1. CO-OPERATIVES AMENDMENT ACT, NO
CO-OPERATIVES AMENDMENT ACT, NO.6 OF 2013 – MECHANISM GEARED TO ENHANCE SUSTAINABILITY OF CO-OPS
PRESENTATION BY JEFFREY NDUMO AT THE COLLOQUIUM , JOHANNESBURG UNIVERSITY, 04 AUGUST 2013

2. Background Information
Cooperatives development in South Africa has come a long way since Cabinet transferred the mandate of developing cooperatives from DoA to the dti: A number of policy and legislative support instruments have been developed aimed at promoting the development of cooperatives:
During 2004, the Co-operatives Policy that formed the basis for the development of the amended Cooperatives Act was finalized and approved;
The Cooperatives Act, No.14 of 2005 was promulgated into law on the 14 August 2005, repealing the 1981 Cooperatives Act.
The Cooperatives Regulations that ensured the proclamation of the Cooperatives Act on the 02 May 2007, were finalized, allowing for the effective implementation of the 2005 Act.
The National Cooperatives Development Strategy, a major policy instrument was finalized and approved by Cabinet in 2012.
Co-operatives Amendment Act No 6 of 2013 was assented to by the President on 2 August 2013 and published in the Government Gazette No on 5 August 2013.

3. Background Information, cont…
Prior to the 1994 democratic transition, most successful co-operatives were in the agricultural sector and finance, during which the responsibility for co-op development vested in the DoA;
Modernisation of the sector led to the drafting of the Co-ops Act 14 of 2005, which is now amendment to Co-ops Act, 06, 2013:
The aim of this talk is to answer the following questions:
Why was the amendment needed, and what does it try to achieve?
Is the amendment likely to achieve the desired outcome?

4. Current Situation
The number of registered Co-operatives as on 31 March 2013 stands at ;
The number of co-operatives that submits financial information and information on membership: 156 cooperatives, which constitute 0.2% of the total number of registered co-operatives;
Total income for the 156 co-operatives that submitted information: R , which constitute an average of R per co-operative; that submitted information;
The GDP contribution of the co-ops that submitted information is 0.3% and the agriculture co-ops contribute 10% in the agricultural sector;

5. Current Situation, cont…
The total number of members for the 156 (that submitted information) co-operatives: , which constitute an average of members per co-operative that submitted information;
Almost 81% of cooperatives are 3 years old or younger and most of these are still to fully comply with the Act requirement, namely, to submit the information to CIPC to aid in providing an accurate picture of co-ops performance;
The mortality rate of the co-ops submitting information is a mere 5% and those that do not is as high as 80%; and
Over 50% of cooperatives are in rural areas (villages and farms) and 65% of the coops are situated in provinces with above average poverty;

6. Challenges facing co-ops
Paucity of co-operatives financial information to paint an accurate picture, which can also aid development of policy instruments for the co-operative movement;
Few co-operatives comply with the Act in terms of submitting information to CIPC;
Impact of late payment on co-operatives from both public and private sector;
Limited financial support from banks due to the democratic nature of ownership
within co-operatives; and
Inadequate public sector financial support programmes, which are also integrated and streamlined throughout the economy;
Lack of mentorship programmes to support survival small and micro co-ops;
Inadequate business technical and management skills amongst co-ops;
Lack of capacity building support for co-ops and inadequate business incubation programmes;

7. Challenges facing co-ops, cont..
Inadequate technology transfer and business infrastructure on co-ops;
High levels of conflict amongst co-ops thus contributing to high failure rate; and
Lack of quick and affordable legal remedy to resolve conflict and provide compliance enforcement of the law, as well as, rescue support to dying co-ops;
Most micro and small co-ops and in particular the agricultural co-ops lacks capacity and ability to access market for their produce, which contributes to high failure rate;
Lack of access to public sector procurement and linkage to the private sector value chains;
Lack of market information, intelligence and integrated market access support programmes aimed at aiding co-operatives in this respect;
Improving the local business environment and encouraging business diversification amongst co-operatives to have a complete co-ops value chain.

8. Main aims of the Amendment Act
Strengthen co-operative governance, accountability and transparency and provide for a differential dispensation for co-operatives to reduce the regulatory burden for co-operatives
Strengthen the co-operative structure to allow for organic growth informed by own needs and requirements and to enable unity
Enhance Compliance, Coordination, Administration and Sustainability of Co-operatives
Establish co-operative institutions in order to streamline support for co-operatives and ensure alignment across all 3 spheres of govt.

