There had not even been acknowledgement of a request for it.

The Chairperson commented that the South African Local Government Association (SALGA) was a statutory body that represented municipalities. He asked about the possibility of forming a statutory body that was a national association of cooperatives, to be put into law. He asked if such a possibility had been discussed.

Ms Sauli responded that according to the Act, the function of the CBDA was to register associations as cooperative banks, which had to meet certain requirements. There had been a fall-out with Nacfisa, but she did not know the reasons for that.

The Chairperson advised that the CBDA should meet with other associations. Nacfisa had to consider the elements of a strong national association.

Mr Sikhosana responded to a question about Nacfisa’s relationship with the Financial Services Charter (FSC), and said it was waiting for an invitation.

The Chairperson asked if gazetted advertisements were responded to. He would write to the FSC to say that Nacfisa wished to make submissions. The Committee would recommend that all the entities make submissions on the review of the Charter. He would urge the Committee that dealt with it in the DTI to respond.

Mr Sikhosana said that Nacfisa wished to become a statutory body. He asked if there could still be consultation on the Financial Sector Regulation Bill, or whether it had been signed off.

The Chairperson answered that the Committee had spent 250 hours on the Bill. Mr Sikhosana could “Google” for information. He did not want to open up from Parliament’s side. Parliament had spent 15 months on it. There was to be no more debate. Parliament wanted implementation.

Mr Sikhosana commented that Nacfisa had no relationship with stokfels. It wanted stokfels to reach the 200 threshold and operate as cooperative banks, which was more sustainable.

Ms Malebane told Mr Maynier that he had posed a naughty political question about a state bank. He wanted to set cooperatives up against the government. A state bank was desirable, and not a threat to cooperative banking. Commercial banks did not open accounts for cooperative banks, as they did for Denel Systems. A cooperative bank had to get all the board members together to open an account.

She responded to the Chairperson’s question about who Wealth Creation Global was. WCG had formerly called for the dissolution of the CBDA. It had looked at the legislation and had come to the conclusion that the responsibility of the CBDA prescribed by the Act was not developmental. The Act that created the CBDA had set it up for failure. The CBDA had achieved nothing. It was not because of lack of capacity or willingness, but because of the Act. WCG had undergone a change of heart, and were currently saying that the CBDA had to be moved to the Department of Economic Development. The CBDA could not be effective if under the jurisdiction of accountants. Accountants were not economists. The CBDA could effect radical economic transformation if it was placed under the Economic Development Department, with a budget. Changes in legislation could take long, although it could be done within a week, if there was a will to do that.

The Chairperson agreed with that. The Provident Fund was a big matter, and it had been done in three weeks.

Ms Malebane replied that it could not be done that rapidly, as stakeholders had to be involved. However, she advised that the CBDA should be taken up within Economic Development with immediate effect. The National Treasury did not benefit, as the CBDA did not even have a budget.

The Chairperson asked about the social weight of Wealth Creation Global.

Ms Malebane replied that WCG went back to 2009. Non-governmental organizations (NGOs) had been merged. There was a long history of working with communities, on charity or at the consulting level. 200 schools had been worked with in the Eastern Cape. WCG did not dump organizations, but worked with and incorporated them. Needs were identified for capitalisation, and for improving skills and knowledge. It went out into the community and helped with infrastructure.

The Chairperson asked how many members there were.

Ms Malebane replied that WCG was registered for strategic reasons as a cooperative. Initially there had been the minimum of five members, but later more had been brought in. Currently, more than 200 people were incorporated nationally. Cooperatives were trained and monitored.

The Chairperson asked if there was donor funding.

Ms Malebane replied that there was no donor funding.

The Chairperson said that Parliament took individuals seriously. However, if there were 1.6 million workers, like Cosatu had behind it, there was more social weight. Still, individuals could make good points that could be incorporated into legislation, and an individual had changed legislation on the Municipal Systems Bill.

Mr Urry responded about a state bank. There was as yet no definition, but it was not meant to be a system where people took money and got out. There were already state banks in existence, like the Land Bank, the Industrial Development Corporation (IDC) and the Small Enterprise Finance Agency (SEFA). It was not meant to be a charitable system. Cooperatives did not compete with state banks -- it was a different model in which communities put money together and lent it to themselves.

The Chairperson said that the Ministry had stated that there were no plans for a state bank. The focus was mostly on the Post Bank. The Committee would send its report on transformation of the financial sector to the entities, and grant them two weeks to respond. The entities could withdraw what had been said in public hearings, and soften their approach if necessary. However, Parliament had to be robust and people had to speak their minds, as long as the other person had the right to reply.

In the Committee report it would be stated at the outset that an overview would be given of what stakeholders had said, but the fact that they were covered in the report did not mean that the Committee agreed with the stakeholders. The first draft would be sent to Members on the Tuesday of the following week. It would be an internal report. The following Tuesday was to be a public hearing. The public would be there. Some of them would be catching 5 p.m. flights. He asked that Members be on time, so as not to cause embarrassment.

The Chairperson adjourned the meeting.