1 THE INTEGRATED STRATEGY ON THE PROMOTION OF COOPERATIVES: PROMOTING AN INTEGRATED COOPERATIVE SECTOR IN SOUTH AFRICA PRESENTATION TO THE SELECT COMMITTEE.

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THE INTEGRATED STRATEGY ON THE PROMOTION OF COOPERATIVES:

PROMOTING AN INTEGRATED COOPERATIVE SECTOR IN SOUTH AFRICA

PRESENTATION TO THE SELECT COMMITTEE ON TRADE AND INTERNATIONAL RELATIONS, 9 FEBRUARY 2011

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Presentation Outline

Introduction and Background

Support Programmes & Institutional Arrangement

Coop as a global driver of economic growth

International Best Practice & Coops SA Situational Analysis

Strategic Principles

Strategic Approach for Promoting Cooperatives in SA

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Vision

Consistent with the Cooperative National Policy (2004) :

Towards a growing, self-sustainable and integrated cooperative sector, supported by all stakeholders,

contributing to economic growth, poverty reduction and employment creation as well as assisting in bringing about economic transformation and an

equitable society

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Mission

• Strengthen the potential benefits of coops by raising the value and profile of coops in the economy and designing support programmes suitable for this end;

• Foster human capital development with a special focus on coops principles, business management and technical skills;

• Foster a culture of cooperation, self-help, self-reliance and solidarity among coops beneficiaries

and beyond through raising awareness;

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Mission cont..

• Work towards self-sustainability of the cooperative movement in the medium to long-term, which will be achieved through partnership models and by consistently capacitating all stakeholders during the formation years and beyond

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Objectives

• To grow all forms and types of coops and its movement as well as increase its

contribution to the country’s GDP growth rate, economic transformation and social impact;

• To promote coops as a vehicle that can assist in creating decent employment and reducing poverty through income-generating activities;

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Objectives…..

• To support coops in developing their human resources capacities; understanding coops

principles and values through the provision of technical, entrepreneurship, management

skills and coops education and training;

• To increase savings and investment through the promotion and support coops banks and financial services coops;

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Objectives….

• To foster cooperation among coops through supporting the creation of the vertical structure of coops and conducting awareness campaigns.

• To raise the profile of cooperatives as a dynamic and effective business organisation that can be

utilised by individuals and communities to empower and uplift their social and economic well-being through awareness campaigns.

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Objectives….• To raise the profile of cooperatives as an institution that allows agglomeration of small economic activities (i.e. consumer cooperatives, cooperative banks, etc) into massive activities, market linkages (i.e. marketing and supply cooperatives), mobilization of captive markets (i.e. increase membership that uses the service/product of the cooperative), as well as enable vulnerable groups to compete with big market players through conducting feasibility studies, market research intelligence and awareness campaigns.

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• To aggressively promote closed cooperatives that constantly attract high levels of membership as captive market, enabling them to be highly

sustainable and have huge potential to contribute towards substantial economic and social impact.

• To promote coops as an effective vehicle that contributes to the development of rural and peri-urban areas, as well as, improve economic and social well being of these targeted groups: black people, women, the youth and people with disabilities.

Objectives….

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Co-operative as a global driver of economic growth

Co-operatives is a highly successful business model in the global business environment and is relevant for South Africa, here are some

of the international statistics

The Revenue of the world’s top 300 co-operatives exceeds US$ 1 Trillion, equal to the world’s 10th largest economy

International Co-operative Movements represent 800 million members, more than the total population of the entire European continent

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Co-operatives in Germany and France create 440,000 and 700,000 jobs respectively

Co-operative as a global driver of economic growth

Kenyan co-ops accounts for 45% of the GDP and 31% of gross national savings. The co-ops also control markets for coffee, cotton and dairy

In the US, more than 100 million people or 40% of the population are members of co-ops

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International best-practice

Favourable legislation; Inter-governmental coordination; strong partnerships with the coop movement; formation of secondary coops; coop education and training through universities

Canada

Spain

Favourable legislation (incl. constitution); Intergovernmental coordination; financial and non-financial support, include tax benefits; education and training through university

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Favourable legislation; Ministry of cooperatives (decentralized); strong partnership with the cooperative movement; Coops College; Coops Bank and conflict resolution system

Kenya

Favourable legislation; full fledged Department of Cooperatives; Coops College and Coops Bank

Bangladesh

International best-practice…

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Favourable legislation (incl. constitution); strong partnerships with and self-sufficiency of the coop movement; favourable procurement policies; and emphasis on reserves and solidarity funds on the law.

Italy

Favourable legislation (incl. constitution) strong coops movement; and financial and non-financial support from govt.