9. Main aims of the Amendment Act, cont…
To increase the survival rate of registered co-operatives
To increase the proportion of co-operatives with formal legal status, which can receive govt financial and non-financial support
To improve the quality of information on the co-operative sector available to the dti

10. Purpose of the Act Act 14 of 2005 Amendment Act 6 of 2013
Specify the persons that benefit from Act;
List agencies of national departments to provide development support to co-operatives;
Regulations to specify for persons that benefit from Act; P6, lines 50 and 58
Relevant agencies of national departments; P7, Line 5
Promote the establishment of PPP P7, Line 13
Section 3 and Section 46 page 13

11. Compliance with co-operative principles
Act 14 of 2005
Amendment Act 6 of 2013
Stipulated minimum requirements to ensure compliance to co-operative principles;
Co-operatives must comply with co-operative principles; P7 line 21
At least 5% of surplus set aside as indivisible reserve
At least a percentage of surplus set aside as indivisible reserve P7 Line 27
Section 3 and Section 46 page 13

12. Compliance with legislative requirements
Act 14 of 2005
Amendment Act 6 of 2013
Primary co-ops – each member has one vote;
Primary category A and B co-ops – each member has one vote;
Constitutions of Primary category C, Secondary, Tertiary or the National Apex may provide for members to have more than one vote –
3 members < 40%
4 members < 30%
5 members < 25%
> 5 members <17%
Voting rights for primary cat C, secondary and tertiary co-operatives registered prior to the commencement of Amendment Act 6 of 2013 may retain voting rights as stipulated in their constitutions P 7 lines 31 to 49
Section 3 and Section 46 page 13

13. Compliance with co-operative principles of good governance
Act 14 of 2005
Amendment Act 6 of 2013
No provision
All co-operatives must comply with the prescribed principles of good governance for co-operatives;
Minister must publish principles of good governance for co-operatives in Government Gazette. P7 lines 56 to 61
Section 3 and Section 46 page 13

14. Co-operative structure
Act 14 of 2005
Amendment Act 6 of 2013
3 levels/forms of Co-operatives:
Primary Co-ops
Secondary Co-ops
Tertiary also called Apex
4 levels/forms of Co-operatives:
Tertiary Co-ops
National Apex Co-operative. P8 line 6
Section 3 and Section 46 page 13

15. Primary co-operative: definition
Act 14 of 2005
Amendment Act 6 of 2013
“Primary co-operative” means a co-operative formed by a minimum of five natural persons whose object is to provide employment or services to its members and to facilitate community development
“Primary co-operative” means a co-operative whose object is to provide employment or services to its members and to facilitate community development, formed by a minimum of:
(a) five natural persons; or
(b) two juristic persons; or
(c) a combination of any five persons, whether natural or juristic. P5, Lines 41 to 48
Section 3 and Section 46 page 13

16. Categories of primary co-operatives
Amendment Act 6 of 2013
Category A
Small primary co-operative P12 Line 11
Category B
Small to medium primary co-operative P12 Line 13
Category C
Medium to large primary co-operative P12 Line 15
Section 3 and Section 46 page 13

17. Secondary co-operative: definition & application to register
Act 14 of 2005
Amendment Act 6 of 2013
“Secondary co-operative” means a co-operative formed by two or more primary co-operatives to provide sectoral services to its members, and may include juristic persons
Remain unchanged
“a minimum of two or more primary co-operatives in the case of a secondary co-operative”
“a minimum of two or more operational primary co-operatives in the case of a secondary co-operative” P8 Line 21
Section 3 and Section 46 page 13

18. ’Operational’ in relation to Co-operative
Act 14 of 2005
Amendment Act 6 of 2013
No provision
‘Operational’ means a co-operative that has held its annual general meeting and has submitted its annual report, audited report or independently reviewed report P8 Line 33
Section 3 and Section 46 page 13

