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Adv. Kathy Idensohn Dept. of Commercial Law, UCT

THE CO-OPERATIVE: A MODEL FOR WORK & DEVELOPMENT. Adv. Kathy Idensohn Dept. of Commercial Law, UCT. 1. Some worldwide numbers:

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Adv. Kathy Idensohn Dept. of Commercial Law, UCT

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  1. THE CO-OPERATIVE: A MODEL FOR WORK & DEVELOPMENT Adv. Kathy Idensohn Dept. of Commercial Law, UCT

  2. 1. Some worldwide numbers: • 1 billion people are members of co-operatives (50% of the world’s population & 3 x more than individual shareholders in companies and other investor-owned enterprises) • Active in all countries. • International Co-operative Movements represent 800 million members (more than the total population of Europe) • Africa - 40% of households belong to a co-operative • US – more than 100 million members (40% of the population) INTRODUCTION – THE FACTS

  3. 1. Job creation • Provide 100 million jobs around the world. • EU - provide 2.3 million jobs. Securing livelihoods • Secure the livelihood of 3 billion people (half the world’s population.) • Kenya - 63% of the population derive their livelihoods from co-operatives. INTRODUCTION – THE FACTS Financial co-operatives - serve 857 million people (13% of world’s population)

  4. 1. Proven success and resilience • Highly successful business model • Global driver of economic growth. • 2005 - 2010 co-operatives worldwide outperformed publicly listed companies on market share gains (e.g. insurance, food retail, pharmacy, healthcare, business services , education and housing sectors). • 2010 - 300 largest co-operatives had combined ann. turnover of $2 trillion INTRODUCTION – THE FACTS

  5. 1. Proven success and resilience • Kenya • account for 45% of the GDP • 31% of gross national savings • control the markets for coffee, cotton and dairy. • India • consumer needs of 67% of rural households are met by co-operatives INTRODUCTION – THE FACTS

  6. 1. Proven success and resilience • Agricultural co-operatives - aggregate market share of 28% in processing & marketing of agricultural products in the US, 60% in Europe. • European co-operative banks: • 50 million members (10% of the continent’s total population) • 181 million clients, & 780 000 employees • €5.65 billion in assets • market share of approx 20%. INTRODUCTION – THE FACTS

  7. 1. Proven success and resilience Showing resilience to the global economic crisis. • Financial co-operatives - remaining financially sound • Consumer co-operatives are reporting increased turnover • Worker co-operatives are growing with stable employment levels. INTRODUCTION – THE FACTS

  8. 1. International interest and enthusiasm • 2012 - ‘The International Year of the Co-operative’, with the assertion that: ‘Co-operative enterprises build a better world’ • UN’s ‘2020’ vision for co-operatives INTRODUCTION – THE FACTS

  9. 2. • What is a co-operative? • How do they work? • Why are they growing? • Why are they outperforming more dominant forms of enterprise? • Why so much international attention and the enthusiasm? WHAT’S IT ALL ABOUT

  10. 2. Some explanations… • Nature and legal features of a co-operative • Way in which co-operatives are structured & governed and how they operate • The co-operative philosophy, principles and values • Unique features • Potential for creating work and promoting development • Co-operatives in South Africa • Co-operatives in the labour law context WHAT’S IT ALL ABOUT

  11. 3. 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) WHAT IS A CO-OPERATIVE?

  12. 3. Types of co-operatives • Can be used for a wide range of economic, social and cultural purposes. • Purpose may be economic profit, non-profit purpose, social, cultural, political, charitable or a combination of purposes. • Examples of different types of co-operatives: • Consumer / service co-operatives • Producer co-operatives • Worker co-operatives • Multi-stakeholder co-operatives WHAT IS A CO-OPERATIVE?

  13. 3. Legal features of a co-operative • Legally recognised model or structure • Most significant legal features - legal status and capacity • Have separate legal or ‘corporate’ personality: • Separate rights and obligations • Limited liability WHAT IS A CO-OPERATIVE?

  14. 4. • Bringing of economic and other resources under democratic control. • Kind of economic participation they give their members. • The co-operative values: • Self-help, • Self-responsibility, • Democracy, • Equality, • Equity, • Solidarity, • Honesty, openness, social responsibility and caring for others. THE UNIQUE CO-OPERATIVE PHILOSOPHY The co-operative principles ICA’s ‘Statement on the Co-operative Identity’, UN resolution & ILO recommendation

  15. 4. 1st Principle: Voluntary and open membership THE UNIQUE CO-OPERATIVE PHILOSOPHY

  16. 4. 2ndPrinciple: Democratic Member Control • Controlled and managed by members • Equal participation on a ‘one person one vote basis’ • Participation not dependent on: • Extent of membership interest • Financial status • Race, gender, cultural or social background or any other discriminating criterion • Voting rights depend on number of shares • Number of shares depends on existing wealth and financial means. • Maintenance of majority control Structures • Separation of ownership / membership and control / management THE UNIQUE CO-OPERATIVE PHILOSOPHY

