WEEK 5 NOTES – THE CO-OPERATIVES

This the third and final structure we will be considering. that logo is the international association of co-
operatives.

Introduction – General Overview

 This structure is arguably under-valued and not used, but it is a very good structure.
 There is barely any information in SA law that covers this topic.
 This structure has a lot of advantages in the South African context.

Some facts: Some numbers (slightly out od date , they will be higher now)

 3 million+ co-operatives in the world

 Active in all countries
 At least 12% of the world’s population is involved in / members of co-operatives & millions more
benefit from co-operative undertakings
 10% of all employment in the world (280 million people) is provided by co-operatives
 The top 300 co-operatives in the world together generate turnover of 2.1 trillion USD

Advantages

 Proven success and resilience

 Highly successful business model
 Global driver of economic growth
 Co-operatives worldwide often outperform publicly listed companies on market share gains.
 They remained financially sound
 Consumer co-operatives are reporting increased turnover.
 This model has received a considerable amount of international interest and enthusiasm.

What is a co-operative?
 Some of the reasons for the success and talk about this model has a lot to do with:
 Nature and legal features of co-operatives
 Way in which co-operatives are structure and governed snd how they operate
 The co-operative philosophy, principles and values
 Unique features
 In SA , there were setbacks, some misinformation. At some point the C got a bad reputation.
 Employees in this structures did not fall within labour relations act. For all these reasons this
model has not taken of in South Africa.
 The lack of use in SA , is not to do with flaws in the structure of this entity.
 What is a co-operative?

The definition of a co-operative

‘An autonomous association of persons united voluntarily to meet their common economic, social and
cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.’

(ILO Recommendation 193 on the Promotion of Cooperatives, 2002)

Legal features

a. Like a company or CC , this entity also has separate legal personality.

b. This denotes separate rights and obligations
c. There is limited liability of members ( exceptions in instance of some form of fraudulent
conduct)
d. Perpetual succession – advantage of continuity, also good as creates in the market
stable ,reliable enterprise.

Types of Co-operatives:

 It is a versatile structure .
 Can be used for wide range of economic social and cultural purposes
 Purposes may be economic profit , non-profict purpose ,social ,cultural ,political ,charitbel or
combination of purposes
 Examples of different types:
a. Consumer /services co-operative
b. Producer co-operative
c. Worker “ “
d. Multi-stakeholder “ “

The unique Philosophy

 Much of the success or appeal is to do with its unique philosophy

 The values , principles
 The idea of brining of economic and other resources under democratic control
 The kind of economic participation they give their members.

The values?

 Self helo
 Self responsibility
 Democracy
 Equality
 Equity
 Solidarity
  Honesty ,openness ,social responsibility and caring for others.

1st Principle – Voluntary and open Membership , cannot break this principle. Cannot discriminate
anyone that wants to be member etc.

2nd Principle – Democracy Member Control

 Controlled and manged by members

 Equal participation ona ‘one person one vote basis’
 Participation not dependent on:
a. Extent of membership interest
b. Fincial status
c. Race ,gender ,cultural or social background or any other discrimination criterion.

If we Compare Companies:

 Voting rights depend on number of share

 Number of shares depends on existing wealth financial means
 Maintenance of majority control structures
 Separation of ownership/membership and control/management.
 There is this idea that there must be a maintenance of the hierarchy , the rich stay in control.

3rd Principle :Member economic participation

 Primary aim of the co-operative is to meet members needs

 Economic needs – aim to maximize return for individual members rathe then made profits for
the co-operative itself
 Equitable participation in economic returns
 The financial workings of a co-operative
 The concept of surplus – to be distributed to all , there isn’t discrimination against what ones
interest in company are. at the end of the year there will be calculation of the surplus. This is
then paid out to members through what is known as patronage payment.
 The concept of patronage payments.

If we compare with companies:

 Main aim is to maximise company profits

 Shareholder profit shares depend on number of shares
 Number of shares depended on existing wealth and financial means
 No redistribution of wealth , the rich stay rich and the poor stay poor.

These entities clearly operate on a – Different kind of Capitalis

  Where companies ,CC’s favor financial capital ,co-operatives favour social capital
 Companies reward individual competition
 Where co-operatives reward co-operation

4th PRINCIPLE Autonomy and independence

 Should be autonomous ,self-help organizations controlled by members

5th PRINCIPLE EDUCATION TRAINING AND INFORMATION

 Provide education and training for members representative and employees

 Play an important role in raising community awareness of co-operation

6th PRINCIPLE CO-OPERATIO AMONGST CO-OPERATIVES

 Co-operation with other co-operatives in local regional ,national and international structures.

7th PRINCIPLE CONCERN FOR COMMUNITY

 Work for sustainable community development

Advantages of co-operatives

 General strengths and benefits

 Flexible -can be used in diverse sectors and regions for a wide range of purposes, by groups of
all sizes.
 Can simultaneously meet a number of socio-economic needs.

General strengths
- More resilient
- Have long term sustainability
- Empower marginalized groups , disadvantaged groups
- Responsive ,innovative and dynamic.

Contributions to employment and economic growth

- Reduce market failures and stabilizes the economy.

- Improve market access ad competiveness for individual members through pooling of
resources.
a. Give marginalised individuals access to markets they would not be able to access alone
b. Allows individuals with different knowledge, skills and products to add value to the end
product or service -  opens up different markets and increases profits
c. Economies of scale - allow for bulk buying and selling, reduce costs and increase profits.
Illustration – Olive farmer

 Has a small piece of land , few trees , very little capital , limited machinery for harvesting .
 If they operate they have very little harvest .
 If they continue at this rate wouldn’t do well.
 If there are 20 olive farmers in similar position , pulling it together what they have
harvested. This operation functions much more efficiently, profits much higher, beneficial
for all members.

Contributions to employment and economic growth

 Help balance market participation and wealth distribution

 Keep the production of goods and services close to the needs of the people they serve
 Provide goods and services that are unattractive to tother commercial enterprises and
public authorities are unable to supply
 Long term view rathe than short term profit
 Create jobs, increase sustainable employment and protect incomes.

Contribution to social development

 Inclusive ,unite communities

 Concerned with promotion members well-being and aspirations
 Address the needs of particular communities
 Help to solve problems that would otherwise remain the responsibility of government
agencies.

Main areas of success

- Countries with diverse political conditions ,degrees of economic development cultural and
historical backgrounds
- Times of economic crisis
- Rural and regional development
- Agricultural ,credit and banking sector
- Provisions of water ,electricity and other utilities

Under-utilization challenges

- Lack of awareness of the co-operative model

- Lack of appreciation of its potential
- Lack of resources
- Underdeveloped networks and lack of co-operation
- Lack of institutional support
- Mismanagement
 - Breakdowns in member relationships

Measure for Reform

The Co-operatives National Policy 2004

 To grow a self-sustainable and integrated co-operative 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.
 Government strategic objectives to grow, promote and support all types of co-operatives
 Key focus, areas -youth ,women and people living disabilities ,rural ,peri-urban and former
homeland areas.

Conclusions

 Failure of predominant models of social and economic organization

 A time of global challenges and changes
 Co-operatives provide hope and clear direction forward.

The ICA’s cooperative growth areas

 The provision of credit

 The provision of housing
 Job creation
 Agricultural production
 Management of cultural institutions ,water resources ,waste disposal ,public transportation
and renewable energy sources.