Speech delivered By the Minister of Trade and Industry, Dr. Rob Davies, MP, at the National Council of Provinces on Co-operatives Amendment Bill

Speech delivered By the Minister of Trade and Industry, Dr. Rob Davies, MP, at the National Council of Provinces on Co-operatives Amendment Bill

The Bill broadly aims to achieve the following objectives:

• To strengthen co-operative governance, accountability and transparency and provide for a differential dispensation for co-operatives to reduce the regulatory burden for co-operatives;
• Strengthen the co-operative structure to allow for organic growth informed by co-operatives own needs and requirements;
• Enhance compliance with legislative requirements; coordination amongst development support for co-operatives at national, provincial and local level as well as to improve the administration, good governance and sustainability of co-operatives; and
• Establish co-operative institutions in order to streamline support for co-operatives and to assist with conflict resolution.

The Bill fully embraces the internationally accepted 7 principles for co-operatives.  These principles emphasize the unique characteristics of co-operatives and their full compliance assist to improve the sustainability of co-operatives. Various international studies showed that in countries where these principles are fully applied, co-operatives are sustainable and are much more resilient against financial and economic crisis particularly when compared with shareholder based forms of enterprises. Not only are these co-operatives sustainable, but they also invariably contribute economically towards socially uplifting the local communities within which they are located and operating. In the final analysis they play an effective role towards economic development. These principles are as follows:

(i) Voluntary and Open Membership
(ii) Democratic Member Control
(iii) Member Economic Participation
(iv) Autonomy and Independence
(v) Education, Training and Information
(vi) Co-operation among Co-operatives
(vii) Concern for the community

Mr. Speaker, the structure for co-operatives has been strengthened in order to improve the sustainability and the organic growth of co-operatives as informed by their own needs and requirements. Apart from primary, secondary and tertiary co-operatives, the Bill also allows fir the formation of a fourth tier structure that will be known as the National Apex Co-operative for South Africa.  The National Apex Co-operative will unite co-operatives, across off provinces and provide advocacy on behalf of co-operatives as a unified co-operative movement. The National Apex Co-operative can be established by a minimum of three National Sectorial Tertiary Co-operatives and 5 Multi Sectorial Co-operatives representing co-operatives at a provincial, district or local level. The National Apex Co-operative will represent South African co-operatives at national and international level in organisations such as the International Co-operative Alliance Africa and International Co-operative Alliance (ICA).

The Bill also calls for the establishment of principles of good governance for co-operatives that will assist co-operatives to improve their good governance, which will enhance good practice and the sustainability of co-operative enterprises.

The Bill has been refined in order to strengthen governance and accountability within the co-operatives.  A code of good practice for co-operatives will be developed to assist co-operative in complying with the principles of good governance.  The code will ensure clarity on the corporate identity of co-operatives and assist and direct co-operatives to ensure compliance with requirements stipulated in their constitutions as well as legislative requirements.  The code should guide co-operatives to develop their own operational policies and practices that will reinforce the principles of good governance based on co-operative values and principles.

The Bill furthermore mandates co-operatives to submit to the Registrar of co-operatives the annual financial, social and management decision reports.  This refinement will enhance accountability and transparency by the board and management of co-operatives towards its members. It will also strengthen the democratic decision making within co-operatives and thus reduce conflict within co-operatives and improve their sustainability.

The Bill provides for the categorization of primary co-operatives into three categories in order to allow for a differential dispensation with regard to auditing, accounting activities and exemptions. Category A primary co-operatives who are survivalist to small co-operatives will be expected to comply with a far reduced compliance requirement in tandem with their economic level. This will be in the form of exemption and support by the state to ensure compliance; Category B primary co-operatives, who are small to medium scale co-operatives, will be expected to comply with the requirement in tandem with its economic level. Similarly, category C primary co-operatives, who are medium to large co-operatives, will be expected to comply with the requirement in tandem with its economic level. The policy rationale here is to reduce the regulatory burden, especially for micro to small scale survivalist and medium scale co-operatives.

With respect to voting rights, the Bill recognizes that there are co-operatives that have structured their voting proportionately. However, special provision is made to prevent and mitigate against the risk of dominance by minority vote in large scale commercial primary, secondary and tertiary co-operatives as well as the national apex co-operative.  The principle of one member one vote will apply for small scale co-operatives, particularly those formed after the promulgation of the Amendment Act.

The Bill seeks to address the abuse of worker co-operatives exemption from labour law by stipulating that all worker co-operatives must comply with Labour legislation. The Bill allows co-operatives to be exempted on application provided that they fulfill certain conditions, which conditions will be expressed in detail within the forthcoming regulations.

