The South African Civil Society Information Service

Co-operatives for Development

By Glenn Ashton · 26 Jan 2011

Picture: Ontario Co-operatives Association

Few South Africans realise the power of Co-operatives in the global economy. Canada, Norway, Italy, India, China and Brazil each have a significant amount of their GDP generated by Co-operative organisations. One in four citizens in the USA and Germany are members of Co-ops. The United Nations has proclaimed 2012 as the International Year of Co-operatives.

Even though our government has identified and prioritised Co-operatives as an ideal developmental tool, most South Africans remain ignorant of quite what a Co-op is. Ask most of us and you would probably get one of two responses: That Co-ops were business models that the apartheid government used to establish the white South African farming sectors dominance; less often you may be told that Co-operatives are mechanisms for workers to control the means of production and distribution for their own benefit. Both are true but the latter is more relevant today.

Given South Africa’s massive inequality it is extremely difficult for an individual to create a viable new business that will have to compete against the well established enterprises that dominate almost every sector of the market.

The beauty of Co-operatives is their flat, democratically ordered structure in which the resources of many people can be pooled and where individual strengths can be tapped. Co-operatives are arguably the most closely representative business model to the concept of Ubuntu. They should have been widely adopted, but the sector remains a marginal economic player locally. South Africa promulgated a new, progressive Co-operative Act in 2005, yet some of its most important stipulations remain unimplemented.

Today’s Co-ops are very different from the old agricultural behemoths that littered the platteland and out of which hugely successful companies like Senwes, KWV and Rooibos South Africa have grown.

In 2006 the Grameen Bank of Bangladesh, responsible for lifting millions from poverty, was awarded the Nobel Peace Prize. The Co-op of the Italian political left, Legacoop, has more than 8.5 million members and a turnover of over 60 billion Euro (R570 Bn.), more than one fourth of South Africa’s GDP. Legacoop is involved in everything from retail and wholesale trading to construction and manufacturing and from agricultural processing to tourism and social housing. Nearly 40% of Brazils agricultural GDP is realised through Co-ops. 90% of the Indian dairy industry is managed by a single Co-op.

Thus Co-ops are clearly instruments that provide a direct stake in major economies for people and communities. They create powerful incentives for local social cohesion and Co-operation, as well as at regional and national levels. In short, Co-ops have proven themselves to be potent developmental tools. Around the world Co-ops employ 20% more people than corporations. There are more than 800 million members internationally, with nearly half of the world’s population benefiting directly from participation. Yet in South Africa less than half of one percent of our population are members of a Co-op.

The so-called “richest village in China,” Huaxi village - now more a city than a village – is a Co-op which has provided remarkable benefits for its citizens. Every adult, from factory workers to doctors, have a car, live in large, spacious villas and have US$250,000 in the bank. The Co-operative has increased its value from US$1.7 billion 5 years ago, to over US$6 billion today. The downside is an authoritarian lifestyle with few personal freedoms and a seven-day workweek, plus if you leave you lose it all. However the standard of living is far higher than most of our citizens will ever experience. There are endless other examples of the power of Co-operatives. 

Co-ops provide a different way of doing things, an alternative to selfish capitalism, being focused on the collective rather than the individual. They have the potential to reform capitalism from within. Co-ops are a model that may be able to counter the power of the entrenched corporate oligarchy in South Africa, which remains driven by the neo-liberal model that has shaped the economic policies of the country since 1994 (and before), scattering its lucrative crumbs to strategically placed insiders, while inequality has grown in lockstep with the economy. 

Despite the stated intentions of government, the Co-op movement in South Africa remains depressingly moribund. There are signs of life but some serious work is required in order for Co-ops to enter the economic mainstream. 

There are some theoretically meaningful incentives to encourage the establishment of new Co-ops. The Department of Trade and Industry (DTI) has a Co-operative incentive scheme where Co-ops that service the emerging sector can qualify for matching grants for up to R350, 000. There is also support at provincial level. Even so the uptake remains depressingly low.

What are the reasons for the sluggish local manifestation of Co-operatives? 

A major constraint is our lack of skills, a result of the inherent shortcomings of the legacy of the apartheid educational system. Yet this is a poor excuse. It is remarkable, given the prioritisation of Co-ops as instruments of economic development by successive governments, that not a single dedicated course has been developed for training in Co-operative management skills or the relevant financial and entrepreneurial skill-sets.

Even the New Growth Path headed by the progressive Minister of Economic Development, Ebrahim Patel, which talks a lot about co-operative governance (which is an entirely different beast), has failed to adequately focus on the inherent policy weaknesses and related failure of Co-ops to thrive or play any meaningful role in economic development. Even within the Department of Trade and Industry (DTI) it is extremely difficult to get assistance or find someone who is adequately informed on the matter. While there has been recognition of the important role of small and medium enterprises, Co-operatives remain sidelined.

