The document provides an overview of cooperatives, including: - A cooperative is an autonomous association owned and controlled by its members to meet common economic and social needs. - The cooperative movement began in the 19th century in Rochdale, England in response to unfair labour practices. - Cooperatives are based on the seven principles of voluntary membership, democratic control, member economic participation, autonomy and independence, education and training, cooperation among cooperatives, and concern for community.

1. HISTORYAND PRINCIPLES OF
CO-OPERATIVES 2CDH111
Tracing the history of cooperatives

2. Table of contents
 What is a cooperative?
 What a cooperative is not?
 Cooperatives differences from other businesses
 What a cooperative is not
 What is cooperative movement
 History and development of cooperatives
 History and development of cooperatives contd.
 History and development of cooperatives contd.
 History and development of cooperatives contd.

3. Table of contents
 What is good governance?
 Key attributes of good governance
 Cooperative values defined
 Cooperatives defined contd.
 Cooperatives principles defined
 Cooperatives principles defined
 Types of cooperatives
 Functions of a National Apex Cooperative

4. What is a co-operative?
• A co-operative is 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.
• Cooperatives are significant vehicles for job creation and contribute to sustainable
development;
• Over 1 billion people are members of cooperatives globally
• Each cooperative has a voice on how it is run

5. Cooperatives difference from other
businesses
 It is the adherence to Cooperative principles and values and trace the roots of
these principles to Rochdale pioneers. They were first set out in 1844 by the
Rochdale Pioneers, in Rochdale, England in 1844.

6. What a cooperative is not
 It is not an economic system
 It is not a movement, political, otherwise
 It does not seek to overthrow or destroy capitalism but it seeks to preserve
capitalism
 It is not a conspiracy to link the cooperatives in one nation or in several nations
into one economic movement
 It is not a social movement
 It is not a welfare scheme
 It is both for poor and the rich

7. What is a co-operative movement?
 It is an international movement that aims to encourage people to produce, buy and
sell things together, and to share profits.
 It is an organisation owned by and run for the benefits of its members.

8. The historical development of
Cooperatives
 Began in Europe in the 19th century
 Rochdale is the birthplace of the modern cooperative movement
 Increased pressure from the changing market system was a driving force in their
decision to move toward cooperation
 New large industries relied on unfair labour practices to meet production quotas
 Employees lost control over working conditions, low pay, long hours, unsanitary
workplaces
 No mechanisms for claiming worker rights

9. History and development of cooperatives
contd.
 International Cooperative Alliance was formed in 1895 (statement of Cooperative
identity) autonomous association
 The ICA recognised empowered workers to own share of the business and to
govern themselves
 The attempt is to solve common problems by combined action is at the root of
cooperatives;
 Empowerment, shared ownership and democratic control are key concepts of
cooperatives ideology;
 Members become bound to each other through values and principles as well as
their shared experiences in the cooperative.

10. History and development of cooperatives
contd.
 Cooperatives attempt to balance individuals ’needs with those of the community as
a whole;
 Encourage individual empowerment within the structure of membership and
responsibility to the group;
 Cooperative principles place a strong emphasis on democratic processes such as
majority voting system, participation by all members in decision making; and
sharing work and benefits equally;
 Cooperatives do not operate in isolation from their community but integrated into
society;
 They offer educational opportunities to non-members

11. History and development of cooperatives
contd.
 Cooperatives values and principles are intended to support the structure of the
cooperative, which in turn support the structure of society;
 Cooperatives value the principle of participatory governance;
 Its structure encourages the sharing of resources among members and a
democratic management style
 Cooperatives are based on honesty, openness, social responsibility and caring for
others.

12. Historical development of Cooperatives in
South Africa
 Cooperatives were invented in 1800s in South Africa;
 In a form of stockvels especially black people were heavily involved in stockvels;
 Most stockvels were informal and were not guided by policies until later;
 Funds were used for functions such as funerals, birthday parties, weddings and family
gatherings;
 The Apartheid regime supported the development of cooperatives in the agricultural
sector by recognised only white commercial farmers
 Other measures were put in place to support white farmers develop successfully and
thrive
 They received subsidised loans from the Land Bank fully known as the Land and
Agricultural Bank established in 1912
 A Cooperative Act of 2005 was the first initiative towards the development and creation
of legal environment in support of black cooperatives

13. South African Cooperatives
 The Cooperative Act of 2005 stipulated how cooperatives could contribute towards
income generation especially for the black population
 A policy to develop cooperatives was created by Department of Trade and
Industry(DTI)
 The DTI also established a Cooperative Development Unit which in charge of
reviewing policies and strategies, promoting the cooperative concept and
coordinating donor activities and government institutions.
 Cooperatives Advisory Boards act as a representative of all cooperatives and
gives advise to the Minister of Trade and Industry on all matters that relate to
cooperatives in South Africa;
 Only genuine cooperatives that are registered under the ICA principles will
receive any support measures (proof must be presented.

