A cooperative is a registered formal business entity in South Africa with key differences from other types of businesses.
Groups of people who share a common interest in the enterprise establish cooperatives. Cooperative members are not shareholders; they are owners of the cooperative. Ownership means that you have a say in how your business is run, and also control over its direction and development. There is no board of directors as there would be in a conventional company; each member has an equal say on all matters affecting the business.
Cooperatives are legally recognised as a distinct form of business enterprise and are required to register with a statutory institution (Co-operatives Banks Development Agency) under the Co-operatives Act, 2005. The registration process requires you to submit certain documents, which include:
- A copy of your Memorandum and Articles of Association
- A list of members showing their membership number, address, occupation and signature (if the member is an individual). If the member is not an individual, then a way of the affidavit must confirm this from an authorised person such as a director or secretary. The affidavit must also state that all information provided is true and correct.
What is a cooperative?
A cooperative is an association of persons who have voluntarily joined to achieve a common economic end through the formation of a democratically controlled business organisation. The Co-operatives Act defines a cooperative as an association of persons who have voluntarily joined to achieve a common economic end through the formation of a democratically controlled business organisation. We may define a cooperative 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 business.” A cooperative enterprise differs from other forms of enterprise by supporting member service values such as equality, inclusivity, sharing, mutual benefit and self-help.
What is the difference between cooperatives and other forms of businesses?
The difference between cooperatives and other forms of businesses is that profits are distributed based on members’ participation in the business, not simply by how much capital they have invested.
A cooperative member could be someone who has invested lots of money into their cooperative, but they might also be a member who works long hours without pay, or even someone who contributes to the business by volunteering their skills. In this way, cooperatives tend to have more democratic decision-making processes than traditional businesses do.
We can see this as a strength: It means that people who work in your business will feel more invested in its success because you reward them for their participation instead of being seen as just “employees” or “workers.
What is the purpose of cooperatives?
The purpose of cooperatives is usually stated to meet member needs or serve the community. For example, a cooperative might state its purpose as: “The purpose of this cooperative is to meet the needs of members and to serve the local community.” This means that your cooperative has two main goals—to help members by providing them with goods or services that they need, and to provide goods and services that benefit the wider community.
A cooperative is a registered formal business entity in South Africa with key differences from other types of businesses.
Unlike other forms of enterprise, cooperatives are not part of the informal sector. This means that you cannot consider them as small-scale or micro enterprises (MSEs), which refer to unincorporated businesses with an annual turnover below R1 million per annum. Cooperatives are required to register with a statutory institution, such as the Registrar of Cooperatives and Credit Societies. They are legally recognised as a distinct form of business enterprise.
Conclusion
This post has given you an overview of what cooperatives are and how they differ from other businesses. We hope that this information will help you if you’re looking to start one yourself or just want to learn more about them.
