Building vibrant and sustainable co-operative enterprises that stimulate the social economy of the province



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COMMISSION 2: INSTITUTIONAL CAPACITY BUILDING FOR CO-OPERATIVES


Questions

  1. What should be the role of Higher Learning Institutions, FET Colleges, Training Agencies and CDC’s in supporting co-operatives in the Eastern Cape?

  2. Identify the key training areas that must be prioritized to address the needs of co-operatives in the Eastern Cape.



  1. How should this training be conducted to co-operatives on the ground – any role for municipalities?

Response to question 1

-The Higher Education Institutions need to do needs analysis.

-Research must be done on what the training needs are for co-operatives.

-Develop a standard curriculum in all languages and to include school curriculum.



Response to item 2

  • Financial management

  • Basic business skills Leadership training.

  • Understanding the co-operative concept.

  • Policy and legislation.

  • Marketing.

  • Conflict management.

Response to question 3

  • All trainers must be accredited.

  • Municipality must provide a conducive environment for training.

  • Continuous monitoring and evaluation.

The way forward


  • The establishment of database for different sectors to identify the needs for co-operative support.

  • To establish an advisory and support structure to assist co-operatives in expanding for offering new services.



  • To ensure that information is accessible to services co-operatives in terms of the criteria needed for funding opportunities.

  • Government to ensure that the process for funding co-operatives is fast-tracked.

  • The Services Seta should be accessible to Services Co-operatives.

  • Capacity building needed since there is a lack of understanding of the sector.

  • A networking structure should be established, in order to assist the co-operatives in marketing their products and services.

  • The development of market research the DTI and co-operatives.

  • In order for co-operatives to survive, there’s a need to prioritise viable economic sectors.

  • Cultural Co-operatives should be promoted by developing local content (e.g. arts, language and heritage).

  • Marketing and Networking of co-operatives should also be promoted.

  • LED - must develop a strategy and a policy on support for co-operatives.

  • Concurrent with the establishment of a database, a research on the successes and failures of each co-op need to be identified. Following this a set of best practices as well as training/capacity building plan need to be developed.

  • Explore the possibility of a LED Development Agency which would be driven by a 51% of co-operatives.

  • IDPs should outline programs on support for co-operatives.

  • A dedicated 30% of goods and services should be procured from co-operatives.

  • Each municipality should establish an office that would undertake co-operative issues.

  • Participation of the Co-operatives in the entire value chain i.e. primary agriculture, production, marketing and supply - Linkage of producers, processors and traders.

  • Motivate a co-operative specific budget.

  • Supporting organisations to become associate member of secondary co-operatives to impart business skills.



  • Trade Unions to assist with the development of worker co-operatives amongst those who have been retrenched.

COMMISSION 3: FINANCING MODEL FOR CO-OPERATIVES ENTERPRISES


Items for Discussion

  1. Identify the funding model and gaps (policy context and operational) of the existing funding mechanism for the co-operatives.

  2. Propose and motivate a financing model that is appropriate for co-operatives in the Easter Cape (how must it be structured, who must provide resources, define its operations).

  3. Describe a process map for operationalization of the financing model in the Eastern Cape.

Response to item 1

  1. Co-operatives Incentives Scheme (CIS) National

The scheme grants R350 000 comprising of a 90%/10% loan and grant.

The members identified mentoring as a gap. Co-operatives receive the grant but are not mentored as to how to manage the finances.This finance scheme only provides capital for equipment and the co-operatives then struggle with working capital for salaries, rentals for space, etc.

The turnaround time for the application for funding was regarded as too long. Most of the commission members (co-operatives) were not aware of this model. It was recommended that the scheme should give grants for all the operations happening in the co-operatives.


  1. Imvaba Fund (Eastern Cape)

This model offers from R20 000 to R1,4 million at 30% grant and 70% loan. A number of limiting factors were identified, especially in the application process. The co-operatives felt that the application form is not user friendly and not simple and does not seem to be customized for co-operatives.

The ECDC/Imvaba Fund staff/administrators do not create a conducive customer care environment and one is pushed from pillar to post with the application. There was also a feeling that the model is not well marketed and as a result, most co-operatives are not well-conversant with how it works.