14. Four main historical imperatives in the
development of the movement
 Agricultural sector co-operatives- were initially established to build the white
farming community early in the 1900s;
 Coops were owned and operated solely by white farmers who served as agents of
the Land Bank set by government;
 They handled all exports and controlled the agricultural production, marketing and
processing especially in rural areas
 Homeland (Bantustans) co-operatives –cooperatives in Bantustans were
launched to address the economic needs of a redundant workforce;
 Majority of such cooperatives established under Bantustans system ceased to exist
after the end of apartheid

15. Four main historical imperatives in the
development of the movement
 Trade Union Co-operatives – trade unions considered cooperatives as vehicles to
address the economic needs of retrenched and redundant workers;
 During this period, NUMSA established the Sarmcol Workers Cooperatives (Sawco)
 NUM, on the other hand, began developing Cooperatives in 1988 and to-date the
membership is in the region of 400;
 Co-operatives in the informal sector – the informal sector witnessed the
emergence of Co-ops among hawkers, in home industry and other self-
employment initiatives

16. Four main historical imperatives in the
development of the movement
 Co-operative rotating savings and credit schemes worked in conjunction with the
values such as solidarity, self-reliance and common ownership;
 These co-operatives flourished especially in African communities where the stokvel
concept originated

17. Cooperatives development
 Cooperatives serve to provide a significant vehicle for economic and social
development;
 It is viable, autonomous, self-reliant and self sustaining structure that creates
employment, generate income, facilitate broad-based black economic
empowerment and eradicate poverty;
 Plays a role in economic development of regions and countries such as India,
Kenya, Malawi, Mozambique, Swaziland and others;
 South African cooperatives have established various industries to produce wool,
citrus, dairy, grain and retail farm supply cooperatives

18. Cooperatives development
 In 1980s, about 250 cooperatives with 142 000 members had total assets of R12,7
billion, with total turnover of R22,5 billion with pre-tax profits of more that R500
million;
 Cooperatives supplied and financed 90% of fertilizer, 85% of fuel, 65% of chemicals
and a significant amount of machinery and implements;
 Cooperatives Act 14 of 2005, subsequently amended (Amendment Act 6 of 2013)
provided new imperatives that has seen the Cooperatives registrations nationally of
up to 43 062 cooperatives in 2009;
 Unfortunately the mortality rate of cooperatives has been in excess of 88%;
 The Companies and Intellectual Properties Commission recorded 20 396 as at 2015
in its 2014/2015 Report

19. Rationale of Cooperatives
 Economies of scale & scope – Through cooperatives, independent entrepreneurs,
rural and urban households as well as workers, joint purchasing, (bulk buying)
and marketing strength ;can be used.
 Through shared services, cooperatives and other forms of entities, natural and
juristic entrepreneurs can enjoy benefits of shared services of labour, and joint
production facilities, which facilitate the division and specialisation, thereby
enhancing productivity and sustainability;
 Bargaining power – the supply and demand of goods and services by
Cooperatives increases their bargaining power in the market place;
 Community participation and development – can mobilise and develop the
entire community and encourage the culture of saving within communities

20. Rationale for Cooperatives
 Investment is circulated among its members and remains with the communities;
 Member participation and motivation – active participation of members in the
management of cooperatives reduces the cost of doing business
 Managing risk – risk sharing between members are more stable than individual
enterprise
 Innovation- learning from each other enhances innovation;
 Legal protection- by joining a cooperative, small scale producers obtain legal
protection and limited economic liability

21. The role played by government in the
growth of co-operatives
 The great challenge in South Africa is to increase the number of variety and viable
and sustainable, economic enterprises;
 SA government adopted an economic policy that promote the development of
emerging economic enterprises;
 Co-operatives diversify the ownership, size and geographic location of those
enterprises;
 Co-operatives are an one intervention that can uplift the indigenous South African
people who were neglected or excluded in the apartheid system to play a role in
the economic development of the nation;
 Reforms were put in place to remove subsidies and tax concessions that had a
huge negative impact on the Cooperative sector