  17. 4. 3rd Principle: Member Economic Participation • Primary aim of the co-operative is to meet members’ needs. • Economic needs - aim to maximise return for individual members rather than make profits for the co-operative itself • Equitable participation in economic returns • The financial workings of a co-operative: • Transactions by the co-operative – transactions with members /outside 3rdparties • The concept of ‘surplus’ • The concept of ‘patronage payments’ THE UNIQUE CO-OPERATIVE PHILOSOPHY

  18. 4. 3rd Principle: Member Economic Participation The contrasting position in companies • Main aim is to maximise company profits • Shareholder profit shares depend on number of shares • Number of shares depends on existing wealth and financial means • No redistribution of wealth - the rich stay rich and the poor stay poor THE UNIQUE CO-OPERATIVE PHILOSOPHY

  19. 4. 3rd Principle: Member Economic Participation A different kind of capitalism • Companies favour financial capital • Co-operatives favour social capital • Companies reward individual competition • Co-operatives reward co-operation THE UNIQUE CO-OPERATIVE PHILOSOPHY

  20. 4. 4thPrinciple: Autonomy and Independence • Autonomous, self-help organisations controlled by members. 5th Principle: Education, Training and Information • Provide education and training for members, representatives and employees • Play an important role in raising community awareness of co-operation. 6th Principle: Co-operation amongst Co-operatives • Co-operation with other co-operatives in local, regional, national & int’l structures. 7th Principle: Concern for Community • Work for sustainable community development THE UNIQUE CO-OPERATIVE PHILOSOPHY

  21. 5. 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 ‘Co-operatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.’ – UN Secretary General Ban Ki-moon ADVANTAGES OF CO-OPERATIVES: WORK AND DEVELOPMENT

  22. 5. General strengths and benefits • Comparatively more resilient to economic downturns • Have long-term sustainability • Give marginalised and disadvantaged groups access to work and markets, mobilisation and ‘voice’ • Responsive, innovative  and dynamic ADVANTAGES OF CO-OPERATIVES…

  23. 5. Contributions to employment and economic growth • Reduce market failures and stabilise the economy • Improve market access and competiveness for individual members through pooling of resources: • Gives marginalised individuals access to markets they would not be able to access alone • Allows individuals with different knowledge, skills and products to add value to the end product or service -  opens up different markets and increases profits • Economies of scale - allow for bulk buying and selling, reduce costs and increase profits ADVANTAGES OF CO-OPERATIVES…

  24. 5. An illustration: the olive farmer ADVANTAGES OF CO-OPERATIVES…

  25. 5. 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 other commercial enterprises and public authorities are unable to supply • Long-term view rather than short-term profit • Create jobs, increase sustainable employment and protect incomes ADVANTAGES OF CO-OPERATIVES…

  26. 5. Contributions to employment and economic growth • Provide a different kind of work: • individual autonomy and empowerment • directly incentivise and reward individual effort • benefits of a co-operative environment • generate knowledge and skills, act as schools of entrepreneurship and management ADVANTAGES OF CO-OPERATIVES…

  27. 5. Contributions to social development • Inclusive, unite communities • Concerned with promoting members well-being and aspirations • Address the needs of particular communities • Help to solve problems that would otherwise remain the responsibility of government agencies. ADVANTAGES OF CO-OPERATIVES…

  28. 5. ADVANTAGES OF CO-OPERATIVES… 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 sectors • Provision of water, electricity and other utilities

  29. 6. Current regulation • The Co-operatives Act 2005 & Regulations • Administered by a branch of the CIPC • Additional support agencies e.g. The Small Enterprise Development Agency, Co-operatives Bank Development Agency CO-OPERATIVES IN SOUTH AFRICA

  30. 6. Registration numbers Total of 54,461 co-operatives registered as at 31 January 2012 … Co-operatives registered under the Co-operatives Act 2005 alone, by province CO-OPERATIVES IN SOUTH AFRICA

  31. 6. Under-utilisation and challenges • Lack of awareness of the co-operative model • Lack of appreciation of its potential • Lack of resources • Undeveloped networks and lack of co-operation • Lack of institutional support • Mismanagement • Breakdowns in member relationships CO-OPERATIVES IN SOUTH AFRICA

  32. 7. • The creation of jobs • The provision of decent and sustainable work • The position of worker co-operatives • Current status • Concerns and calls for reform CO-OPERATIVES AND LABOUR LAW

  33. 8. • The Co-operative 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’s strategic objectives to grow, promote and support all types of co-operatives • Key focus areas -youth, women, and people living with disabilities, rural, peri-urban and former homeland areas MEASURES FOR REFORM

  34. 8. The Co-operatives Amendment Bill, 2012 • The Bill’s aims – to address all identified challenges to co-operative growth and success • Main reform areas: • Ensure good governance, transparency and accountability • Facilitate co-operation and co-ordination between co-operatives • Provide new support structures and resources • Address the position of worker co-operatives MEASURES FOR REFORM

  35. 9. • Failure of predominant models of social and economic organisation • A time of global crisis • Co-operatives provide hope and a 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 CONCLUSION

  36. 9. ‘The argument in favour of co-operatives has never looked stronger.’ – the ICA CONCLUSION

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