India

International best-practice…

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A Situational Analysis of Cooperatives in South Africa

(Source: Registrar of Cooperatives, Statistics of Cooperatives in South Africa, 1922-2009)

2005 – 2009 (Boom period) for coops growth in numbers

Drivers of Growth

• Enabling environment through legislative framework such as the 2005

Coops Act

• Support programmes across government

These emerging cooperatives are still weak and vulnerable

Trends in cooperative registrations & deregistrations

0 0 220 69 126 200 157 5891,4441,444

3,9114,2104,652

7,355

13,920

17,154

22,619

22,030

16,997

3,911

13,720

7,229

4,5833,990

0

5000

10000

15000

20000

25000

Period

No

. o

f co

op

s

Deregistration

Total Registered

Total Active per theRegister

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A Situational Analysis of Cooperatives in South Africa…

• The total number of

cooperatives by March 2009

was 22,619 and they were

spread provincially.

•The majority of registered

cooperatives was

Kwa-Zulu/Natal with 38%;

• followed by the Eastern

Cape, 19%;

•followed by Gauteng, 10%

and others.

(Source: Registrar of Cooperatives, Statistics of Cooperatives in South Africa, 1922-2009)

Overall Provincial Picture of registered cooperatives

WC, 1003, 4%

EC, 4224, 19%

NC, 798, 4%

FS, 900, 4%

KZN, 8697, 38%

NW, 1257, 6%

GAU, 2365, 10%

MPU, 1496, 7%

LIMP, 1879, 8%

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A Situational Analysis of Cooperatives in South Africa…

• Agri still dominates (25%);

followed by services (17%) and

multi-purpose(14%) and others.

Factors influencing the current

sectoral growth of coops entrants

•Agri received massive support in

the past in form of subsidies & tax

concessions and is still viewed as a

focus traditional

sector for coop development.

• Government support in the form

of procurement opportunities has

given rise to the emergence of

services and multipurpose

cooperatives.

(Source: Registrar of Cooperatives, Statistics of Cooperatives in South Africa, 1922-2009)

Sector spread of registered cooperatives

consumer, 128, 1%

agriculture, 5580, 25%

agroprocessing, 369, 2%

arts and culture, 340, 2%

bakery, 334, 1%

burial, 65, 0%

clothing and textile, 1247, 6%

construction, 1280, 6%

environmental, 85, 0%

financial, 233, 1%

fishing, 46, 0%

food and bev, 91, 0%

housing, 78, 0%

ICT, 193, 1%

manufacturing, 1093, 5%

marketing and supply, 177, 1%

medical, 77, 0%

mining, 78, 0%

multipurpose, 3160, 14%

retail, 117, 1%

services, 3762, 17%

social, 311, 1%

tourism, 211, 1%

trading, 2708, 12%

transport, 856, 4%

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A Situational Analysis of Cooperatives in South Africa…

Comparative analysis of registered coops in CIPRO and in the dti baseline study (mortality & survival rate)

No. of registered cooperatives No. of surviving cooperatives

No. of dead cooperatives Survival rate Mortality rate

Current data from the CIPRO register

Data from the dti baseline study, 2009

National Picture

22,619 2,644 19,975 12% 88%

Provincial breakdown

KZN 8,697 1,044 7,653 12% 88%

EC 4224 287 3,957 7% 93%

WC 1003 69 934 7% 93%

NC 798 20 778 2,5% 97,5%

Limpopo 1879 405 1474 22% 78% (1st)

Mpumalanga 1496 187 1309 12,5% 87,5% (3rd)

Gauteng 2365 394 1971 17% 83% (2nd)

Free State 900 71 829 8% 92%

North West 1257 167 1090 13% 87%

(Sources: CIPRO current register and the dti baseline study)

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A Situational Analysis of Co-operatives in South Africa...

(Sources: CIPRO current register and the dti baseline study)

Sector analysis of co-operatives

Kinds of co-opsCIPRO data The dti baseline

studySurvival rate(%)

No. of dead cooperatives

Mortality rate (%)

Food & Agriculture 6086 671 11% 5415 89%

Service 4209 357 8.5% 3852 91.5%

Textile 1247 272 22% 975 78%

Multipurpose 3160 187 6% 2973 94%

Construction 1280 202 16% 1078 84%

Manufacturing 1093 137 12.5% 956 87.5%

Arts & crafts 340 103 30% 237 70% (1st)

Social 311 90 29% 221 71% (2nd)

Other 328 89 27% 239 73% (3rd)

Home Industry (Baking) 334 83 25% 251 75%

Transport 856 50 6% 806 94%

Trading 2708 47 1.8% 2661 98,2%

Financial / credit services 233 36 15% 197 85%

Housing 78 25 32% 53 68%

Burial 65 19 29% 46 71%(2nd)

Mining 78 12 15% 66 85%

Consumer 128 11 9% 117 91%

Recycling & waste management85

7 8%78 92%

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A Situational Analysis of Cooperatives in SA...

