Co-operatives Act, 2005 (Act No. 14 of 2005) Regulations Principles of Good Governance for Co-operatives 2. Co-operative Identity

 

It is important to differentiate the identity of a co-operative from that of its corporate partners. The most important difference is that co-operatives are owned and controlled by members and not by external shareholders. As a result they maintain a different approach to the philosophy, structure, ownership, governance, investment and benefit sharing within the business entity, i.e. the co-operative.

 

Co-operatives are established by members with a common bond. This common bond is the services or benefits the co-operative offers to its members at competitive prices and the organisation they as members own and share is a business entity based on democratic principles. The main purpose is shared services or benefits. Member profits are an indirect result of benefits gained through shared services. The profitability of members as a result of the competitive services delivered by the co-operative guarantees the relevance of the co-operative, ensures sustainability and enables social responsibility.

 

Co-operatives emerge when important services are not available, or where economies of scale are too small to be economically viable as individual business entrepreneurs or where important community needs are not being met. It is thus the needs of the community that are the most important, with profit generation being a secondary concern. The existence of co-operatives is driven by both social and economic concerns. The priority of a co-operative is to serve the needs of its members and to improve the quality of life of its members. To be successful and be able to grow, co-operatives must, however, be financially robust and well managed just like any other type of enterprise.

 

The following table highlights the key elements that differentiate the identity of a co-operative from its corporate partners:

 

 

The International Co-operative Alliance (ICA) blue print for a co-operative decade, January 2013, gives emphasis to 5 interlinked topics that make co-operatives to do business better and brings a more effective balance to the global economy than the dominance of companies. The 5 topics are participation, sustainability, identity, legal framework and capital and are explained as follows:

(e)        Access to secure reliable capital is important whilst guaranteeing member control.

 

The 5 topics are interlinked and overlapping and are important to ensure the viability and future of co-operatives to promote sustainability and public interest rather than private interests.

 

Source: ICA Blue Print for co-operative Decade

 

 

The Co-operatives Act, 2005, as amended through the Co-operatives Amendment Act, 2013, defines a co-operative as 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 organised and operated on co-operative principles. This definition for a co-operative is aligned with the internationally accepted definition for a co-operative as adopted by the International Co-operative Alliance (ICA).

 

Co-operatives are thus businesses that are owned and democratically controlled by their members based on the co-operative values and principles. The board of directors is accountable to the members and mangers are accountable to the board of directors. The board of directors is responsible to ensure the economic viability and effective management of the co-operative whilst at the same time ensuring that the co-operative serves the needs of its members.

 

 

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity; and co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

 

 

Co-operative principles are guidelines by which co-operatives put their values into practice. All co-operative members and their boards should act in accordance to the following seven cooperative principles:—

 

Principle 1: Voluntary and open membership

 

Co-operatives are voluntary organisations and should be open to all persons able to use their services and willing to accept the responsibility of membership, without gender, social, racial, political, or religious discrimination. (Persons can join or leave the co-operative)

 

Principle 2: Democratic member control

 

Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. (Because you have an equal say in what happens, you have the right to listen and communicate openly and honestly – your voice will be heard)

 

Principle 3: Member economic participation

 

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership of the co-operative. (Members provide capital and are part of decision making)

 

Principle 4: Autonomy and independence

 

Co-operatives are autonomous self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy. (Together you are autonomous – co-operative members work together and help each other to achieve their goals)

 

Principle 5: Education, training and information

 

Co-operatives provide education and training to their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation. (Co-operative members develop themselves, they learn from each other)

 

Principle 6: Co-operation among co-operatives

 

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional, and international structures. (Through co-operation you can be more successful if you co-operate – co-operatives look for opportunities to co-operate with others)

 

Principle 7: Concern for community

 

Co-operatives work for the sustainable development of their communities through policies approved by their members. (As you succeed you can do something for your community)