Business Parliamentary Office

An initiative of the South African Chamber of Business

Representing chambers of Commerce and Industry South Africa (Chamsa)


Business Unity South Africa (BUSA)



Cooperative Banks Bill (2007)

Portfolio Committee on Finance

Parliament of the Republic of South Africa

Tuesday, 28th August 2007



1.                   INTRODUCTION

The Business Parliamentary Office (an initiative of the South African Chamber of Business) whose organised business constituency members include the Chambers of Commerce and Industry South Africa (CHAMSA) and Business Unity South Africa (BUSA), thanks Parliament’s Portfolio Committee on Finance for the opportunity to make a submission on the Cooperative Banks Bill (2007).

We welcome the introduction of the Bill as a further progressive step ensuring the continuous improvement of access to a variety of viable banking products and services for the South African nation. Also to appropriately regulate what is currently an unregulated activity.

2.                   CONSIDERATION OF THE BILL

The Cooperative Banks Bill (2007) progressively builds on the existing suite of measures, by government to ensure the creation of an enabling and supportive legislative environment for a vibrant cooperative movement.


Access to sustainable cooperative financial services is an important consideration, in order to fully realise the socio-economic benefits that such a cooperative movement can play in our national development.



3.1        Institutional and administrative governance

The provisions for sound institutional governance and administrative accountability are important features captured in the Bill. While cooperative development is based on amongst other things, self-sufficiency, its sustainability must be entrenched through good governance and accountability to protect the interests of those it serves. 

Pertinent in this regard, are the legislative instruments, institutional arrangements, governance criteria, administrative arrangements and compliance measures detailed in the Bill to ensure protection of member interests and sound supervision of the cooperative banking system.

We urge that these are further extended when the regulations to the Bill are developed and published. These regulations should appropriately capture the investment criteria for cooperative banking establishments. Business trusts that these regulations will not in any way dilute, but rather build on what is already provided for in the Bill.

3.2        Increasing access to autonomous financial services

The licensing, governance and administration processes envisaged by the Bill, aimed at increasing access to autonomous cooperative banking and financial services, should be pursued in such a manner that supports the broader national agenda of improving:

·         Access to finance;

·         Personal savings and investment;

·         Broad-based black economic development;

·         Job creation; and

·         Enterprise development (particularly SMMEs).


The diversity of possible cooperative banking types provided for the Bill augurs well in this regard.

3.3        Progressive build-up vs. Rapid uptake

Business is in favour of legislation resulting in a steady build-up in the organic growth of cooperative banking establishments, as opposed to a rapid wholesale uptake. This is not to suggest that business does not recognise the potentially valuable contribution of cooperative banking to socio-economic development in South Africa. Rather, the registration, licensing and management of cooperative banks should be carried out appropriately to avoid unintended consequences which undermine and jeopardise the intent of the legislation.


Such organic growth would assist government with the practical challenges of implementing the legislation and monitoring compliance, through a well-balanced spectrum of cooperative banks brought into being under the enactment of this legislation. This would also assist in reviewing the legislation to bring about further desired improvements and ultimately serve of the system in the best way possible.

Here we would like to refer the committee to the 2006 World Bank publication “Making Finance Work for Africa”, which notes the institutional lessons learnt in cooperative financing on the continent. It cites the example Benin, where in 1998 rapid growth under the impulse of credit lines at the expense of good financial management, was among the lessons learnt which jeopardised institutional stability of the sector.

The publication also notes the positive example of Kenya’s Cooperative Bank, initially established as a department in the ministry of cooperatives, which later evolved to become a kind of apex for Kenyan cooperatives as well as a stand-alone licensed bank.

Notwithstanding the distinct needs and challenges facing cooperative banking in South Africa, business considers it prudent and beneficial for the South African cooperative banking movement to establish linkages and working relations with the International Cooperative Banking Association. The association is a sectoral organization of the International Cooperative Alliance, and has a presence in East, Central and Southern Africa. Such cooperation should be explored and where beneficial should be facilitated through the appropriate institutional channels.

Recognizing the trajectory envisaged for the South African cooperative movement as a result of this Bill, the promotion of such linkages would assist in cultivating the exchange of information and collaboration among cooperative banking formations in South Africa and the African region. This could pave the way for the collective research and study of subjects of common interest and the exchange of good practices. For example capital formation and cooperative values applied to banking.

1.                   CONCLUSION

Business wishes to commend the extensive manner in which this Bill has been consulted among key constituencies and stakeholders. This includes within government structures, and since December 2004 through to February 2005, with Nedlac constituencies and the financial services industry. We therefore welcome the introduction of the Cooperative Banks Bill (2007).

Should there be any specific and detailed enquiries emanating from this submission, the Business Parliamentary Office is more than happy to act as a conduit to facilitate interaction between the Committee and relevant experts among our key constituency members, who are well-placed to provide more detailed and specific technical commentary on the Bill.