Enterprise development – Facts about Co-operatives
Co-operatives – an emerging business model amongst co-operators
Historic evolvement of Co-operatives
Co-operatives movement started in the early 1960s when farmers in Eastern Europe and African communities saw
the power of pulling resources together towards the attainment of common objectives that could otherwise be
difficult for an individual to attain alone.
Socio –economic needs
Societal needs are characterised by socio-economic needs that requires collectivism in dealing with those
needs and it is on this background that co-operatives movement gained momentum based on the success of this
collectivism. Proponents of co-operatives movement universally agreed that the model works well across all
the functioning of the society when governance in co-operatives is based on sound principles. Universally
co-operatives thrive on the following seven principles.
• Jointly owned and democratically controlled
• Voluntary and open membership
• Autonomy and independence
• Education, training and information
• Concern for community
• Members economic participation
• Corporation amongst co-operatives
Business Modelled Co-operatives
Co-operatives have evolved to become sound business establishments globally modelled on the above principles.
Like any other business co-operatives are subject to the market conditions that determine success and failures
depending on their ability to read market forces and take correct decisions. Like any business entity they
become sustainable, they collapse, they learn business trade in the industry where they operate and become
multinational or remain small market players.
African business Model
Termed Letšema, co-operation amongst community members were predominant during harvesting seasons amongst
African communities. The collective effort of ploughing and harvesting together ensures that work that could
take a few days, week and even months depending on the size of the work at hand. These business model would
therefore safe time and ensure that sufficient harvest is brought home for consumption over long term periods.
South Africa and Co-operatives
In most developing countries such as Kenya, India and Malawi, co-operatives are very popular to an extend that
almost all members of the society belong to some form of co-operatives. In South Africa, co-operatives also
started some years ago with farmers and farming companies dominating the business model in a value chain structures
that created jobs and wealth for owners. The success of these co-operatives, as empirical evidence shows, lies in
the principles underlying their formations. The government realizing the potential of co-operatives business
model promulgated several legislations that culminated in the National Co-operatives Act N0. 14 of 1995, which
established grant instruments for co-operatives business development in the country with a view to creating
employment and economic activities at the local level of the South African communities. Leveraging on natural
resources to create economic activities is at the core of the programme and that gave communities a lifeline
in establishing businesses on this model
Dti and other business development Agencies
The Department of Trade and Industry, the core department responsible for industrial development through provincial
departments of economic development, spearheaded the development and promotion of the co-operatives business model in
South Africa. The idea is to provide the framework for rural and urban communities to participate in the economic
processes at the local level of the society by encouraging other state departments, private sector and consumers
in general to support co-operatives businesses in order for them to be sustainable. Like any other businesses
co-operatives need business management support programmes to be sustainable especially during the first critical years of establishment.
LIBSA and Co-operatives development in Limpopo Province
As the provincial entity responsible for SMMEs and Co-operatives development, LIBSA has critical roles to play in
providing business development support to funded and non-funded co-operatives in the province. Funded co-operatives
are those that accessed grants from LIBSA, LIBSA with other institutions such as District and local municipalities,
LIBSA and National Development Agency etc while non-funded are those that might have started without LIBSA
intervention and later receive an array of business development support services from LIBSA.
What LIBSA does in facilitating co-operatives development
LIBSA does not own any co-operative nor does it have a say in the day to day management of any co-operative but however,
provide awareness, education on the pre-incorporation workshop for members who want to start co-operatives facilitate
registration, assist in the feasibility study on the business concepts, assist to compile the business plan, leverage
funding instrument where necessary and facilitate the implementation in the case of green field business. When a
co-operative is in business LIBSA continues to provide mentoring, counselling and other business advisory services
to co-operatives to ensure their long terms sustainability and growth.
Local economic development in most of the municipalities provides for the funding of co-operatives development and
some community projects and most of these municipalities have co-funded co-operatives businesses in their localities
with LIBSA. In some instances, municipalities have provided funding and requested LIBSA to provide non-financial
support services. This is based on the understanding that co-operatives development is not the responsibility of
LIBSA alone, rather all stakeholders either through funding, procurement and other forms of support.
Co-operatives businesses and the business environment
Co-operatives businesses operate in a business environment, not in a vacuum. They are subject to the brutalities
of the market forces just like any other businesses. They play their trade in the global market space against any
other small, medium, macro and multi-national enterprises, where markets are driven by customer needs and
preferences. They are not immune to entry barriers, and competition and they too, require sound business
management principles and practices. They need to be competitive and efficient. They are businesses that
need cost-cutting financial management strategies that underpin their existence. Over and above the training
programmes that LIBSA continues to provide to co-operatives members, members need to take care of these businesses as theirs.
Co-operatives and community based projects
Most of the co-operatives across the country are facing challenges emanating from misconceptions and minute thinking
that they are projects that have no basis for independence. This misconception, it was found, it is based on the fact
that most of what started as community based projects turned into sound co-operatives businesses. LIBSA embarked on
co-operatives awareness campaign in 2005 in all five districts to disseminate information on co-operatives model of
business and has seen an increase in the number of co-operatives that started out of the campaign and the workshops
that followed during that time. It is the belief of LIBSA and the provincial Department of Economic Development,
Environment and Tourism that, collectively we should embark on other campaigns to focus on the role of LIBSA in the
development and promotion of co-operatives businesses. The campaign will be taken to all district and local
municipalities to engage all stakeholders to formulate a model that will ensure that all spheres of government
have a role to play for the programme to succeed.
National and global research
LIBSA conducts ongoing research nationally to identify opportunities and best practice for management and sustainability of the co-operatives.
Article developed by LIBSA Marketing and Communications Unit