Co-operatives on rise, but beware bogus initiatives

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South Africa appears to be witnessing a surge in the growth of co-operatives. In this regard, only 1 444 were registered in the 72-year period between 1922 and 1994, yet the Companies and Intellectual Property Commission is now registering more than this number a month.

Indeed, the Registrar of Co-operatives reflected a little more than 20 000 total registered as at 2009, but by 2012 and last year, more than 20 000 new co-operatives were being registered each year.

What are some of the thoughts of the South African labour movement on this growth in the co-operative sector?

Many progressive unions have an ideological and practical interest in co-operatives. After all, progressive trade unions and co-operatives share many values and methods, including being member-driven organisations, guided by democratic processes, and being rooted in the working class and working-class concerns.

One of the most attractive ideological features of co-operatives is the centrality of democracy in their internal processes: everyone who is a member of a co-operative has the power to play an active role in setting policies and making decisions.

Members are equal (one member, one vote) regardless of whether different members have contributed differently to the capital requirements of the co-operative, and regardless of the kind of work each member performs.

For these reasons and others, progressive unions consider co-operatives to be attractive alternatives to the standardised, hierarchical employment structure of regular enterprises. We also consider them to be our fraternal partners in the broader struggle for a different and better economy, and for socialising and transforming the ownership structure of the economy.

While some critics have disparagingly suggested that unions are threatened that co-operatives will negatively affect membership, many serious labour activists believe that partnerships with co-operatives may offer interesting membership opportunities.

For we recognise that there is nothing that necessarily prevents members of co-operatives from becoming members or affiliate members of a trade union.

Co-operative members may not be compelled to join unions to give them power against their employers (since they are self-employed), but motivation to join may come from the desire for solidarity, or to benefit from the experienced and extensive organising platform which unions offer, as well as increasing labour expertise in co-operatives in industrial management support.

Furthermore, co-operative members may want to access union benefits, such as health care, funeral benefits, and educational programmes, among other things. Yet while we support co-operatives, we also hold some concerns about some of the trends we believe we have observed in the co-operative sector.

First, we are not convinced that the current surge in new co-operatives signals the arrival of a genuine and sustainable co-operative movement in South Africa, particularly one that is well rooted in the ethos and principles of co-operatives.

Is it possible to adequately train such large numbers of co-operatives in the skills needed to run businesses and the democratic practices needed to sustain co-operatives so quickly – particularly when training capacity is poorly developed in South Africa at present? Probably not.

It is our experience (shared with many others) that many of these co-operatives are simply the products of opportunism: either from consultants who have identified the creation of co-operatives as a lucrative new market for a quick buck; or from municipal local economic development departments, which are rushing to implement co-operatives from the top-down without providing longer-term support; or from co-operative members themselves who are after the immediate gratification of accessing particular government-grant funding and tenders, and do not intend to be sustainable.

Second, while we are keen to see workers owning the economy, we recognise that they already occupy a place in the economy in the formal sector.

So what might be the impact of a growing co-operative sector on the formal sector? We do not expect that self-employed co-operative workers will subject themselves to sweatshop conditions, but it is not inconceivable that some co-operatives may elect to compete in the market with race-to-the-bottom like strategies.

After all, the pressures of globalisation demand that local enterprises must not simply be cheaper than the enterprise next door, they must also compete with ones in neighbouring countries and continents. Hence, there will be substantial pressure on co-operative workers to consider lowering their own incomes below the minimum wage, or extending their hours of work, in order to win orders. This is another reason for unions to consider organising among co-operatives.

It is also a reason that we are concerned that government’s strategy to grow co-operatives should include a plan to develop new markets (instead of simply penetrating existing ones). If not, the realities of competition could simply lead to a jobs trade-off in oversubscribed markets: where workers in co-operatives are pitted against workers in the formal sector.

Not only might job losses occur, but state financial and other resources used to combat unemployment would be wasted (since the state’s industrial policy programmes for formal industry would come into conflict with its enterprise development programmes).

Our third major concern relates to bogus co-operatives. These are set up by employers with the explicit aim of avoiding labour legislation. They have exploited a legal loophole that since co-operative members are self-employed, the wages and working conditions of co-operatives are matters for self-determination.

Bogus co-operatives are formed when workers are coerced by their employers or managers to sign on as members of co-operatives, or otherwise lose their jobs. Yet the enterprises that workers join have none of the substantive features or practices of a co-operative.

Democracy is absent and workers’ powers are non-existent or, at best, superficial.

The de facto employer/s controls all decisions about working processes, wage levels and conditions of work. We even know of instances in which workers who are supposedly co-operative members have been unilaterally disciplined and fired by the de facto employer.

The trick of setting up a bogus co-operative allows employers to avoid minimum wages and conditions of work. In many instances, when workers become part of bogus co-operatives, their wages decrease and they lose the benefits to which they were entitled while under formal employment.

Many thousands of clothing workers now work in bogus co-operatives in KwaZulu-Natal. It is particularly a problem in Durban and Newcastle, and some of the stalwarts of non-compliance have even decided to reinvent their companies as bogus co-operatives.

Obviously, the existence of these bogus co-operatives puts enormous strain on compliant formal enterprises.

The loopholes which allow for bogus co-operatives have now been addressed in amendments to the Co-operatives Act.

To this end, labour legislation will apply to all worker co-operatives which meet particular criteria, unless they receive an exemption. The modalities of the exemption are presently under consideration by the government.

Nevertheless, we have seen how the co-operatives are often different from the ideal: that instead of being vehicles which advance sustainable collective ownership of the economy, they have been used for shallow opportunistic purposes.

This opportunism is unlikely to disappear simply because one of the loopholes has now been closed. This is why, while we continue to explore relationships with individual co-operatives, we remain circumspect about the proliferation of co-operatives across South Africa.

Our counsel to those who would rush the implementation of “unfettered” co-operative rights is to tread with caution, since if the concerns we have raised are not addressed properly, co-operatives may be used to attack, instead of advance, the national consensus to promote a culture of decent work.

* Sipho Chris Gina is deputy general secretary of the Southern African Clothing and Textile Workers Union.


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