Some of the requirements for eligibility and subsequent approval prove difficult for co-operatives to meet. The fact that co-operatives members need to have clean credit records were seen as disadvantaging the entire organisation. The business plan which is one of the requirements for funding is difficult for co-operatives to have and they do not receive any assistance from the funders on how to do it.

The co-operatives felt that they should be afforded the opportunity to motivate for their own funding at the credit committee meetings. They also recommended that the model change to 50% loan and 50% grant with no interest on the loan.



  1. SAMAF (National)

Financial co-operatives, such as Savings and Credit Co-operatives (SACCOs) can provide loans to members to help meet costs of schooling or to smooth shocks in household budgets. SACCOs also help to meet the needs of farmers for credit throughout the agricultural cycle. This creates need for bridging finance, in order to access agricultural inputs, as well as finance for daily living requirements. Access to finance creates opportunity for farmers to purchase services and infrastructure that increase agricultural production

It was highlighted that this model operates in the following manner:

MFIs award R10 million loan and R5 million grant.

FSCs/SACCOs/Co-op Banks assist co-operatives with R5 million loan and R100 000 grant.

Stokvel FSC fund with a R50 000 start up.

The commission identified that there is lack of information about this model and most commission members knew very little about SAMAF products. The fact that SAMAF pay outs take too long was indicated as a challenge. The requirement that a co-operative should have 150 members was debated as limiting and too high thus inhibiting co-operatives from benefiting from SAMAF products.



Response to Item 2

  • Support must make business sense.

  • Co-ops must be viable.

  • Co-ops must not just want money.

  • Must be a business case.

  • financial support must be made available to help co-ops get on their feet.

Response to Item 3

  1. No need to re-invent the wheel.CIS and IMVABA should be maintained and address the above issues by:

  1. Ensuring staff are trained to be friendly and helpful.

  2. Funding model/support should be linked to additional access to market strategies, where possible.

  3. Funding must suit the type of business needed, not one size fits all (e.g. CIS- R350 000).

  4. Should consider alternative services providers – sector experts. Consider a voucher/accreditation system for:

  1. Business plans

(b) Mentoring

(c) auditing/accounting

5. Considering a step up grant scheme linked to achievement of objectives.

6. Need One Stop Co-operative Services Centres to address and access information issues in all municipalities.

7. Small business hubs (Incubator programs) to better premises and as an alternative to rental of poor premises.


Co-operative bank program


Need to educate local municipalities on financial co-ops. Once established, can come together to form a secondary co-op bank. Secondary co-op bank could service all types of co-operatives.

The Way foward


Financing model

  1. The conference noted that the two schemes currently existing (the dti co-operative incentive scheme: Grant and the DEDEAT IMVABA Fund part grant part loan) as meeting their immediate needs though there are operational issues that will need attention of management to sort out. With regard to the CIS the main concern is on the turnaround time for approval process and for IMVABA is the attitudes of the personnel which are not friendly.

  2. Secondly, the application forms for the Imvaba fund are too complicated for the co-operatives so an attempt must be made to simplify them for understanding by co-operatives. The co-operatives strongly moved for retaining a zero% rate on loans from Imvaba and that treasury must be engaged to provide an exception as per the provisions of the legislative frameworks for the fund.



  1. The shared feeling was that the co-operatives must be provided an opportunity to present their business proposal as a way to empower them. The current system is not user friendly as there is third party that present co-operatives to funding approval committees and often these persons are not conversant with the culture and dynamics of the co-operative sector. The arguments advanced indicated that it is a standard practice even by the commercial banks to interact directly with the clients.

  2. The conference noted that the co-operative bank model will be an ideal one however there are challenges with the existing co-operative banking institutions and more institutional support is needed to ensure that they are working effectively and are understood by co-operative enterprises. There must be more information on co-operative banks and it should also start at local level. Co-operatives are encouraged to come together to establish such co-operative banks and as they grow establish secondary co-operative banks.

  3. The co-operatives resolved to support one another and therefore they will need more information on the co-operative bank model so as to promote a culture of savings amongst co-operatives and circulation of social capital within the sector.

  4. The conference also resolved that Management must address operational/service issues immediately.

  5. Issues that require policy changes should be addressed within six months – next Indaba get report back on progress.


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