Co-operatives Development Unit

Second major concern is that the Bill does not contain provision for the purpose and functions of secondary and tertiary co-operatives for them to be empowered to provide services to their members and promote co-operative development.

• The Bill is trying to address the problem of prescriptiveness as currently contained in the current Act through simplification and the empowerment of a co-operative through a constitution. Elaborating on the purpose and functions of different forms of co-operatives leads to unnecessarily overegulation and disempowers a co-operative. This can be elaborated in the constitution of any form or kind of a co-operative if they so wish as their focus area as a service provider.

• The Bill defines the forms and kinds of co-operatives clearly. A key factor to be taken into cognizance is the level of development of the movement in South Africa. We need to build a grassroots movement, which will ensure that coordination of sectoral movement is easy and co-operatives themselves are free and knowledgeable to choose the sectoral association of their choice as embodied in the country’s constitution and furthermore as dictated by the kinds of service needs to be provided to them by the same secondary or tertiary co-operative as defined.

• This is covered in the Policy but not in the Bill/Act since this will be a regulatory burden, which will need monitoring from government to ensure that co-operatives do comply which takes away constitutional rights and autonomy through the way it will be instituted. This can be detailed by each co-op with full knowledge in their own constitution covering the amount they agree to contribute and the services to be provided and functions of the Fund.

• South African history is unique and totally different from other movements that we can start benchmarking with or against. Other movements started in normal environments at par with small businesses development. The Co-operatives development Policy is South Africa is not in isolation from other government polices but embedded in them. The Co-op Fund in other countries was never a product of the Act/legislative framework but born out of necessity and willingness by co-operatives themselves, e.g. Italian model. Co-operatives themselves started the Fund to assist start-up co-ops, education and training when reached a self sustainability level. It was out of the realization of co-operation among co-operatives principle where the movement wanted to support start-up co-operatives on technical, financial and other compliance areas for them to compete globally.

• Currently government is not eroding the co-operative spirit but is ensuring that as practiced all over the world, government intervenes to support the growth directly or indirectly such as in Italy, Spain and other countries where co-operatives can save jobs and create employment, grow the economy and mobilize savings. The government in South Africa unlike other fewer countries that does not support co-operatives wherein they survive under hostile environment but government will intervene due to our society structure, markets and the need to promote sustainable enterprises.

• In SA government will assist the movement to take off whilst building its movement based on core values and principles through its range of support programmes available to SMMEs in the area of capacity building and access to finance. Currently government is investigating possible fiscal benefits (taxation where a Co-operative voluntarily sets aside an indivisible part of their reserves as detailed in their constitutions), technical assistance for ease of compliance through a Technical Assistance Instrument, alignment of available resources across government including the dti cotii agencies, national departments, provinces and local government.

If the capitalization of a co-operative through a co-op fund and reserves are to be included in the Bill will lead to regulatory impediments rather than allowing a co-operative through its constitution to independently decide the amount to be set aside as reserves, and the amount to be contributed to the Fund voluntarily with full understanding without creating unnecessary compliance burdens.

Legislating the Fund and reserves will directly reduce member’s voting rights, which is the key critical democratic component of a co-op differentiating a co-operatives from other forms of ownerships. The critical shortcoming of the current Act point are that it is complex, prescriptive, inaccessible, not user friendly, and empowered the registrar through dis-empowering a co-op and is not favorable for this policy which seek to promote the development of emergent co-operatives as enterprises and businesses.

Yes, it is not a bad idea for a movement to be sustainable and provide services to itself to avoid dependency syndrome to the government, but as highlighted that this policy is embedded to other government policies addressing the apartheid ills and has a clear economic agenda, it is critical that the benefits to other enterprises is also extended to co-operatives.

A patronage proportion as basis for tax benefit to the co-operative as submitted by NCASA, is defined in the Bill but not compulsory provisioned in the same Bill/Act to avoid compliance. But the constitution will determine how to deal with the issue of reserves. The tax issue is being discussed with NT to establish if co-operatives that will put aside an indivisible reserve will qualify tax deductions and what will be the monitoring needs.

