Mooted SME and co-operatives mega-agency all but guarantees co-operative failure
It seems that plans for a dedicated development agency for co-operatives are going to be scrapped, pending a legislative amendment, in favour of creating a mega-agency for SMEs and co-operatives. This is a mistake that will all but guarantee failure for co-operatives. In this post published first on my LinkedIn, I explain why.
Recent proceedings in Parliament make clear that South Africa is unlikely to establish a dedicated national Co-operative Development Agency (CDA), proposed initially in 2011 in response to reports of high failure rates among co-operatives. The people in the Department of Trade and Industry who’d proposed creating the CDA had consulted widely and done an impressive amount of due diligence to make a case for a standalone agency dedicated to co-operatives, owing to the unique nature of our self-help enterprises.
But now it seems the CDA will be relegated to being a division in a new SME and co-operative development mega-agency, which will be created from the merger of existing agencies (the Small Enterprise Development Agency, the Small Enterprise Finance Agency and the Co-operative Banks Development Agency). The new mega-agency will consolidate and continue activities these agencies have been doing, including supporting co-operative activities that reduce poverty and inequality and create jobs through selling goods and services to members, the public and private sectors, and the general public — all for the betterment of the co-operative’s members and society.
To explain why this outcome is not only unfortunate but also guarantees continued co-operative failure, I need to delve into a bit of theory to explain why co-operatives aren’t simply another form of small business or even merely a form of social enterprise — as we have been treated in South Africa.
An alternative cultural and governance paradigm
Like other forms of business, co-operatives pursue financial goals. Our enterprises also pursue social change and environmental goals, like social enterprises do.
But, quite unlike any other organisational form, co-operatives are also designed to allow us, co-operative members, to organise our lives and work under an alternative cultural and governance paradigm, too.
This design feature — an indispensable element of the co-operative model — originates in the values and principles that define the co-operative identity. The values and principles allow co-operatives members to move away from the dominant culture in western and westernised societies like South Africa of individual ownership and wealth accumulation in favour of joint ownership and equitable economic participation — predicated on growing the capacities of members to participate through education, training and skills development. They also allow co-operatives to ditch dominant governance practices in traditional enterprises whereby the number of shares held determines how many votes and therefore decision-making power a shareholder gets. Decision-making in a co-operative works by the principle of one member, one vote.
That the values and principles have potential to enable all of this is why compliance with them is a legal requirement in South Africa. They aren’t perfect, of course. But, my research has led me to conclude they represent a good, good-faith attempt to create a compass that points to a future where we all could be more free from oppression and exploitation. It’s on us co-operative members to continue the work to develop them further to meet our common needs — which I hope to do in an upcoming study, which I encourage all co-operatives in South Africa to join, ahead of the 33rd World Co-operative Congress in Seoul, Korea, at the end of this year, organised around the theme of deepening our co-operative identity.
Guaranteeing failure
So, co-operatives are business, and also social enterprises, and also post-capitalist projects. It’s not enough for a co-operative to pursue any one of these three sets of goals in isolation. Our enterprises need to pursue them all, navigating the contradictions and tensions between them while also resisting internal and external pressures to abandon one in favour of another. Invariably, because co-operatives in western and westernised societies like South Africa operate in capitalist, market-oriented economies, the pressure to prioritise financial goals above the other two is immense and is often set up by members, governments and other providers of capital alike to seem like the only goal worth pursuing.
However, as Kate Philip notes in a recent book based on her PhD thesis, pursuing financial goals alone might allow a co-operative to succeed as a business, but it guarantees failure as a social and post-capitalist project. This failure is called ‘degeneration’ and is specific to co-operatives, as values-based, principles-driven enterprises by design rather than afterthought, as many corporations are trying (and failing) to be through inserting non-financial capitals into their business models or considering broader social, environmental and economic measures of performance. Once a co-operative elevates financial goals above social and post-capitalist goals, it stops being a co-operative and becomes like any other enterprise.
So, an agency dedicated to preventing co-operative failures needs to run support programmes that allow co-operatives to perform the difficult task of pursuing all three sets of goals. It needs to be set up to support us to both succeed as businesses and also resist degeneration, which no generic enterprise development programme can do.
Unfortunately, programmes for co-operatives in existing agencies, which are to be rolled up into a co-operative development unit in the mooted SME and co-operatives mega-agency, focus singularly on financial goals. They treat co-operatives no differently to other small businesses, as defined in the national small business act. In their single-minded focus on having co-operatives create business plans, feasibility studies and itemised budgets that prove the potential of the enterprise grow financially, create jobs and contribute to economic growth, they create conditions for the co-operative-specific failure of degeneration.
Not too late to change course
The dire state of the country’s public finances seems to be what drove the decision to abandon plans to create an agency dedicated to co-operatives. My review of proceedings in Parliament also revealed feelings ranging from disinterest to hostility towards co-operatives and the concept of a dedicated co-operatives agency from some members of the Portfolio Committee on Small Business Development.
But, before the CDA can be scrapped and collapsed into an SME and co-operatives mega-agency, the committee will need to amend existing legislation, which is set to happen once the current (and controversial) process to amend the small business act is complete. It will require a public participation process, creating a chance for us, co-operatives, to make a case for why we need an agency that caters to our unique and specific needs. If the government is to play a role in the development of our enterprises, that role should be to create dedicated support programmes that allow us to pursue our financial, social and post-capitalist goals, as directed by our members. Otherwise, and I do not say this lightly, it might be better if they didn’t bother at all.