19. Tertiary co-operative: definition & register
Act 14 of 2005
Amendment Act 6 of 2013
“Tertiary co-operative” means a co-operative whose members are secondary co-operatives and whose object is to advocate and engage organs of state, the private sector and stakeholders on behalf of its members, and may also be referred to as a co-operative apex”
“Tertiary co-operative” means a sectoral or multi-sectoral co-operatives whose members are secondary co-operatives and whose objectives are to advocate and engage organs of state, the private sector and stakeholders on behalf of its members, in line with its sectoral or geographical mandate”P6 Line 15
“a minimum of two or more secondary co-operatives in the case of a tertiary co-operative”
“a minimum of two operational secondary co-operatives, in the case of a tertiary co-operative” P8 Line 23
Section 3 and Section 46 page 13

20. National Apex Co-operative
Act 14 of 2005
Amendment Act 6 of 2013
Tertiary co-operative may also be referred to as a co-operative apex
“national apex co-operative’ means the national apex co-operative contemplated in section 6(1)(d) P5 Line 37
An application to register a co-operative must be made by:
6(1)(d) a minimum of –
(i) Three operational sectoral tertiary co-operatives that operate on a national level; and
(ii) Five operational multi-sectoral tertiary co-operatives that operate on a provincial, district or local level, in the case of the national apex co-operative P8 Line 27
Section 3 and Section 46 page 13

21. National Apex Co-operative
Amendment Act 6 of 2013
An operational secondary co-operative may join the national apex co-operative where there is no sectoral or multi-sectoral tertiary co-operative that can represent the secondary co-operative P8 Line 38
Section 3 and Section 46 page 13

22. National Apex Co-operative
Amendment Act 6 of 2013
Only the national apex co-operative registered in terms of section 6(1)(d) may use or have as part of its name the word “apex”P9 Line 54
The registrar must:
Automatically correct the name of any co-operative that at the commencement of the Co-operatives Amendment Act No 6 of 2013, has the word ‘apex’ in its name, so that the word ‘apex’ is substituted for the word ‘tertiary’; and P9 Line 55
Notify each affected co-operative in writing within 60days of the commencement of the Co-operatives Amendment Act, No 6 of 2013, of the amendment effected. P10 Line 1
Section 3 and Section 46 page 13

23. Functions of the national apex co-operative
Amendment Act 6 of 2013
The functions of the national apex co-operative must include advocacy and engaging organs of state, the private sector and stakeholders on behalf of its members; P12 Line 50
Any other functions of the national apex co-operative must be determined by its members and included in the constitution of the national apex co-operative; P13 Line 1
The Minister may publish guidelines for the functions of the national apex co-operative by notice in the Gazette P13 Line 4
Section 3 and Section 46 page 13

24. Registration of Co-operatives
Act 14 of 2005
Amendment Act 6 of 2013
An application to register a co-operative must be submitted to the registrar in the prescribed form, and must be accompanied by –
(a) The constitution of the co-op, signed by the founder members;
(b) A list of founder members;
(c) The prescribed fee or proof of payment thereof
(a) The constitution of the co-op that complies with section 13, signed by the founder members; P8 Line 43
(b) A list of founder members and proof of their identity; P8 Line 45
(c) The prescribed fee or proof of payment thereof ; and
(d) a proposed name for the co-op and a request to reserve that name P8 Line 49
Section 3 and Section 46 page 13

25. Area amended: Co-operative Governance
Challenge: High failure rate and enhance clarity on the corporate identity of co-operatives
Co-operative values now in body of Bill, i.e. (i) Voluntary and Open Membership; (ii) Democratic Member Control; (iii) Member Economic Participation (iv); Autonomy and Independence; (v) Education, Training and Information; (vi) Co-operation amongst Co-operatives; (vii) Concern for the Community Page 3, Line 54 & Line 43
Co-operatives are compelled to comply with the co-operative principles Page 7, Lines 21 and 22
Code of Good Governance for co-operatives Page 7, Lines 56 and 57
Section 3 and Section 46 page 13

26. Area amended: Co-operative Governance – Reporting Framework for co-operatives
Challenge: Lack of accountability by directors and management as well as transparency with members
Co-operative reporting framework for co-operatives that requires, in addition to annual financial statements, the submission of social and management decision reports Page 18, Lines 21 to 23
Section 3 and Section 46 page 13