The explicit outlining of support in the Bill is unnecessary since the Bill is not administrative but developmental which is outlines the support in the purpose of the Act. Support measure will be detailed in the co-operatives strategy.

The dti has on several occasions stressed that the current SMME

Programmes will be extended and aligned to co-operatives and where gaps exist new instrument will be developed e.g. SEDA mandate, NEF, KHULA etc. To ensure an integrated approach to supporting co-operatives by government agencies, an interdepartmental committee has been established to ensure that the resources are harnessed across government. The dti is closely working with National Treasury on the issue of Co-operatives Bank Bill and linkages have been identified and synergised.

• The tax issue is currently being discussed at highest level with National Treasury and a business case to support the tax benefits is being developed to prove a case for a tax reduction need whilst retaining the existing tax benefits as provided in the Income Tax Act.

There is no harm that section 32 brings in the Bill as it supports and guide what is embodied in the constitution.

The audit is done for the protection of interest of members, for the enterprise to run and be managed on sound business principles and for its own sustainability. The government will subsidize the cost of audit compliance and the registrar of co-operatives will critically consider exempting very small co-operative producers as contemplated in section 55(1) of the Bill so as to ease compliance burden further.

It is imperative for co-operative enterprises to observe good governance through audit, but through the technical capacity building fund of the dti or instrument co-operative members will be capacitated over shorter period to be able to keep up records and draw up yearly financial statements for easy auditing therefore lowering the cost of audit.

In addition to the above, the Bill has opened up the scope and support for alternative auditing through alternative assurance providers, meaning any other person outside of the public accountants and auditors Act can be authorized to conduct audit for the co-operatives provided they comply with codified guidelines of South African auditing Standards. The government will take reasonable steps in ensuring that accounting standards are not lowered whilst ensuring that indirect barriers to entry are reduced.

Lastly, the route of accounting officers as assurance providers is totally supported due to the fact that it will bring South Africa co-operative auditing in line with international precedent, reduce cost of reporting function, increase the number of persons that can provide assurance services as well as correlate with other SA legislations, i.e. more assurance engagements than audit engagements which will build and transfer skills.

Co-operatives are enterprises targeted to operate throughout the mainstream of the economy and cannot be marginalized to be rural entities or non-profit organization but a special form of ownership or entity alternatively available to be formed by the citizens.

A company cannot call itself a co-operative vice versa for purposes of control.

There no confusion since all the provision in the Act supports provision in the constitution and co-operatives must not only comply with what is provided in the co-operatives Act, constitution but also other related laws.

There two kinds of general meetings viz the meeting by Board of Directors that can be called at anytime of the year to discuss issues affecting the co-operative or related to the co-op. and the Annual general meeting which should be held annually to discuss the financial matters and all resolution taken during the year for rectification by members. This section supports, simplify and guide what is in the constitution.

The reason for legislating the chapter ands not leave it in the constitution only, is for the protection of the members to ensure that members are part of the decision making process in a co-operative and also provide the platform to exercise their voting rights. If it is left to operate outside of the Act, we will see a lot of NCT co-operative management style. This supports the co-operative principle of economic participation by the members of a co-operative.

With regard to appendixes, schedule in the co-operatives Bill, details are provided due to the differences in the sectors in which they operates e.g. financial services co-operatives, housing and consumer co-operatives .A housing co-operatives operates differently from a financial services co-ops and therefore it should have different provisions. It is easy to change schedule than changing an Act and therefore schedules must remains.

A model statute cannot be attached as appendix to the Bill due to the fact that it is fully detailed in the Act.

The alternative auditing approach should not allow the introduction of high barriers to entry to this field by indirect unintended consequences to this initiative. The alternative should confirm that the accounting policies have been applied consistently and will be required to issue of factual finding report on the compliance on the co-operative principle in an agreed format on simplified test basis in line with accredited unit standards.

