www salga org za SALGA Input to hearings

www. salga. org. za SALGA Input to hearings on Cooperatives Amendment Bills 24 July 2012 Mr Douglas Cohen Specialist: Economic Development SALGA National Office 1

www. salga. org. za Outline • SALGA comments cover the following areas: 1. Consultation 2. Local Economic Development a) the dti’s Integrated Strategy on the Development and Promotion of Co-operatives (2012 -2022) 3. Comments: a) General b) Sections affecting co-operatives themselves c) Sections affecting the State d) Co-operatives Second Amendment Bill 4. Conclusion

www. salga. org. za 1. Consultation q "People support what they create and resist that which they are excluded from". − Margaret Wheatley

www. salga. org. za Page 46: MEMORANDUM ON THE OBJECTS OF THE CO-OPERATIVES AMENDMENT BILL, 2012 4

www. salga. org. za 1. Consultation • Organised Local Government was not consulted on the Bills. • The document refers to some engagement with municipalities, while there are 278 municipalities, the document does name which were consulted, nor who in the municipality was consulted. • It is not clear if COGTA or other lead departments responsible for local economic development (LED) were consulted • This is a flaw in the process of the policy makers.

www. salga. org. za 1. Consultation • Implications: – As the government sphere at the coal-face of service delivery, it will be municipalities who need to engage with co-operatives to ensure that they are aware and understand the implications of such legislation – If there is a lack of consultation and participation limits / undermines the municipal role and therefore would impacts the end results

www. salga. org. za 1. Consultation • Implications: – Only with greater participation the local government sector that will result in their effective participation on the Co-operative programme – When municipalities are made aware, understand agree to their role will it result in improved to cooperatives support / development

www. salga. org. za 2. Local Economic Development (LED) q “To build robust and inclusive municipal economies at district and metropolitan level exploiting local opportunities, real potential and competitive advantages, addressing local needs and contributing to national development objectives, such as economic growth and poverty eradication” − DPLG’s 2005 LED Policy Guidelines: Vision of LED

www. salga. org. za Traditional development policies Local economic development Top-down approach in which decisions about the areas where intervention is needed are taken in the centre Managed by the central administration Promotion of development in all territories with the initiative often coming from below Development of large industrial projects to stimulate other economic activity Maximising the development potential of each are to stimulate a progressive adjustment of the local economic system to the changing economic environment Provision of key conditions for the development of economic activity Decentralized, vertical cooperation between different tiers of government and horizontal cooperation between public and private bodies Sectoral approach to development Territorial approach to development (locality, milieu) Financial support, incentives and subsidies as the main factor for attracting economic activity 9 “STRATEGIC REVIEW OF LOCAL ECONOMIC DEVELOPMENT IN SOUTH AFRICA” Prof Christian M. Rogerson May 2009

www. salga. org. za Traditional development policies Top-down approach in which decisions about the areas where intervention is needed are taken in the centre Managed by the central administration Local economic development Promotion of development in all territories with the initiative often coming from belowa Creating a conducive Decentralized, vertical cooperation environment between different tiers of government and horizontal cooperation between public and private bodies s to development ie t li a ip ic n u Sectoral approach to development Territorial approach M r nge fo e ll a h C D E L e h T (locality, milieu) Development of large industrial projects to stimulate other economic activity Pro-poor LED Financial support, incentives and subsidies as the main factor for attracting economic activity Maximising the development potential of each are to stimulate a progressive adjustment of the local economic system to the changing economic environment Provision of key conditions for the development of economic activity 10 “STRATEGIC REVIEW OF LOCAL ECONOMIC DEVELOPMENT IN SOUTH AFRICA” Prof Christian M. Rogerson May 2009

www. salga. org. za • Organised Local Government was not consulted on the Strategy. • The document refers that some engagement with local government, while there are 278 municipalities, the document does name which were consulted, nor who in the municipality was consulted. 11

www. salga. org. za 2 a) The dti Co-operative Strategy • Local Government impacting co-operatives: – At a local government level, less than 100 officials are involved in co-operatives development work. – Most challenges are experienced at local levels, as there is a lack of knowledge about the co-operative concept by the officials themselves. – Limited access to critical business infrastructure: Lack of critical business or development infrastructure facilities in the areas (i. e. municipality level, etc) where co-operatives are active has resulted in an inability for co-operatives to operate effectively.

www. salga. org. za 2 a) The dti Co-operative Strategy • Responsibility of provincial and local government: Provincial and local governments have responsibilities of promoting and developing co-operatives • Municipalities have a responsibility of formulating Municipal Co-operative Implementation Plans located within their Integrated Developments Plans (IDPs), coupled with support programmes, business infrastructure, information centres and the district or local chapters of the Co-operative Development Agency.

