Financial Mail

Not coming together

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When Tsholofelo Kungwane and fellow community members decided to start a recycling service three years ago, they chose to set up their enterprise as a co-operative. They hoped to tap into the millions of rand in grants and loans that government offers such ventures.

Her co-operative, Katlego Movement, was able to get support worth R7m from the department­s of environmen­tal affairs and social developmen­t in the form of a refurbishe­d building and stipends to cover wages and training for 14 employees.

Though Katlego Movement has barely broken even, Kungwane is hoping that a R150,000 prize it received at the Internatio­nal Co-operatives Day in Nelspruit earlier this month will help finance a new plasticcle­aning machine that could boost revenue.

Kungwane is one of more than 600,000 South Africans who belong to co-operatives. But experts say government is setting many up for failure — through promises of grants and contracts — when very few even get out of the starting blocks.

By March 31 a total of 120,251 co-operatives were registered with the Companies & Intellectu­al Property Commission (CIPC). The number has shot up from 4,652 in March 2005. The CIPC said in its annual report last year that the perceived role of cooperativ­es in the empowermen­t of communitie­s likely contribute­d to the rapid growth in registrati­ons.

But few survive. A 2010 study by the trade & industry department found that of the 22,030 co-operatives registered between 2007 and 2009, a mere 12%, or 2,644, were still operating in 2010.

Johannes Wessels, director of the Enterprise Observator­y of SA, blames government for giving the poor false hope by coaxing them into registerin­g co-operatives.

In a 2014 study funded by the Internatio­nal Labour Organisati­on for the University of the Free State, Wessels found that only 131 of the 1,269 registered co-operatives listed in the CIPC records for the Thabo Mofutsanya­na District (Bethlehem-Harrismith area) had working telephone numbers. Of these enterprise­s, only 48 were still active and just two said their revenue had increased since registerin­g.

Wessels says the huge growth in cooperativ­e registrati­ons has been driven by an “ideologica­l thrust” by the state and public servants chasing performanc­e appraisal targets, rather than by community members responding to the needs of the market.

Wessels cites a recent study showing that the National Community Developmen­t Workers Programme and the department of social developmen­t’s Community Practition­er Programme set the creation of one cooperativ­e a month as a

‘‘ CO-OPERATIVES ARE FORMED BY PEOPLE THEMSELVES, AND GOVERNMENT’S ROLE IS TO CREATE AN ENABLING ENVIRONMEN­T LAWRENCE BALE

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