The basic understanding of the Co-operatives Bill is critical to be able to certify the compliance of the essential financial provision. Such organizations or individuals will access support available to support access to such a service. The necessary changes will be effected for alternative audit in the Bill to complement the exemption by the Registrar of small co-op enterprises from complying with the Act.

The details of the submission though helpful, will not be detailed in the Act but as part of the implementation plan.

The organization was one of the main representatives of the highly commercialized co-operatives at NEDLAC. The issue of the weighted voting system was widely debated and agreed upon by the majority of stakeholders that status quo cannot be maintained. The current Act defines a co-operative wrongly as closer to companies and hence a total removal of a chapter on investment shareholding since it distorted and diluted the principle of one-man one vote, which differentiate a co-operative enterprise from a company.

The issues of weighted voting arrangement need to be even monitored at a secondary level to avoid bigger co-operatives from disadvantaging emerging ones. The Co-operative policy is for ensuring that we promote the emergent sector in line with international principles as agreed by all SA key stakeholders that supported the ILO Recommendation 193 of June 2002 including Business constituency.

The co-operative principle of one-man one vote guarantee equality of members and member’s power to validate some on the decision that have been taken by Board of directors on behalf of a co-operative during the year.

If the weighted voting system is acceded to, the principle of one man one vote will be defeated and therefore gives room for any register co-operative to disguise as genuine co-operative whilst operating outside the ambit of a co-operative model.

It is our conclusive view that the weighted voting system should not be allowed in the Bill.

• The NCT wants the current Act of 1981 to remain in the provision of voting by allowing weighted voting system. This means that a patronage voting system where in the larger the financial contribution each member has determines his voting weight. They want this provision to be optional rather than compulsory.

Response: one man one vote remains in the Bill to promote the principles of co-operatives which promote broader equal, collective ownership and democratic control and management of a co-operative enterprise by its members. This principle further differentiate a co-operative from other forms of businesses or ownership such as a Company or cc where the more the shares, the more voting powers you have in a company.

If the bigger guys in a co-operative will leave due to the voting rights being introduced in terms of how co-operative are to be managed collectively all over the world and also in line with the International standards and principles then that co-operative is a psuedo co-op.

If the current Bill is passed in its current form will be more empowering to the members and will prevent the bigger guys from further hindering access to empowerment in many areas, and automatic selling the assets of a co-operative with no say from the smaller emerging ones. The co-operative has already benefited millions from the dti on tax concessions and stand to loose if de-register as a co-operative. But closely looking at such support measures received, in value terms it benefit the bigger guys wherein it is accessed through the broader picture depicted.

Co-operative members have the right to information in term of the Access to Information Act. The Bill has provided that only in cases where for a certain reasonable time the disclosure may be of commercial disadvantage to the co – operative the information may be withheld. It is on this basis that the section does not grossly violate the Directors’ rights as presented but promote transparency and openness to all members.

Currently, it is our view that this co-operative is hiding massive information to the smaller members from the previously disadvantage groups due to the knowledge of the industry. This is exploitative and need to be discouraged at all costs if we are to grow a strong co-operative movement, which will broaden the participation of the majority of blacks and targeted sectors in the economy as per the mandate of the policy and new legislative framework. Currently the bigger guys due their understanding of the sector and open denial to embrace empowerment in this country can harness opportunities coming to the co-op with no inclusion of the emerging ones.

Education and training will be key in implementing this policy due to the need of certain co-operatives that have benefited from subsidies for their growth wanting to keep the status quo. It is the right of the each co-operative to convert to any entity unless it respect the principle of co-operation if it chooses to be a co-op.

Co-operatives Programme is the main Programme of the BEE Policy or Programme to promote enterprises of different kinds and forms. This Bill will promote its agenda of employment creation, poverty alleviation and empowerment of the PDIs through providing the relevant support and instruments to ensure that co-operatives participate meaningfully in all spheres of the economy including BEE, PPPs, and ownership holding in bigger multinationals and state-owned enterprises.

• Co-operatives will be promoted in all sectors of the economy not only in Agriculture as historically done.