To enhance coordination amongst development support for co-operatives the Bill provides for the strengthening of intergovernmental structures at all three spheres of government, i.e. national, provincial and local levels.  This specifically refers to the Department, provincial government departments responsible for economic development, municipalities, provincial public entities, municipal public entities, the Co-operatives Tribunal and the Co-operatives Development Agency.  The structures established to strengthen this coordination around co-operatives development and support must comply with the principles of cooperative governance and intergovernmental relations referred to in section 41 (1) of the Constitution, the provisions in the Intergovernmental Relations Framework Act, 2005 as well as national and the applicable transversal provincial policies and other regulating intergovernmental relations.

The functions of these structures, inter alia, are to promote co-operative governance; ensure coordination on planning, budgeting, provisioning of services and support to and monitoring and evaluation in respect of co-operatives.

The Inter-Provincial Coordinating Committee will, for example, meet on a quarterly basis and coordinate all co-operative development programmes developed at provincial level and discuss matters of mutual interest whilst the provincial interdepartmental and municipal coordinating structure will coordinate co-operative development programmes at a provincial level amongst provincial departments as well as municipalities.

The Bill provides for the development of a framework to ensure the establishment of mechanisms, processes, procedures and indicators required to report on, monitor, evaluate, assess and determine the impact of the exercise of powers, the performance of functions, the execution of duties and the operational efficiency of such structures and co-operatives.   This will assist to ensure accurate and current information not only on all structures established or recognized in accordance with this Bill but also (a) the status of the co-operatives movement; (b) the various levels of co-operatives as well as categories of primary co-operatives contemplated in this Bill.

Speaker, the 2012 Co-operatives Amendment Bill provides legal support for the establishment of the following proposed institutional mechanisms aimed at enhancing the development of co-operatives within our economy, as well as, strengthen good governance, i.e. The Co-operatives Development Agency; and The Co-operatives Tribunal.

(a) The establishment of the Co-operatives Development Agency:
The Co-operative Development Agency will be established as a government component to perform its powers and functions in accordance with legislative provisions in terms of the Co-operatives Amendment Act 2012 as well as any other relevant legislation.  The Co-operative Development Agency will, after consultation with the relevant authorities in provinces, districts or local governments, be able to establish satellite branches in all provinces and districts. The objective is not to duplicate but to co-locate and ensure the delivery of tailor made support services to co-operatives organized around the principle of One Stop Shop as well as bringing support services closer geographically where co-operatives are. We must remember that the majority of co-operatives formed in our country are from the far flung rural areas of our economy.  Through the establishment of regionalized offices offering tailor made support to co-operatives in all provinces, development support will be at the doorstep of co-operatives in rural areas.

The objectives of the Co-operatives Development Agency will, inter alia, include the following:

• Support, promote and assist with the development of co-operatives;
• Provide financial and non-financial support to co-operatives;
• Provide business support services to co-operatives;
• Assist, especially small scale survivalist co-operatives to ensure compliance with legislative requirements;
• Provide access to information;
• Facilitate access to markets, both locally and internationally, etc.

The functions of the Co-operatives Development Agency will, inter alia, include

• Financial support services;
• Non-financial support services;
• Education and training;
• Support and extension services;
• Market intelligence and development;
• Monitoring and evaluation; etc.

(b)The establishment of a Co-operatives Tribunal:
The Co-operative Tribunal will ensure compliance with legislative requirements; assist with judicial management, winding-up, deregistration as well as conflict resolution and liquidation.  The tribunal will have full time as well as part time personnel and will be mobile in operation, (i.e. will be able to adjudicate in different areas of the country as required) in order to reduce cost while being effective in fulfilling its mandate. Although the head office will be based in Pretoria the fact that it will be mobile in its operation will ensure accessibility to co-operatives in all provinces, especially co-operatives in the far flung rural areas of the country where the majority of co-operatives are located.The functions of the Co-operatives Tribunal will, inter alia, include

• Adjudicate on any application made in terms of the Act and to make appropriate recommendations;
• Assist with conflict resolution;
• Assist with Judicial Management
• Assist with requested dissolution, winding-up and liquidation;
• Assist with the investigation and enforcement of compliance with the provision of the Act, etc.

The regulations required in terms of the Amendment Bill to enable the operationalisation of the legislation is in the process of being updated and will be published in the Government Gazette for public comment.
The Bill has organisational and personnel implications as it creates new structures to support co-operatives. The creation of the new structures will entail that personnel and existing products currently supporting co-operatives through other government institutions will be transferred to the newly proposed institutions to ensure streamlining of support for co-operatives.  The transfer of staff will be carried out in accordance with Section 197 of the Labour Relations Act, 1995 and any collective agreement reached between the state and the trade union parties.