www. salga. org. za 2 a) The dti Co-operative Strategy 14

www. salga. org. za 2 a) The dti Co-operative Strategy • Most municipal Supply Chain Management Policies (SCM) encouraged procurement from within a local municipal environment. This is to ensure that the municipality itself supports companies and SMME’s from their local community where possible. • The imperative of promoting local small and enterprise development is constantly reinforced at local imbizos and IDP consultation processes. • The new preferential procurement regulations do not allow SCM policies to provide or set-aside and targeting of local (geographical) supplier including co-operatives, SMME’s and CBO’s. • While municipalities will have had to amend their policies, but it is the local businesses themselves who will potentially suffer the most. 15

www. salga. org. za 2 a) The dti Co-operative Strategy • ANNEXURE A: ACTION PLAN FOR THE IMPLEMENTATION OF THE INTEGRATED STRATEGY ON THE DEVELOPMENT AND PROMOTION OF COOPERATIVES, 2012 – 2022 • The Strategy envisions that various actions will be undertaken by relevant role-players, giving effect to its implementation…. ”the competency for promoting and supporting co-operatives be a shared responsibility, involving all spheres of government and other extraparliamentary stakeholders”

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www. salga. org. za 2 a) The dti Co-operative Strategy • Implications: – Despite the shortcomings Municipalities appear to be a key role-player in the dti strategy – Should the strategy rather be integrated been imposed into “the mandate / services” of local government and must speak to the LED agenda of local government (not visa versa) for ownership to take place – What approaches are there to invest and build the necessary capacity at the local level to best support and implement the strategy?

www. salga. org. za 3. Comments q “State support to co-operatives is well intentioned this is not enabling but instead instrumentalises cooperatives as part of a state led development agenda The co-operatives are then not developed in accordance with the member needs and capacities but in terms of government objectives. q This is dangerous because it does not cultivate the autonomous and independent impulses with the cooperative for sustainability” − Vishwas Satgar (the State of South African Co-operatives (2007)

www. salga. org. za 3 a) General • How accessible are the bills? • Are co-operative’s simply a form of business? • Are they regarded more a vehicle towards enterprise development / social development or more a vehicle for BBBEEE? • How does the state communicate with cooperatives currently? • How will the state ensure an exit strategy?

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www. salga. org. za 3 b) Sections affecting cooperatives • More “Red Tape” for co-operatives? – The introduction of the reserve fund / surplus could be regarded as a Government objective for co-operatives, rather than their own wish or desire. It could secondly serve as a deterrent for new co-operatives or red-tape for existing co-operatives – The capacity of the co-op to manage financial statements and other compliance mechanisms. – The administrative costs (both for state and co-op) in the process of amending names to include “co-op Ltd”

www. salga. org. za 3 b) Sections affecting cooperatives • More “Red Tape” for co-operatives? – The Annual submission must be done in the most simple, accessible and efficient manner. Why not introduce benefits (and not only penalties) to doing the annual registration for co-operatives. – There is a great deal of new regulation and additional costs for co-operatives in complying with the audit / or independent review. – What will the implications be in the deep rural areas?

www. salga. org. za 3. Comments q The challenge for Government is to find a balance between ensuring it provides strategic enabling support while co-operatives are initiated around opportunities identified by aspirant co-opertors rooted in their own organic impulse of collective effort and solidarity. − Vishwas Satgar (the State of South African Co-operatives (2007)

www. salga. org. za 3 c) Sections affecting Government • The Advisory Council / Board – should include representation from local government as a stakeholder • Establishment of the Co-operatives Development Agency aim is to have satellite branch in “every province, metro and district” - obviously what they imply is that they will be working with municipalities. But How? ? • There are obviously concerns of duplication with agencies such as SEDA or the new SEFA on the on hand that all have such a presence and then the role of municipalities – Must question using something new rather than use existing?

www. salga. org. za 3 c) Sections affecting Government • The agency reports directly into the DTI and reports in only at a Chief Director level. This implies that: – The agency is “owned” by the DTI and therefore is not a shared resource to all (where-as supporting co-operatives is) – It appears as non strategic. • In both these cases it will undermine the effectiveness of the agency to be taken seriously within and across government especially at the local level. • What will the reach of the Tribal inspectors be? And their turnaround times? How accessible will this tribunal be, especially in rural areas?

www. salga. org. za 3. Comments q Co-operatives Second Amendment Bill Sections affecting local government

www. salga. org. za 3 d) Second Amendment Bill • The MOU between the newly established agency and municipalities seems to include a political MOU – surely this must be done at a political level i. e. through the Ministry of the DTI? – Similar to the EPWP protocol agreement • The section also deals with delegation of functions, which is unnecessary because municipalities have in many cases been doing this function prior anyways under their LED agenda. – But there is no mention of funding, resources, technical support or capacity building

www. salga. org. za 4. Conclusion 29

www. salga. org. za 4. Conclusion No formal consultation with SALGA / Organised Local government Finding a balance between ensuring Gov provides strategic enabling support while co-operative retain entrepreneurial spirit Enhance the development character of co-operative legislation: Reduce regulatory burden for co-operatives Ensure compliance, co-ordination, administration and sustainability of co-operatives Open and engage further national dialogue and discussions on co-operatives 30 ? ?

www. salga. org. za Thank You Mr Douglas Cohen Specialist: Economic Development SALGA National Office 31