The co-operative as an appropriate enterprise for black economic empowerment

• Published date: 01 January 2006
• DOI: 10.10520/EJC51198
• Author: N.F. Schoeman
• Pages: 23-71
• Date: 01 January 2006

N F Schoeman, Joe Schoeman Attorneys, Bloemfontein.

NF Schoeman

The co-operative as an

appropriate enterprise for

black economic empowerment

1. Introduction

BEE is not a suggestion but rather a moral, social,1and, of course, a

legislative imperative.2BEE is legislatively new and in order for the

transformation movement in South Africa to be successfully implemented

and achieved, practical suggestions for its implementation must be identified

and researched.3Moreover, because of the serious drawback in terms of the

availability of capital, especially in poverty-induced areas needed in order to

exercise entrepreneurship in creating own opportunities and generating

income, a problem arose in the implementation of the empowerment

process in general,4to overcome this lack of resources, government started

to look at specific vehicles that can possibly overcome this obstacle and

successfully implement BEE.5 The co-operative is a unique business

enterprise, unlike other traditional business enterprises;6it has certain

attributes, making it ideal for the implementation of the requirements set by

1 Osode 2004: 107.

2 Woolley 2005:16.

3 The B-B BEE Act was promulgated in 2004 while the first and second phase

of the codes of good practice was issued in November- and December 2005,

making BEE's implementation in terms of regulatory measures strange and

new.

4 The objective of BEE is to be of general or broad based application and not

merely to advance a select few.

5 Department of Trade and Industry:South Africa's Economic Transformation: a

Strategy for Broad- Based Black Economic Empowerment: http://www.

dti.gov.za/bee/bee.htm:accessed 16 August 2005.

6 For example, public and private companies.

the B-B BEE Act7and government’s BEE strategy.8BEE is about providing

access to participation in the economic mainstream through a wide range of

persons, including those that coincide with the designated groups,9falling

within the ambit of its application on a wide range of socio-economic

activities extending to ownership,10 employment,11community development12

and both internal and external procurement schemes.13 It is thus of cardinal

importance that the co-operative specifically, as a vehicle of practical

implementation of the B-B BEE Act,14 be examined.

Inferring the co-operative worthy of research is further strengthened by

the definition of co-operatives included in the “Broad Based Black Economic

Empowerment Strategy”:15

Autonomous associations of persons who voluntarily join together

to meet their economic, social and cultural needs and aspirations

through the formation of a jointly owned enterprise and

democratically owned enterprise.16

24

Journal for Estate Planning Law 2006(1)

7 Act 53/2003.

8 This includes all BEE strategy documentation as well as the Codes of Good

Practice and BEE sectorial charters. Refer to Department of Trade and

Industry: South Africa's Economic Transformation: a Strategy for Broad-Based

Black Economic Empowerment: http://www.dti.gov.za/bee/bee.htm:accessed

16 August 2005, Department of Trade and Industry 2005: http://www.

thedti.gov.za/bee/2ndphase.htm:accessed 28 June 2006 and Department of

Trade and Industry 2005:http://www.thedti.gov.za/bee/2codesofgoodpractice2005.htm:

accessed 28 June 2006.

9 Designated groups refers to black people, women and people with disabilities

hereafter, refer to Act 55/1998:sec 1.

10 Refer to paragraph 4.1.1.1 below.

11 Refer to paragraph 4.1.1.2, 4.1.2.1 and 4.1.2.2 below.

12 Refer to paragraph 4.1.3.1 below.

13 Refer to paragraph 4.1.2.4 and 4.1.2.3 below.Internal procurement strategies

refers to the co-operative procuring its own BEE compliant members in

delivering goods or services to the co-operative, while eternal procurement

strategies refers to the co-operative procuring other BEE compliant

enterprises to provide goods or services to the co-operative.

14 Act 53/2003.

15 Broad Based Black Economic Empowerment Strategy 2001.

16 Department of Trade and Industry:South Africa's Economic Transformation: a

Strategy for Broad-Based Black Economic Empowerment: http://www.dti.

gov.za/bee/bee.htm:accessed 16 August 2005.

According to the Co-operatives Act of 2005,17 co-operatives have much

potential on both SMME — and large corporate scale,18 for both social and

economic upliftment of people.19 Furthermore, they aim to incorporate and

align SMME policies,20 strategies and support programmes specifically for

co-operative entrepreneurship21 as illustrated in the 2003 South African

governmental publication of, “The growth and development summit

agreement” which stated that the co-operative is an important vehicle to:22

• “Create and develop income generating activities and sustainable,

decent employment,

• develop human resource capacities,

• increase savings and investment,

• improve social and economic well-being,

• establish and expand a viable and dynamic distinctive sector of the

economy, which includes co-operatives, that responds to the social and

economic needs of the community.”

On government department level, co-operatives have been described as

being very accessible and attractive enterprises that draw people into

productive activity.23The DTI have further also committed themselves to

ensure that co-operatives are developed and promoted in that they:

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Schoeman / The co-operative as an appropriate enterprise for BEE

17 Act 14/2005.

18 Primary co-operatives can only have natural persons as members, while

secondary- and tertiary co-operatives have juristic persons as members. Act

14/2005: sec 1 and refer to Harms 2006:repor t submitted to author.Pretoria.

19 Refer to paragraph 2.7 below for a detailed discussion on the co-operative's

social and economic function, i.e. its dual function.

20 Refer to Code 1000, statement 1000 - 1700 of the Codes of Good Practice

second phase executive summary at http://www.thedti.gov.za/bee/2ndphase.htm:

accessed 28 June 2006.

21 Department of Trade and Industry 2006:vii.

22 Government of the Republic of South Africa 2003: 71 and Government of the

Republic of South Africa 2005: http://www.info.gov.za/speeches/2005/

05031415151001.htm: accessed 7 June 2006.

23 Department of Trade and Industry:South Africa's Economic Transformation: a

Strategy for Broad-Based Black Economic Empowerment: http://www.

dti.gov.za/bee/bee.htm:accessed 16 August 2005.