27. Area amended: Co-operative Governance – Social and Management Decision Reports
Challenge: High failure rate and lack of clarity on the corporate identity of co-operatives and transparency
Social report - means an assessment report drafted by the Board that asses the social impact and ethical performance of the co-operative in relation to its stated vision, mission, goals and code of social responsibility of the co-operative as set out in its constitution Page 5, Lines 60 to 63
Management decision report – means an assessment report drafted by the Board that accompanies the financial statements and that assesses the a co-operative’s compliance with all legal requirements and the requirements contained in its own constitution Page 5, Lines 31 to 34
Section 3 and Section 46 page 13

28. Area amended: Categorisation of primary Co- operatives
Challenge: High cost of compliance for smaller co-operatives
Primary co-operatives categorised as follows:
Category A: Survivalist to small co-operatives
Category B: Small to medium co-operatives
Category C: Medium to large co-operatives Page 12, Lines 11 to 16
Section 15A

29. Challenge: High cost of compliance for smaller co-operatives
Area amended: Differential Dispensation with regard to auditing and accounting activities
Challenge: High cost of compliance for smaller co-operatives
Category C primary co-operatives, secondary, tertiary and the national apex co-operative must submit an audited report to the registrar for each financial year; Page 18, Lines 9 to 14
Category B primary co-operatives must produce an independent reviewed report to the registrar in respect of each financial year; Page 18, Lines 15 and 16
Category A primary co-operatives must produce an annual report which does not have to be audited or independently reviewed to the registrar for each financial year and the survivalist will be exempted Page 18, Lines 17 to 20
Section 3 and Section 46 page 13

30. Area amended: Reserve Fund
Challenge: No clear guidelines on purpose, reporting and use of reserve fund
A percentage of surplus must be set aside as an indivisible reserve; Page 7, Lines 27 to 30
Members to decide and stipulate the limits to be kept as reserve in the constitution of their co-operatives but not less than 1% and need not be more than 5% of the net asset value reflected in the most recent financial statements submitted to Registrar; Page 17, Lines 40 to 44
Minister will provide guidelines for records in respect of reserves; purposes for which reserves may be used; and manner in which co-operatives must report on reserves Page 17, Lines 50 to 54
Section 3 and Section 46 page 13

31. Area amended: Voting rights
Challenge: Co-operatives formed in terms of Co-operatives Legislation prior to Act 14 of 2005 allowed to structure voting rights proportionally.
Constitutions of Category C Primary, Secondary, Tertiary and National Apex Co-operatives may provide that members may have more than one vote but subject to certain limits (not more than 17%); and Page 7, Lines 32 to 49
Co-operatives registered prior to 2013 may retain their voting rights as per their constitutions. Page 7, Lines 50 to 55
Section 3 (3), (4), (5) and (6)

32. Area amended: Constitution of Co-operatives
Challenge: Democratic control of co-operatives compromised
All co-operatives (primary, secondary, tertiary and national apex) must have constitutions; Page 10, Lines 25 and 26
Every group of individuals or co-operatives that intends to register as a co-operative must submit its constitution and the prescribed forms in the prescribed format to the registrar for registration. Page 10, Lines 35 to 37
Section 14 (1) (i)

33. Area amended: Constitution of Co-operatives – Minimum requirements
Challenge: Democratic control of co-operatives compromised
Constitution of co-operative must provide for:
a reasonable term of office for directors; Page 11, Lines 5 and 6
whether directors may be reappointed for a consecutive term; Page 11, Line 7
the manner of rotation of directors; and Page 11, Line 8
may provide for the appointment of non-executive independent directors Page 8, Line 18
Section 14 (1) (i)

34. Challenge: Democratic control of co-operatives compromised
Area amended: Constitution of Co-operatives – Minimum requirements, continues…
Challenge: Democratic control of co-operatives compromised
Constitution of co-operative must provide for:
a provision relating to the extension of the period for the repayment of the nominal value of membership shares in the event of the death of a member of the co-operative to a maximum of two years; Page 11, Lines 12 to 15
Section 14 (1) (i)

35. Area amended: Constitution of Co-operatives, continues …
Challenge: No provision indication if co-operative is “Open” or “Closed” co-operative
Constitution of co-operative must indicate if it is an “open co-operative” or “closed co-operative”; Page 10, Lines 49 to 52
A co-operative must indicate all business transactions concluded with members and non-members in its annual financial statements. Page 13, Lines 14 to 16
Section 14 (i) (b)