Contribution to GDP

2003 2004 2005 2006 2007

No. of Co-ops 212 297 137 136 100

Millions in value 000’ 000’ 000’ 000’ 000’

Food, beverages & tobacco 6442.2 1058.4 4026.3 2866.5 3025.27

Primary industries 2562.5 1718.8 735.5 1137.9 892.55

Secondary industries 6485.2 10646.5 4058.7 2890.3 4801.72

Tertiary industries 3251.3 2757.4 2427.5 2742.4 1435.36

Total (Rbn) 12,299 15,123 7,222 6,771 7,129.6

Percentage Contribution of Co-operatives to GDP and Contribution within each Sector

Food, beverages & tobacco 18.18 2.68 9.45 5.70 5.35

Primary industries 2.05 1.34 0.52 0.66 0.44

Secondary industries 2.34 3.59 1.26 0.80 1.15

Tertiary industries 0.44 0.33 0.27 0.27 0.12

Total ** 0.98 1.08 0.47 0.39 0.33

(Source: the dti baseline study)

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Other Supportive Initiatives: Key national policies and strategies

• A number of supportive initiatives have emerged specifying various support measures for cooperatives within the public sector.

• This strategy is not coming in a vacuum, but it addresses the existing gaps and challenges still confronting cooperatives and it also re-enforces these existing initiatives with respect to cooperatives development. These initiatives include amongst others, • ASGISA, NIPF, SMME Strategy;• Integrated Manufacturing; B-BBEE Strategy; National Youth Strategy; Gender and Women Empowerment; and Anti-Poverty Strategy

RIDS

Anti-Poverty Strategy

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A Situational Analysis: Challenges facing Coops in SA

Government Challenges: • Inadequate economic and social impact

statistics on cooperatives• Coordination• Limitation of current support from existing

enterprise development agencies for cooperatives

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Government Challenges..:

• Recognition of cooperative as a unique business form and diversity in public and private markets remains very low

• Accessibility of cooperative registration to local communities

• Limited promotion and awareness

A Situational Analysis: Challenges facing Coops in SA

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Government Challenges…:

• Avoidance of formalization of informal self-help groups

• Limited access to finance• Limited access to technology• Limited access to business infrastructure

A Situational Analysis: Challenges facing Coops in SA

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Cooperative Management Challenges

• Poor management and technical skills;• Limited trust and social cohesion;• Democratic decision-making skills within

the cooperatives remain low;• Limited cooperation among cooperatives

A Situational Analysis: Challenges facing Coops in SA

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Cooperative Management Challenges..

• Appreciation of collective interest above individual interest;

• Embracing self-reliance as a principle within cooperatives;

• Compliance with the Cooperative legislation among new cooperatives

A Situational Analysis: Challenges facing existing & emerging Coops in SA, cont.

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Market Challenges

• Undeveloped networks and economic value chains

• Limited access to markets

Challenges on Cooperative Organisational Structures

• Lack of strong and viable cooperatives associations and organisations

A Situational Analysis: Challenges facing existing & emerging Coops in SA, cont.

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Strategy positions the development of Cooperatives as a shared responsibility involving all spheres of government

National, Provincial and Local Government (including agencies) to align to one

Integrated National Co-operative Strategy aimed at developing and growing cooperatives

National Departments will be responsible to formulate sector-based

legislation /policies/strategies/ support programmes aimed at

enhancing the growth of a specific sector aligned with the National

Cooperatives Strategy. The dti to lead the process of establishing the

Cooperative Development Agency (CDA) and Cooperative Academy in

partnership with provinces and municipalities.

Provinces will be responsible to formulate provincial coops strategies

with support programmes aimed at enhancing the growth of

cooperatives in the province aligned with the National Cooperatives

Strategy. Support for the CDA and Coop Academy

District & local Municipalities will be responsible to develop

Cooperatives Implementation Plans to be integrated in the IDP’s & LED

Strategies – must provide business infrastructure and other relevant

support to develop cooperatives. Support for the CDA and Cooperative

Academy

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Strategy positions the promotion of cooperatives as a shared responsibility involving the following

stakeholders as well, cont.

• Government aims at partnering with the cooperative movement organisations, CBOs

and NGOs and possibly the private sector in growing and developing cooperatives

Responsible for growing and develop cooperatives: They may provide

research, education and training, financial and non-financial support,

advocacy, mobilisation and awareness-raising.

