By: Tebogo Mokwena
The government has been slammed for not understanding the role of cooperatives nor offering the right support to ensure their growth. Instead, the state focused on a one-size-fits-all approach, which was not working in their favour, the National Cooperatives Association of SA (NCASA) said on Wednesday.
Across developing economies, cooperatives contribute significantly to job creation, reducing poverty and social integration. They also help members save money and offer them credit facilities that often cannot be accessed by traditional lenders. NCASA was speaking in Parliament, where it was joined by other associations representing cooperatives and informal traders at a meeting with the Portfolio Committee of Small Business Development.
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NCASA’s Matthews Mpondo told the briefing that the biggest challenge the government faced, along with an extensive list of other challenges which were also crippling the growth of cooperatives, was a general lack of understanding of what a cooperative was and what it did. “The biggest challenge regarding cooperatives concerns the general lack of understanding of the nature, character, and purpose of cooperatives,” Mpondo said. “This contributes to the failure of supporting cooperatives sufficiently.”
Mpondo also criticised the government’s singular approach in providing funding models for cooperatives.“The government must understand that cooperatives belong to different sectors, so funding models for cooperatives must be sector-specific,” he said. “The Department of Small Business Development seems to take the lead for cooperatives, and when they create funding models, they use a one-size-fits-all approach, and this does not work.”
Mpondo said it was a similar situation for non-financial support. “The training for cooperatives is also not sector-specific, and the training model that organs of state like the Small Enterprise Development Agency provide (seem to be similar to SMMES), and they don’t work,” he said. “Cooperatives also suffer from the lack of financial inclusion and the establishment of reliable financial capital, the lack of economic inclusion and the establishment of reliable markets.
“They have to compete with captains of industry, and as a result, face monumental challenges to overcome.” Mpondo also pointed out that although the department advocated for cooperatives, it only supported worker-led cooperatives. “There are cooperatives in every sector. There are cooperatives run by workers and cooperatives in the financial, services and the insurance sector,” he said. “There has to be a support ecosystem for cooperatives where funding models and training models are aligned with access to market opportunities in order to further their growth.”
Committee member Faiez Jacobs said that there needed to be cooperation between cooperatives and big businesses to create more opportunities for them. “The formal economy must make space and we must have coexistence between multinational companies and cooperatives and find value and supply chains in sectors like agriculture for cooperatives to thrive,” he said. “The cooperatives’ sector is a very important sector and we need to ensure that we put more emphasis on assisting that sector.”
Member Hendrik Kruger encouraged the associations to invite committee members to future conferences and events relating to cooperatives and informal traders. “We need to understand the frustration of cooperatives as there are a lot of things happening in that sector that we need to be aware of,” he pointed out. Members also acknowledged that SMMEs and cooperatives needed different support as they were not the same thing.
A cooperative is a business that is owned and run by its members and is for its members. Whether the members are residents, employees, or customers, they all have a say in what the cooperative does and how it shares its profits. While they are often compared to small businesses, they have very different purposes. Businesses are primarily focused on revenue and profits, while cooperatives work to meet the needs of their members whether they are social, cultural or economic.