22. The role played by Government in the
growth of Co-operatives contd.
 Co-operatives were registered under Companies Act until 1908
 This legislation was enacted in 1922 in the form of Co-operatives Societies Act of
1922 whish focused primarily on Agricultural Co-operatives;
 This Act distorted the identity , values and principles of Co-operatives and failed to
address the needs of non-agricultural co-operatives;
 It did not support the development of diversified co-operatives sector
 Its amendments promoted the conversion of cooperation into companies
 Members should be given training to get maximum benefit;
 Government should supervise and monitor the activities of cooperative time to
time

23. The role played by Government in the
growth of co-operatives
 The policy of government fosters the creation and growth of cooperatives as a
vehicle for promoting self-reliance and harnessing people power towards the
attainment of economic development and social justice;
 The Cooperative Development Authority (CDA) is mandated to lead as an agency
for the promotion and development of cooperatives;
 To adopt and implement integrated and comprehensive plans and programs on
cooperative development consistent with the national policy;
 Cooperatives provide quality goods and services to areas that are usually alienated
by major corporations

24. Three dimensions of empowerment of co-
operatives
 Cooperative Members should have:
 Personal – the ability to meet basic material and non-material needs
 Relational- the ability to shape and influence relationships and avoid exploitation,
and
 Collective- the ability to participate in collective action and reflection
 The support measures to row this Sector are clearly defined in the Co-operative
development strategy as an implementation framework;
 Policies and strategies were formed by government to ensure that the Co-
operatives favour the current situation of South African people;
 Strategies were used to promote Cooperatives in order to unleash their potential to
create and develop income generation activities.

25. What is Good Governance?
1. Processes and institutions produce results that meet the needs of society
2. Aims to minimise corruption, take into account the opinions of minorities;
3. Listen to the voice of the oppressed people in the decision making process
4. Examples are: participation, rule of law, transparency, responsiveness, consensus
orientation, equity, effectiveness and efficiency and accountability

26. Key attributes of good governance
 Participation –taking part in something
 Rule of law- state, community, lawmakers and leaders are accountable to the same
laws
 Transparency-decisions taken in a manner that follows and regulations
 Responsiveness- respond to stakeholders within reasonable time
 Consensus orientation- existing systems serve the best interest of society
 Equity- equality of treatment/fairness
 Effectiveness and efficiency-how useful and how well
 Accountability-willingly accepting responsibility for your actions

27. Cooperatives values defined
 Self-help – on the one hand it refers to the individual person “self” and on the
other, it refers to the collective “self”;
 Self-help as a value obligates/encourages the individual person to satisfy his/ own
needs and obligation through personal effort
 Self-responsibility – Cooperative ideology is based on the idea that each
individual is individually responsible within the group
 Democracy is a practice of governance in which the people are collectively the
repository of authority
 The exercise of that authority is democratically legitimate only if the people who
will be affected by that exercise are consulted openly;
 Free and open discussion, deliberation and consultation are essential to
preconditions to elections as democratic elements

28. Cooperative values defined contd.
 Equality – each member should benefit from the same rights based on their level
of contribution
 Equity- all members should be treated fairly without any form of discrimination;
equity is essential to create a harmonious relationships among members;
 Solidarity refers to the respect and dignity with which individual persons of a
community relate to one another; members form a unified organisation where each
member support one another.
 A relationship that grows out of each person seeing the other as valuable as the
self:
 It encompasses the concept of interdependency
 Community is an important product of solidarity

29. Cooperative Principles defined
 Open and Voluntary Membership- A Cooperative is open to all people who can
use its services and willing to accept the responsibilities of membership regardless
of race, religion, gender or economic circumstances
 Democratic Member Control – Cooperatives are democratic organisations
controlled by their members, who actively participate in setting policies and
making decisions;
 Members’ Economic Participation- members contribute and benefit equitably to,
democratically control, the capital of their cooperative.
 Part of that capital remains the common property of the cooperative;
 Surpluses are allocated to develop a cooperative, setting up reserves and support
other activities approved by membership

30. Cooperative principles defined contd.
 Autonomy and independence- cooperatives are autonomous, self-help
organisations controlled by their members;
 They keep their unique identity
 Education, training and information- education and training for members,
elected representatives, directors/trustees, CEOs and employees themselves in
order to contribute towards the development of their cooperatives. Non-members
are trained as well
 Cooperation among Cooperatives – working together through local, provincial,
national and international structures, cooperatives improve services, bolster local
economies and deal more effectively with social and community needs, work
together harmoniously to form stable structures and networks.

