Response on Submissions to the Co-

operatives Bill 2005

Presented by Nweti Maluleke

Background/Purpose

– The portfolio committee received submissions from different stakeholders.

– The dti to respond in line with the Policy stance

– Allow to the TIPC to input and give guidance

– where possible and appropriate changes will be effected

– A summary of submissions made and copy to be distributed

– No need to be opened for NEDLAC consultations

List of Submissions

• FingerPrint Co-operative Limited• Institute of Certified Accountants of South Africa• NCT Forest Co-operatives Limited• Agricultural Business Chamber• COSATU• National Co-operatives of South Africa• A letter by Mr Msowenkosi Ntombela

Fingerprint Co-operative Ltd

Co-operative Bill Part 2 page 35 section 3(1)(a)

Workers co-operatives –Requirements of a constitution

3. (1) (a) In addition to the the requirement of this Act, the constitution of a worker co-operatives must provide-

(a)whether membership is restricted to a natural person who work for the co-operative;

ProposalMembers of a workers co-op must be employed by a co-operative and membership should be restricted to a to natural persons only.

Fingerprint cont.

The dti:

• The provision recognizes a worker co-op as defined in this Bill;

• No need to make amendment;• The provision of 3.(1)(a) provide space for the members of

a worker co-op to decide whether they want their members to be natural persons or juristic;

• Not prescriptive but an optional broader guideline available;

• A worker co-op is the one to design the constitution.

Institute of Certified Accountants of SA

Chapter 7. Co-operative audit

Proposal: • That the alternative auditor providers be retained in the Bill

- called assurance auditors;• But these alternative auditors to comply with qualifying

criteria;• Criteria to be legislated to avoid lowering of audit

standards;• Criteria/guidelines to be incorporated into the SA

alternative audit standards (new)• Accounting officers to be accredited to perform assurance

audit;

Institute of Certified Accountants of SA

Response by the dti:

In terms of the new Bill an auditor means any person registered as such in terms of the Public Accountants’ and Auditor's Act no. 80 of 1991 and includes a firm as defined in that Act and where appropriate any other person authorized by regulation to conduct an audit of a co-operative.

the dti supports the input but however this cannot be enforced further by being legislated in this Act.

introduction of the alternative audit will increase new entrants to the profession and lower the cost of reporting function thereby building and transferring skills

NCT Forest Co-operatives Limited

Concerns:

14(1)(e). Provides that each member of a co-operative shall have only one vote;

22 (1). Where members are permitted access to records of Board minutes, personal information on each member as well as details of Director's interest in other undertakings. Members are also allowed to make copies of information in terms of this provision.

- will lead to confidential information being available to members and to outsiders which could cause hardship and defamation against Directors

- Need to keep strategic information confidential including marketing strategies for competitive reason.

NCT Forest Co-operatives Limited

The dti’s response:

One member one vote remains in the Bill to promote co-operative principle of collective broader ownership and decision making, democratic control, equality, core values of openness, transparency and honesty.

The principle differentiate a co-op from other forms of ownerships such as a company- shareholding chapter removed from Bill.

The principle empowers emerging co-operatives/ timbers to make a decision in the running of a co-operative through voting on decisions.

NCT Forest Co-operatives Limited

• As it stands now bigger co-ops can decide to leave a co-op with no influence from a smaller co-op, since the approach is based on financial muscle, bigger co-ops investing in other undertakings than emerging ones, huge bargaining powers with patronage voting rights.

• Why worry in the voting when there is patronage proportion of the surplus which benefit bigger co-ops in terms of the number of business transactions conducted with the co-op rather than denying the a member the right to vote.

NCT Forest Co-operatives Limited

The dti response to access to information by a co-operative:• A co-op operate in terms of core values of openness, transparency,

economic participation by members, honesty, and equal participation.

• How can other members of the same co-op design marketing plans and have other interest without the knowledge of the other members. A plan need to be drawn and communicated with full knowledge and buy-in by all members.

• Section 22(2) provides for withholding of information to current commercial transactions for a certain period if it is justified that may be of commercial disadvantage to the co-operative.

Agricultural Business Chamber

• Proposing a proportional member control due to capitalization problem in a co-operative. Bigger members must have a bigger say to encourage them to stay in a co-op and to continue capitalizing for the benefit of the smaller co-ops.

• Smaller co-ops will be protected through capping the proportional vote to a maximum of 5 vote per member.

• Allow co-operatives to determine voting system in their own constitution.

Agricultural Business Chamber

Response by dti:

• Widely agreed at NEDLAC and agreed to one man one vote to differentiate from a company;

• Even at secondary level, weighted voting need to be monitored to avoid abuse and blocking of access to opportunities by bigger ones;

• If inserted, will allow the existence of pseudo co-operatives operating as companies

COSATU

Very general and submissions not linked to provisions as in the Bill but only a few are referenced.

For an example, Board of Directors, Audits, complex language, Financial Co-operatives Banks' Bill not talking to Co-operatives Bill, inclusion of support measures in the Bill, winding-up to encourage co-operatives to survive than close down, separation of rules for types of co-operatives in the appendix denying them of operating within general broad rules- schedules, unlawful use of a co-operative word.

The dti conference is of no relevance to the submissions made by stakeholders.

COSATU

• All what COSATU has raised generally has been addressed in the Bill.

• Section 32(1)Board of Directors is repeated and is therefore prescriptive.

• Section 12(1). Unlawful use of the word co-op.

• Section 17. Invalidity of a co-operative. Cosatu says why repeat the whole list instead of allowing a co-op to include in the constitution.

COSATU

Response: nothing to be changed in the Bill.

• Support, cannot be in the Bill.

• Audit promotes good governance and the Registrar will exempt smaller co-ops not affording the audit and further a Technical Assistance instrument developed will assist co-ops in reducing cost through subsidization and capacity building including the introduction of alternative assurance audit providers as introduced in this new Bill.

NCASA

• Sections 41-56- Capital Structure of a Co-operative.

- NCASA submission centers around the inclusion of a Co-op Fund and Reserves to help grow the movement and this to be legislated at a certain % to be deducted from the surplus as indivisible amount.

• Sections 5-17, Wants the Bill to include and legislate the purpose and functions of the secondary and tertiary co-operatives.

• Chapter 8. 66-73. Amalgamation, conversion and transfer. Facilitate conversion of other entities to a co-op. keep the existing provisions as per section 157 of the current Act.

NCASA

• No amendments to be made and not to be legislated on reserves and Co-op Fund;

• Members are empowered by the constitution to determine the reserves if need be;

• A co-op fund was never introduced at NEDLAC;• In the policy is provided as a broad guideline if grass roots

movement takes to voluntarily contribute to such initiatives;• Cannot legislate the purpose, functions of a secondary and

tertiary. • Agree to the inclusion of the conversion of a company or

other entities to a co-op. section to be retained as per the current Act of 1981.

Private submissions

Co-operatives and BEE• Main Programme of the BEE Policy• YES- in the Implementation• All sectors of the economy• To be instruments for poverty alleviation and

empowerment across the mainstream of the economy

• EPWPs, Preferential procurement, led, PPPs.

Comment on the co-operatives Banks’ Bill in line with the Co-ops Bill

• Need to comply with chapters 1 and 2 of this Act

• Deposit taking financial co-operatives

• Bill allows the growth of the emerging sector such as stokvels and burial societies

• Bills talks to each other