August 17, 2022

Sacco Review|The Leading Newspaper for Co-operative Movement in Kenya

The Leading Newspaper for Co-operative Movement in Kenya

Cooperative autonomy, identity vital for Sacco’s survival

Fred Sitati, Consultant in the Co-operative Movement

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By Fred Sitati

One basic characteristic that distinguishes companies from cooperatives is that companies are associations of capital while cooperatives are associations of persons.

Additionally, while companies strive to maximize profits for their shareholders, the same cannot be said of primary cooperatives that are voluntary self-help organizations that aim to solve members’ socio-economic and cultural needs.

At the end of each financial year, members divide the surplus, if any, based on their level of patronage or investment in the cooperatives. 

There are other distinctions between the two formations but the common denominator is that both companies and cooperatives are body corporates or legal persons, hence enjoy similar privileges granted by the respective Acts of Parliament under which they are created.

Yet scant details reveal that trading of cooperative shares was approved by one government to have cooperatives contribute to that nation’s economy.

It raises some fundamental questions on how share capital in our cooperatives is treated relative to the objectives for which they are registered. 

From the legal standpoint, every member is obligated to purchase a minimum number of shares as per the society by-laws and the limit is capped at 20 percent for a single member.

Shares in a cooperative represent co-ownership and the same is not refundable upon cessation of membership, but is only transferable within the membership of any given cooperative.

The share capital so raised is intended to further the cooperatives’ objectives as stipulated in the registered by-laws.

While that is the legal position, a closer look at many cooperatives reveals that the amount represented as share capital is so insignificant that it effectively renders them superficially body corporates.

One of the takeaways from the impact of Covid-19 was the fact that many cooperatives were founded on very weak capital bases.

The position is, however, different in Saccos regulated by SASRA given the stringent compliance requirements they must fulfill before being licensed to receive deposits from their members.

The poor capitalization of cooperatives was among the issues deliberated on during the World Cooperative Congress held last December in Seoul, South Korea, where it was generally agreed that cooperatives can only provide quality and competitive goods and services if they are properly capitalized.

So, is the proposed trading of cooperative shares a necessary innovation or undermines the very cooperative identity as reaffirmed by that congress whose theme was deliberately “Deepening Cooperative Identity”?

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Maybe the question would be whether such an innovation is our priority at this point in time.

Kenya’s economy is predominately agricultural and therefore it makes little sense to introduce ‘complex’ secondary economic activities while our core agro-based cooperatives are largely moribund.

For example, due to the fisheries cooperatives’ lacklustre performance, fishermen are today a mere source of cheap labour since they neither own seaworthy boats nor own modern fishing gear.

Consequently, the lucrative deep sea fishing is the domain of foreign semi-industrial or industrial fishermen.

Parliament enacted The Fisheries Management and Development Act, 2016 to introduce controls in the access to the marine resources in order to conserve it for posterity.

However, it has taken six years before regulations are formulated to operationalize the said Act.

Only Kenyan citizens and companies incorporated in Kenya appear in the regulations as the two categories of persons who qualify to be issued with fishing rights under the category of semi and industrial fishers.

In terms of cooperative identity, the media gives the impression that cooperatives are appendages of government, which should not be the case. 

Much as there is need for partnerships between governments and the cooperative, the role of governments should be limited to creating a conducive environment for cooperatives to thrive. 

Members should have a free hand to decide on their priorities of investment. 

It is apparent that the rather indifferent attitude of stakeholders towards preparing cooperatives to survive under the current constitutional dispensation could be very detrimental to the sector in the fullness of time.

Let us have our priorities right so that our cooperative sector returns to the vibrancy of the 80s and 90s, as cooperatives jealously safeguard their identity.