36. Area amended: Constitution of Secondary, Tertiary and the Apex Co-operatives
Challenge: Ensure alignment with interest of members and focus area
Constitution of co-operative must provide for:
for the further objectives of a secondary, tertiary or the national apex co-operative which may include any activity that is not inconsistent with the objectives of any of its members, and which is undertaken for their exclusive benefit; and
The further objectives of a tertiary or the national apex co-operative which may include representing the interests of co-operatives within a sector or region, providing assistance for education and training, establishing a guarantee fund to facilitate external financing of its members, and the establishment of an audit fund to assist members to have their operations audited; Page 12, Lines 35 to 46
Section 14 (1) (i)

37. Area amended: Restrictions on the functions of co- operative
Challenge: Clarity on restrictions on functions
A co-operative must not carry out an objective or perform an action not authorised by its constitution; Page 13, Lines 14 to 16
On conviction of a contravention a co-operative or director of a co-operative will be liable to a fine not exceeding one million rand. Page 13, Line 20
Section 23

38. Clear guidelines on the appointment and limits of proxies.
Area amended: Proxies
Challenge: Confusion on appointment and limits to proxies
Clear guidelines on the appointment and limits of proxies.
Members may appoint one proxy;
Appointment must be in writing and signed by member;
Valid for period stated on the written appointment;
Number of proxies a member may carry on behalf of other members may not be more than 5% of total membership of the Co-operative Page 15, Lines 12 to 31
Section 28

39. Area amended: Advisory Board
Challenge: Connotation of word “Board” suggest that the structure has legal powers, whereas its objective is for advisory purposes
Advisory Board replaced by Advisory Council. Page 26 Line 25 to Page 27 line 22
Functions of the Advisory Council are to advise the Minister and to make recommendations with regard to policies and programmes for the development of co-operatives. Page 27, Lines 28 and 29
Chapter 12

40. Area amended: Co-operative Development Agency
Challenge: Support available not tailor made for co-operatives
Co-operative Agency established as government component to perform its powers and functions in accordance to this Act and any other relevant law.
May after consultations with authorities establish provincial or district satellite branches (one-stop-shop and co-location). Page 28, Line 5 to Page 31 Line 45

41. Aim: To be effective, the Agency needs a provincial footprint
Area amended: Satellite Branches of the Co-operatives Development Agency
Aim: To be effective, the Agency needs a provincial footprint
Stipulate that the Agency must enter into MoU with member of Executive Council responsible for economic development in the provinces or the Municipal Council Page 30, Lines 19 to 22
Delegate functions of the satellite offices to the provincial department responsible for economic development or the Municipal Council Page 30, Lines 23 to 29
Must implement the MoU which must be monitored through the MINMEC or other relevant structures Page 30, Lines 30 and 31
Section 3 and Section 46 page 13

42. Area amended: Co-operative Development Agency, continues …
Objectives inter alia includes:
Support, promote and assist with the development of co-operatives;
Provide financial and non-financial support to co-operatives;
Provide business support services to co-operatives;
Provide, facilitate and coordinate training and education;
Assist with compliance to legislative requirements;
Provide access to information;
Carry out independent review reports; etc. Page 28, Line 15 to 45

43. Area amended: Co-operative Development Agency, continues ..
Functions inter alia includes:
Financial support services;
Non-financial support;
Education and training;
Support and extension services;
Market development;
Monitoring and evaluation; etc Page 28 Line 46 to Page 30 Line 15

44. Area amended: Co-operatives Tribunal
Challenge: Enforcement of Legislation; dispute resolution and judicial management
Ensure compliance with legislative requirements;
Assist with judicial management, winding-up, deregistration, conflict resolution and liquidation. Envisaged that Head office will be in the dti with ability to be mobile to serve all the length and breadth of South Africa. Page 32 Line 1 to Page 39 Line 55
Chapter 12 C

45. Area amended: Co-operatives Tribunal, continues…
Functions inter alia includes:
Adjudicate to any application made in terms of Act and make appropriate recommendations
Assist with conflict resolution;
Assist with requested disollution, winding up or liquidation
Assist with enforcement of compliance with provisions of Act;
Enforcement/investigating officers; etc Page 33 Line 24 to 60