Have a role to play in assisting in providing international expertise; financial

and non-financial support

Cooperative Movement, Apex organisations, CBOs, NGOs, labour

organisations & churches

International organisations: ILO, DGRV

Financial Institutions: banks, etc.

Have a role to play in developing funding products tailor-made for the

development of cooperatives.

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Focusing on youth, women, and people living with disabilities;

Focusing on special geographical areas: rural, peri-urban and former homeland areas;

Focusing and promoting social and enterprise cooperatives – all forms of cooperatives both social and enterprises form will be promoted in the strategy.

Strategy attends to all the cooperatives beneficiary base

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Supported cooperative types and promoting the entire value chain

Storage Storage Raw Raw

Material Material Processing Processing ManufacturingManufacturing Distribution Distribution

Agriculture Co-ops

Marketing and Supply Coops

Consumer Co-ops

Worker Co-operatives- Labour intensive e.g.

mining; construction; textiles; and arts and craft

Financial Co-operatives

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Strategic approach for promoting cooperatives in South Africa

Strategic pillar4: To increase

financial support services to co-

operatives

Strategic pillar 1:To increase non-financial support

services to cooperatives

Strategic pillar 2:

Creating demand for co-operatives

products & services

Strategic pillar 3:

To improve sustainability of co-

operatives

These strategic programmes will be underpinned by efforts aimed at improving the availability of quality business information and knowledge through

expanded research, communication outreach, education and training, and monitoring.

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Support Programmes: Pillar1

Cooperatives Business Development Support Programme: capacity building, cooperatives principles, technical skills, management skills, mentoring and access to market support to be administered by Cooperative Development Agency in partnership with cooperative movement

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Support Programmes: Strategic Pillar 1..

• Compliance Education and Training to be

administered by Cooperative Development

Agency in partnership with CIPRO and the

Cooperative Tribunal; • Enforcement; investigation, conflict- resolution, and proactive inspection Programme to be managed by the Cooperative Tribunal; and • Registration of Cooperatives to be administered by CIPRO

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Support Programmes: Strategic Pillar 2..

• Bilateral and multilateral agreements to be administered by the dti• Export Marketing and Investment Assistance (EMIA) administered by the dti – co-op component to be moved to Agency• Targeted products for micro, small & medium coops administered by the dti in partnership with National Treasury

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Support Programmes: Pillar 3

• Enterprise Network Programme: vertical and horizontal integration to be administered by Cooperative Development Agency; • Business Infrastructure Support: Municipalities to provide space for co-operatives to operate. DPW renovate old govt buildings to be used by coops; • Taxation of Cooperatives: A favourable tax regime for coops by NT & the dti to be administered by SARS.

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Support Programmes: Pillar 4

• Micro Finance loan through wholesaling to be transferred from SAMAF to the Cooperative Development Agency; • Cooperative Incentive Scheme (CIS) to be transferred to the Cooperative Development Agency; and • Cooperative Special projects Fund (start up & expansion) to be administered by the Cooperative Development Agency

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Cross-cutting programmes

• Cooperative Promotion and Awareness Support Programme (CPASP) to be administered by the dti in partnership with other govt departments, institutions and coop movement; •Cooperative Training Academy by the dti, DHET and Cooperative Movement, with support from provinces and municipalities; and • Research and Monitoring and Evaluation by the dti, CIPRO & other stakeholders

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Coordination, Monitoring and Evaluation

Relevant Coordination Bodies

Relevant Monitoring & Evaluating Mechanisms

Department of Trade & Industry and Provincial Departments

Government Departments

Cooperative Movement and other stakeholders

Other Bodies

Provincial Support Committee on Coops Development

Inter – Department Committee on Coops Development

Cooperatives Movement, Labour & Private Sector

Cooperative Advisory Council

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Monitoring Framework

• Cooperative Information Communication System (ICT) • To provide information on cooperatives development

The strategy proposes three key performance reporting mechanisms:

Annual Cooperative Review Report

Three Years Mid - Term Review Report (2011)

Ten Years Comprehensive Review report (2009 – 2019)

Coordination, Monitoring and Evaluation

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Action plan for implementation

Action plan for implementation attached as an appendix to the strategy outlining key activities and actions to be implemented by relevant stakeholders; Activities not exhaustive but provide guidance to role players

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Chief Director of Cooperatives: Jeffrey Ndumo

EIDD: Cooperatives Business Unit: +27 12 394 1631

the dti Call Centre: 0861 843 384

the dti Switchboard: +27 12 394 0000

Website: www.thedti.gov.za

Postal Address: Private Bag X 84

Pretoria

0001

South Africa

the dti’s Contact Details