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Co-operatives in South Africa: their role in job creation and poverty reduction

By Kate Philip
Contact: k-philip@dfid.gov.uk

For the South African Foundation

October 2003

Posted with permission of the author, Kate Philip.
This analysis was commissioned by the South African Foundation who have agreed to its further dissemination via SARPN.
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Executive summary

The Presidential Growth and Development Summit, held in July 2003, endorsed special measures to support co-operatives as part of strategies for job creation in the South African economy. Responsibility for co-operatives in government has been transferred from the Department of Agriculture to the Department of Trade and Industry, where a Co-operative Enterprise Development Division has now been established. A Co-operatives Bill, due to be passed into law in 2004, is currently under final discussion.

Against the backdrop of renewed interest in co-ops in South Africa, this paper provides a background to the issues: to the co-op principles, to the different forms of co-op that have emerged around the world, to key debates and challenges in the co-op movement, and to the track record of various forms of co-op internationally and in South Africa.

A conceptual distinction is highlighted between worker co-ops, in which workers in an enterprise own and control the co-op, and user-owned co-ops, in which the members are users of the services of the co-op, without any necessary employment relationship within the enterprise - such as co-op banks, consumer co-ops, or marketing co-ops.

The paper provides case studies of the Mondragon Co-operative in Spain, the Italian Legacoop, forms of worker-ownership emerging in response to privatization in China, and the case of popular mobilization for co-op development in Kerala State, in India: before turning to the South African experience.

In South Africa, with the exception of the large agricultural marketing, input supply and processing co-ops, the co-op movement remains underdeveloped. The current status of worker co-ops, financial services co-ops, housing co-ops and others is described, before turning to explore lessons from the 1980’s and early 1990’s, when there was a similar push for co-op development as is now reflected in the GDS process.

In the South African debate, the focus has been on worker co-ops, which have been seen as a vehicle for job creation, and as providing a democratic alternative to conventional forms of work. User co-ops have attracted less interest. The paper argues for a fresh look at the role and development potential of different kinds of co-op in the South African context, and in particular, for a shift in focus to user co-ops.

Worker co-ops are a complex and specialised form of enterprise, requiring high levels of internal skill or external technical support to succeed, placing real constraints on their potential as a vehicle for mass job creation. By contrast, the paper argues that the forms of economic co-operation characteristic of user co-ops are better able to mobilize wide participation, and can reduce costs, enhance incomes, and improve the viability of business activities, across the spectrum of formal and informal enterprise activities. As a result, user co-ops hold out significant potential to contribute to the reduction of poverty, to empowerment, to job creation and to enhanced forms of social mobilization to achieve these ends.



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