In 2009, the DTI completed a comprehensive baseline survey on local and international Co-ops. It found that insufficient numbers of young people were forming Co-ops. This is a lost opportunity given the fact that many matriculated youth are unable to find work. This relatively well-educated core could be readily attracted to a potentially vibrant Co-op movement if sufficient training and other incentives were to be provided. 

The DTI study found that while we have over 28, 000 members of Co-ops, they only employ a paltry 2, 646 people. Most members feel that Co-ops have not improved their lives, highlighting the lack of support and encouragement in the sector. We clearly have a long way to go to even begin to approach the levels of penetration of Co-ops in countries like Kenya, where there is a dedicated ministry and where over 60% of the population acquire income from Co-ops.

Most of our Co-ops are between 3 and 5 years old. These are the most difficult years in any business and Co-ops are little different. It is unsurprising that many members give up after a few years of struggling to pay membership fees while failing to see any benefits. This, coupled to the lack of institutional support, lie at the heart of the problem.

It may be useful for government to link poverty alleviation payments, like unemployment insurance fund (UIF) payouts and perhaps even some social grants, to preferential payment scales to be made to members of Co-ops with a certain proportion paid out to the Co-op, which is only able to be redeemed after a time period or amount of work or equity has been provided.  

Government evidently realises that it is not only cheaper in the long run but it is better for individuals - and for society in turn - to provide relevant training so people can help themselves, rather than receive hand-outs. It was refreshing to recently have Deputy President Kgalema Motlante inform us that we could not expect endless hand-outs without concomitant effort and assistance from ourselves. Even vulnerable sectors like the elderly, young single mothers or HIV positive youth could potentially gain huge dividends by creating Co-ops that can help share their burdens while simultaneously enhancing their opportunities. 

Given the poverty of rural areas it is unsurprising that most Co-ops have been established there through communities realising that self-upliftment is often the only choice. Given the neglect of rural communities, Co-ops provide an ideal tool for self upliftment. 

Most members of Co-ops are over 35 years old, from which can be extrapolated that most received poor educations under the apartheid state. This should motivate government to provide more assistance through establish training and mentorship programmes, enabling isolated and disadvantaged communities to acquire the necessary skills and insights to help themselves.

This sort of training could come from assistance and co-operation with well established local Co-operatives, or even through arranging training with countries that have successful Co-op models such as Kenya or fellow BRIC members like India, where language will not be as much of a barrier as would learning from Chinese or Brazilian experts. Peer to peer networks should be encouraged, both in real-time as well as online. Internet co-ops can be established to bridge the digital divide.

It may also be useful to run roadshows to unlock our neglected potential. First would be to inform communities of the potential of Co-ops. Second would be to identify potential Co-ops that could enhance local opportunities. Third would be to share administrative, financial and management skills to unlock the bottlenecks in local development, leading to the logical and organic founding of needs driven Co-ops. 

All of these obstacles to establishing and managing a vibrant Co-op sector can be overcome, but only if the sector has a champion. At the moment this remains in limbo, an orphaned DTI zombie. 

When the new Co-operative act was promulgated, a Co-operative Advisory Board was meant to have been established to guide the implementation of the Act and to facilitate the growth of the Co-operative sector in the economy. Due to departmental dithering and indecision as to whether to include this advisory board under Small Enterprise Development (SEDA) (where co-ops are now shoehorned and forgotten) or whether to place it on its own and how to interface the whole caboodle with BBEEE structures, nothing has really happened.

It is remarkable that Kenya has a ministry dedicated to Co-operatives and we have not even managed, in six years, to establish a body to champion the cause. Instead we have talked while this potentially vibrant sector of our economy has staggered from crisis to crisis. 

Perhaps it is just as well that the United Nations has decided on 2012 being the International Year of Co-operatives. This should at best focus our collective attention on this important matter for long enough to get something done, or at worst embarrass us into action. We certainly cannot do much worse than we have over the past half a decade.

We can talk all we want to about co-operative governance and co-operative models of development but if we fail to get the Co-op movement off the ground in South Africa, we have not only wasted an opportunity, we will have failed to provide one of the most potent developmental tools available to those most in need. 

The people we are failing are the very people who have consistently voted for this government. They remain forgotten and marginalised, through the inordinate focus leadership concentrate on get-rich-schemes of tenderpreneurship and BBEEE, all while perpetuating the lie of neo-liberal trickle down economic theory.

There is an urgent need to champion Co-ops as a real alternative to the misplaced economic policies that have failed the poor majority. If we cannot institute and establish this potent developmental tool, we will collectively pay for our procrastination.

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