46. Area amended: Worker co-operatives
Challenge: Abuse of employees and circumvention of Labour Relations Act and Basic Conditions of Employment Act
Employees and members of worker co-operatives whether a member or non-member is deemed to be an employee as defined in terms of the Labour Act as well as the Basic Conditions of Employment Act;
Exemptions will be allowed based on conditions stipulated in regulations to be drafted by the Minister of Trade and Industry in consultation with the Minister of Labour Page 44 Line 53 to Page 45 Line 16

47. Area amended: Intergovernmental relations framework & structures
Aim: to ensure effective cooperation amongst three spheres of government with respect to co-operative development
Appropriate intergovernmental relations frameworks must be established in accordance with Act and inline with other Legal requirements Page 40, Lines 1 to 24
Establishment of intergovernmental structures Page 40, Line 25 to Page 42 Line 30
Provide for framework for intergovernmental relations Page 42, Line 31 Page 44 Line 36
Section 3 (3), (4), (5) and (6)

48. Area amended: Functions of Intergovernmental structures and administrative arrangements
Aim: to provide clarity on functions, administrative and procedural arrangements with regard to intergovernmental structures
Clarity is provided on the functions of the intergovernmental structures , i.e. promote co-operatives, ensure co-ordination on planning, budgeting, provisioning of services, advise Minister and members of Executive council on matters relating to co-operatives, etc Page 40, Line 55 to Page 41 Line 17
Administrative and procedural arrangements must comply with the framework for intergovernmental relations Page 41, Line 20 to 23
Section 3 (3), (4), (5) and (6)

49. Area amended: Functions of Intergovernmental structures and administrative arrangements cont….
Aim: to provide clarity on functions, administrative and procedural arrangements with regard to intergovernmental structures
Submit copies of the approved minutes of all meetings to the Minister, members of the Executive Council responsible for economic development as well as the CDA, Tribunal and CIPC;
Perform any functions and duties in accordance with the principles of co-operative governance;
Perform any functions and duties as may be determined by the Minister by notice in the Gazette
Section 3 (3), (4), (5) and (6)

50. Area amended: Inter-Provincial co-ordination Committee on co-operatives
Aim: to provide clarity on the establishment, composition and functioning of Inter-Provincial Co-ordination Committee on Co-operatives
Clarity on the composition of members: Minister will appoint - Official from the dti; Official from COGTA; and One person per province; Appoint a Chairperson and Deputy Chairperson and members may designate an alternates to attend on his or her behalf;
Frequency of meetings: Must meet at least on a quarterly basis Page 41, Lines 25 to 55
Section 6 (1) (a)

51. Area amended: Provincial Interdepartmental and Municipal coordinating Structure
Aim: to ensure coordination within provinces amongst provincial and municipal spheres of government
Clarity on the establishment of provincial interdepartmental and municipal coordinating structures; functions and reporting Page 42, Lines 1 to 25
Develop provincial coordinating strategies in consultation with all relevant stakeholders: (Guided by Co-op Act, - Policy; - Strategy and provincial growth and development strategy)
Co-ordinate the co-operative development and support activities for all provincial government departments dealing with co-operatives;
Co-ordinate the provision od support of co-operatives across departments with provincial priorities and the priorities of the dti;
Report to the Provincial Legislature and the dti;
Support the provincial structures of the Agency; and
Collaborate and co-ordinate with all municipalities on the promotion of, and the provision of support for co-operatives and submit reports as prescribed
Section 6 (1) (b)

52. Area amended: Intergovernmental relations framework
Aim: to ensure effective cooperation amongst three spheres of government with respect to co-operative development
As part of the regulations a framework for intergovernmental relations needs to be established. The framework must deal with the following:
Dispute and conflict resolution;
Reporting, monitoring, evaluation and assessment:
Provide for minimum norms and standards in respect of procedures for and the frequency of monitoring, evaluation and assessment of (a) all structures established or recognised in terms of Act; (b) status of the co-operative movement; (c) the various levels of co-operatives, i.e. primary, secondary, tertiary and national apex; (d) the categories of primary co-operatives, i.e. A, B and C;
Establish the necessary mechanisms, processes, procedures and indicators required for the effective implementation thereof; to report on, monitor, evaluate, assess and determine the impact of exercise of powers; performance of functions; execute duties and operation efficiency of structures
Section 3 (3), (4), (5) and (6)

53. THANK YOU