31. Cooperative principles defined contd.
 Concern for Community – cooperatives work for the sustainable development of
their communities through policies supported by the membership;
 They focus on their internal communities outside the organisation.
 Co-ops source materials from and invest in local suppliers to contribute to the
community’s sustainability;
 They work in collaborative effort, so each co-op must contribute towards the
sustainability of communities

32. Different Forms of Cooperatives
 Primary cooperative – a cooperative that provide employment or services to its
members and facilitate community development
 Secondary cooperative – a cooperative formed by two or more primary
cooperatives come together because they are involved in similar activities and
want to promote their services in the sector in which they are active.
 Tertiary cooperative –are formed by two or more operational secondary
cooperatives come together to promote the interests of their members to
government bodies, the private sector and other stakeholders.
 National Apex (3 national or 5 provincial, district or local tertiary cooperatives)
engaging state organs, private sector

33. Subcategories of Primary Co-operatives based
on annual revenue or projected annual revenue
 Category A1 (very small co-op): less than R1million
 Category A2 (small) at least R1 million but less than R10 million
 Category B (small to medium primary): R10 -25 million
 Category C (medium to large primary): R25 million or more

34. Functions of a national apex cooperative
 May establish relations with other cooperative organisations at national and
international level; may perform the ff:
 Provide professional advice to its members;
 Establish a guarantee fund to be used by its members in order to acquire funds to
carry out economic activities;
 Set up a solidarity fund, that may be used as capital by its members in times of
financial distress;
 To assist its members to improve their effectiveness, efficiency and sustainability;
 Conduct and participate in awareness campaigns

35. Types of Cooperatives
 Retail cooperative – these coops which help create retail stores to benefit the
consumers making the retail “our store”
 Worker cooperatives – is a cooperative owned and operated by their employees
 Producer cooperatives – are owned by people who produce the same type of
goods e.g farmers assemble farm produce to be sold in local markets
 Service cooperatives – these are types of services that include finance, utility,
insurance, housing and health care cooperatives
 Housing cooperatives – is a legal entity usually a cooperative which owns real
estate, consisting of one or more residential buildings

36. Types of cooperatives contd,
 Social Cooperative –it is a non-profit cooperative which engages in the provision
of social services to its members, such as care for the elderly, children and the sick
 A juristic person is a person who is elected by members to represent persons in
meetings of cooperatives
 A natural person is an ordinary person who joins a cooperative with the aim of
receiving benefits at the end of the year

37. Co-operatives registration trends in South
Africa
 According to the CIPC register, 19 550 new cooperatives were registered from 2005
to 2009 in various sectors representing a growth rate of 86%
 As at 2009, 43 062 cooperatives spread provincially;
 From 1922 to 2004 new registrants almost quadrupled the number of cooperatives
over the period of 82 years;
 Most of new entrants remain vulnerable and very weak and require high and
sustained levels of support;
 26% Cooperatives were registered in KZN; followed by Gauteng at 20%; Eastern
Cape at 16%; Limpopo at 12%; North West at 7%; Western Cape at 5%; Free State
at 4% and Northern Cape at 2%

38. Co-operatives registration trends in South
Africa contd.
 The increase register is attributed to the availability of support measures and
procurement opportunities for cooperatives in leading provinces;
 KZN registers high levels of performance in terms of new cooperative entrants.
 A strong political commitment from the KZN provincial is noted;
 Each district in the province has a well-structures established a well-resourced
office geared for the promotion of cooperatives;
 An amount of R160 million per annum has been dedicated to cooperatives
development alone;
 Approximately 60% is dedicated to non-financial support and ensure access to
markets

39. Co-operatives registration trends contd.
 Graphs

40. Cooperatives registration trends contd.
 Graphs

41. Cooperatives registration trends contd.
 25% of registered cooperatives are under agricultural sector;
 Services sector stands at 17%
 Multipurpose sector stands at 14%
 Emerging cooperatives are in:
 Manufacturing, mining, construction
 Social, fishing, bakeries, arts and culture
 Medical, environmental, financial and consumer;
 Housing, tourism, transport, food and beverages;
 Agro-processing, clothing and textiles

