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Chapter 8 - Labour Law

Co-operatives

Some workers have decided to form their own businesses. Then the workers themselves decide together on how the business is run and on the wages and working conditions. These businesses are called co-operatives.

What is a co-operative?

A co-operative is a business formed by a group of people which is based on democracy. This means everyone owns the co-operative and everyone participates in the control of the co-operative. The business is owned by its members who buy shares to become members. All the members of the co-operatives have one vote each. Even if a company buys many shares in a co-operative, it still only has one vote, like everyone else.

Members elect three or more directors who manage and control the daily affairs of the co-operative and who are answerable to the members.

There are different kinds of co-operatives, for example producer, consumer, housing and agricultural.

See LAND AND HOUSING, Different kinds of tenure in South Africa

Profits in a co-operative

Although a co-operative is not formed with the aim of making profits, most co-operatives do have a bit of profit to divide up after paying employees and meeting other expenses.

The profits are fairly divided among the members, or the members can decide to use the profits to develop the co-operative (for example buy more tools or get in another member).

Why a co-operative?

In a co-operative there is no boss making money from the workers' work. All the members own the profits.

Co-operatives are a way of creating employment, improving efficiency in work, improving job satisfaction, and encouraging community participation in industrial production. Co-operatives may be the only way for a group of people to survive economically and materially such as the Sarmcol Workers Co-operative in South Africa.

A co-operative is also a way of improving people's skills within the community. It tries to make people more self-reliant by encouraging participation and responsibility by all members of the co-operative.

How is a co-operative democratic?

A co-operative is democratic because:

• it is owned by all its members. The members each make a contribution to the co-operative (for example, part of a few month's wages)
• Management makes decisions together with the members
• Management is accountable to the members
• Members themselves decide how to organise the co-operative, for example what the wages and working hours will be
• Profit and loss is divided among the members.
• A co-operative exists for the benefit of the members and the community
• The co-operative has a social responsibility to see to the continuing education of its members, to work with other co-operatives and to support local community projects.

Why are some co-operatives not successful?

A co-operative needs more than an ordinary private firm needs to keep it going. It must make a profit and it must have people with good managerial and technical skills. But it also needs much greater commitment from the members, because all members have to participate in making important decisions and take responsibility for those decisions.

The other difference between co-operatives and ordinary private firms is that the members of a co-operative cannot only be concerned with making big profits. There is also a 'moral incentive' for being in the co-operative. This is the desire to be part of a democratic business that benefits a whole community. If the 'moral incentive' and members' commitment are lacking, the co-operative will not be a success.

What does the law say about co-operatives?

According to the Co-operatives Act No 91 of 1981, all co-operatives must be registered with the Registrar of Co-operatives.