Labour, business clash on co-ops

2005-05-03 13:48

Cape Town - Differing concerns by organised labour and business over new draft law aimed at controlling the development of co-operatives in South Africa has once again highlighted the opposed economic philosophies of the two groupings.

While both recognise the important role co-operatives 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 Co-operatives Bill, tabled at parliament earlier this year, defines a co-operative 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 co-operatives, as well as provide for the establishment of an advisory board to set policy for the development of such enterprises.

Alleviating poverty

The promotion of co-operatives is seen by 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.

Labour federation 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 co-operatives.

Cosatu parliamentary research co-ordinator Elroy Paulus said: "Cosatu is of the view the bill tends to copy company law too much. This is not helpful, especially given the fact co-operatives have very different requirements."

While company law sought to protect shareholders from management, and laid down specific requirements for operations, co-operative law should seek to directly empower members to control management and operations.

"The real analogy is with law on membership-based organisations, like unions and existing progressive co-operatives, to advise on how, for example, constitutions are collectively shaped."

Empowering business entity

Paulus said the bill, while providing detailed regulatory provisions, was "inadequately enabling" when it came to minimum support measures to be provided by the state.

Cosatu also wanted the language and format for registering co-operatives to be simplified, and warned against "overly prescriptive" constitutional requirements.

There was also a lack of clarity on the role of micro-credit organisations should play in providing financial support for emerging and existing co-operatives, he said.

A different perspective is offered by the Agricultural Business Chamber, which warns against government succumbing to the temptation of using co-operatives for social upliftment.

Chamber CEO Tobias Doyer described co-operatives 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 co-operatives and business was their ownership, and that capital always remained in the hands of the people who used its services, particularly in the agricultural sector.

Because of the structure of a co-operative, the "capital heritage" its founders left behind meant there was something for the next generation.

No benefit in state intervention

However, there was always "creative tension" between co-operatives being seen - by government - as a business entity and as 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 erred on the side of social upliftment, and upliftment of the poorest of the poor, and only time would tell if a revitalisation of the co-operative sector was a success or failure.

Among the main concerns organised business had was the question of weighted voting, with Doyer arguing that its underlying rationale related 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 co-operative "has one vote in all meetings of the co-operative".

Doyer said another issue was 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."

Force won't help

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.

Government should not set up institutions such as co-operatives and "force [such initiatives] down the throats" of the public or commercial sector.

"The history of co-ops over the past hundred years shows that in every case where government forced it down, it collapsed."

The "more lenient" approach was an easier way to get co-operatives going, Myburgh said.

Sabelo Mamba, general manager of the National Co-operative Association of South Africa, said his organisation supported the bill, "even though it is not perfect".

Mamba said a co-operative fund needed 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