Differing concerns by organised labour and business over a new draft law aimed at controlling the development of cooperatives in South Africa has once again highlighted the opposed economic philosophies of the two groupings.
While both recognise the important role cooperatives have played in South Africa’s economy since the early 1900s, business sees the future of such enterprises as being characterised by the dictates of a free market, while labour is calling for more state intervention and support.
The Cooperatives Bill, tabled at Parliament earlier this year, defines a cooperative as ”an autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly owned and democratically controlled enterprise”.
Among other things, the new legislation aims to define the formation, registration, management and structure of cooperatives, as well as provide for the establishment of an advisory board to set policy for the development of such enterprises.
The promotion of cooperatives is seen by the government as a means of alleviating poverty, and promoting equity and greater participation of black people, especially residents of rural areas, in the country’s economy.
‘Hostile environment’
The Congress of South African Trade Unions (Cosatu) says it broadly supports the Bill, despite it having been tabled in a ”hostile environment”, where markets and rules are not conducive to smooth interaction with cooperatives.
According to Cosatu parliamentary research coordinator Elroy Paulus, ”Cosatu is of the view the Bill tends to copy company law too much. This is not helpful, especially given the fact cooperatives have very different requirements.”
While company law seeks to protect shareholders from management, and lays down specific requirements for operations, cooperative law should seek to empower members directly to control management and operations.
”The real analogy is with law on membership-based organisations, like unions and existing progressive cooperatives, to advise on how, for example, constitutions are collectively shaped.”
Paulus said the Bill, while providing detailed regulatory provisions, is ”inadequately enabling” when it comes to minimum support measures to be provided by the state.
Cosatu also wants the language and format for registering cooperatives to be simplified, and warned against ”overly prescriptive” constitutional requirements.
There is also a lack of clarity on the role of micro-credit organisations in providing financial support for emerging and existing cooperatives, he said.
Social upliftment
A different perspective is offered by the Agricultural Business Chamber, which warns against the government succumbing to the temptation of using cooperatives for social upliftment.
Chamber CEO Tobias Doyer described cooperatives as an ”amazing tool” to empower people, being a business activity by the people, for the people.
”It is the most empowering business entity that there is,” he said.
The major distinction between cooperatives and business is their ownership, and that capital always remains in the hands of the people who use its services, particularly in the agricultural sector.
Because of the structure of a cooperative, the ”capital heritage” its founders leave behind means there is something for the next generation.
However, there is always ”creative tension” between cooperatives being seen — by the government — as a business entity and an instrument for social upliftment.
”Governments are always tempted to use co-ops to do social upliftment; then it’s not an instrument of business, but gets to be another instrument of government with associated bureaucracy and government control.
”Government intervention is never beneficial to business.”
Doyer said current legislation errs on the side of social upliftment, and upliftment of the poorest of the poor, and only time will tell if a revitalisation of the cooperative sector is a success or failure.
Weighted voting
Among the main concerns organised business have is the question of weighted voting, with Doyer arguing that its underlying rationale relates to the capitalisation of co-ops.
”What we are saying is that if they don’t consider a proportional voting system, co-ops will be constrained in the future.”
According to the new Bill, each member of a cooperative ”has one vote in all meetings of the cooperative”.
Doyer said another issue is membership, with the draft Bill mitigating against establishing a trust or partnership, thereby bridling the use of business forms to manage ”things like inter-generational transfers”.
”We want to see a more flexible approach. Co-ops can benefit both the rich and the poor, provided they are used as a mechanism and not a tool.”
An agricultural economics lecturer at the University of Stellenbosch, Andre Myburgh, described the draft legislation as positive.
”There is a lot of leeway in the Bill,” he said.
The government should not set up institutions such as cooperatives and ”force [such initiatives] down the throats” of the public or commercial sector.
”The history of co-ops over the past 100 years shows that in every case where government forced it down, it collapsed.”
The ”more lenient” approach is an easier way to get cooperatives going, Myburgh said.
Sabelo Mamba, general manager of the National Cooperative Association of South Africa, said his organisation supports the Bill, ”even though it is not perfect”.
Mamba said a cooperative fund needs to be incorporated urgently to aid capitalisation needs, with the land question also part of the challenge to be addressed.
”We also need to unify agricultural co-ops — the white, affluent co-ops such as KWV and Koo — with the emerging black co-ops, so that we can build the agricultural co-op sector,” Mamba said. — Sapa