42. Factors hindering cooperatives progress
 Poverty, unemployment, limited government funding, limited access to ready
markets, lack of expertise, quality of management is weak, lack of monitoring and
evaluation of cooperative projects;
 Strategic factors: strategic planning, less member’s participation, lack of support to
human capital, structural and relational capital;
 Lack of ownership mentality;
 Poor cooperative governance, poor record keeping, lack of leadership succession,
lack of education and training;
 Experiencing institutional problems of poorly defined property rights resulting in
low levels of equity and debt capital
 Reliance of governance funding and governance problems

43. Factors hindering cooperatives progress
 Government challenges – lack of statistics, poor coordination, focus on
development agencies, recognition as a unique business form, access to
registration, lack of finance and limited access to business infrastructure;
 Cooperative Management Challenges –poor management and technical skills,
business skills, financial management, ICT skills, Marketing, limited trust and social
cohesion, low democratic decision making, limited cooperation amongst
cooperatives, putting individual interest above collective interest, and non-
compliance with cooperative legislation
 Market Challenges – lack of assistance to increase their margins, undeveloped
value chain, maintain control of their product to point of sale, secure a reliable and
consistent market for their goods
 Organisational Structure Challenges

44. Factors hindering cooperatives progress
 Organisational Structure Challenges – lack of cooperative associations and
organisations;
 Institutional safeguard for the maintenance of social capital;
 The extent in which people in an organisation are connected to one another and
cooperative patterns between them;
 How job titles, roles, and responsibilities are assigned within a company
 How to help the organisation to achieve its aims and objectives and employees to
complete their work effectively and efficiently
 Lack of understanding the purpose of cooperatives, how it should function and
what their rights are

45. Factors critical for success
 Access to capital – access to capital is essential for any business enterprise;
 Capital needs of Co-Ops are financed through internal sources such as, member share
capital, membership fees and loans;
 Skills development –technical and management skills vital for the growth and
sustainability of cooperatives;
 These skills are provided by specialised training bodies such as SETAs
 Business planning – a strong business plan supports the viability of a cooperative
 Marketing – is needed to eliminate the chain of middlemen operating between
producers and thus the consumer secures the maximum price for their produce
 Capacity Building –training , education, business strategy, marketing needed for
cooperatives institutional capacity building

46. Factors critical for success contd.
 Presence of capable and dedicated leaders;
 When they are built on good governance;
 A clear understanding of purpose;
 Strategic planning, member’s participation;
 Skills, trait, motive, attitude, value and
 Personal characteristics essential to perform the job
 Powerful engagement purpose;
 Committed local sponsors;
 Strong personal connection

47. Cooperatives & their worldwide status
 Brazil – has most cooperatives in the world
 The 2022 Top 300 cooperatives in the world report $2 trillion USD (2.171billion
USD based on 2020 financial data.
 Agriculture & Food Industries (Japan)
 Industry and Utilities (Spain)
 Wholesale and retail Trade (Germany)
 Insurance (Japan)
 Financial Services (France)
 Education, Health & Social work (Brazil)

48. Cooperatives and their world-wide status
contd.
 Data varies because countries do not use similar systems for reporting
 Data is still limited or non existence in other countries;
 Although cooperatives increased at a higher pace but most reports indicate that
88% of the cooperatives have dismally failed

49. What is an Economic System?
 It is defined as a set of customs, laws, rules and regulations dealing with the
production, exchange and consumption of goods and services
 It consists of a set of controls which determine the manner in which the various
resources available are utilised in satisfaction of wants
 Five characteristics of the economic system are:
 Ownership of property
 Initiation of enterprise
 Economic incentives
 Pricing mechanism
 Market competition

50. Five Economic Systems
 Capitalism
 Fascism
 Socialism
 Communism
 Mixed economy

51. Role of Co-operatives in Economic Systems

52. Role of Cooperatives in Economic Systems
contd.

53. Role of Co-operatives in Economic Systems
contd.

54. Forms of Enterprise (Walmart,
Edcon,Amazon
 Sole proprietorship
 General Partnerships
 Limited liability Companies
 Limited partnership
 Business Corporations

55. Forms of Enterprise
 Who owns the business? What is the size of the business? The nature and products
or services, nature of finance also plays an important role in the establishment of
the business. What type of business to be established?
 Amount of capital necessary for the business for the establishment
 The legal requirements involved in the establishment
 The extent in which the owner is responsible for the debt
 The person and the business are inseparable ( a service can not be separated from
the service provider)