Date: 04/12/2006
Source: Kwa Zulu-Natal Provincial government
Title: Mkhize: Co-operative Microfinance Workshop gala dinner
Address by KwaZulu-Natal MEC for Finance and Economic Development, Dr Zweli Mkhize, at a Co-operative Microfinance Workshop gala dinner at the Blue Waters Hotel, Durban
Programme Director,
MEC for Agriculture and Environmental Affairs,
Mr ME Mthimkhulu,
Dr Mjwara, Head of the Department of Agriculture and Environmental Affairs,
Senior government officials present,
Mr Ada Kidor, Chief Executive Officer of the International Co-operative Alliance (ICA),
Mr Mandla Buthelezi, National Farmers Union (NAFU) President,
All members of ICA present,
Financial co-operatives representatives,
Financial service co-operatives representatives,
Members of community-based organisations (CBOs),
Members of the media,
Honoured guests,
Ladies and gentlemen,
May I begin by congratulating the organisers for co-ordinating this all important Co-operative Microfinance Workshop. It is a pleasure and a privilege to share this occasion with you.
One of the primary objectives of the co-operatives programme not only in KwaZulu-Natal, but South Africa, is to contribute to the creation of sustainable communities through promoting food security and basic income opportunities. I am determined that the co-operatives programme in this province will be a success. Ladies and gentlemen, this determination is not only shared with my colleague the honourable MEC Mthimkhulu, but by our entire Cabinet. The government of KwaZulu-Natal has endorsed the policy on co-operatives as a vital element of the province's poverty alleviation and economic alignment strategy.
And we are determined that this is the key to us achieving economic growth with broader participation in the economy.
I don't have to tell the delegates here how co-operatives have been successfully used in developing countries as building blocks of community development.
Our objective through the co-operatives programme in KwaZulu-Natal is to place an emphasis on supporting the poor, who through our history of apartheid are locked in the vicious cycle of poverty. Ladies and gentlemen, this government is constantly exploring various strategies of extricating them from poverty. This we have not done alone but together with our people, some of whom are in this room today. We have adopted what we call the stepwise rise to prosperity through the co-operatives programme, to address these needs.
Since we launched the co-operatives programme last year more than 4 000 primary and 10 secondary co-operatives have been established in KwaZulu-Natal. Most of the co-operatives in this province are in rural areas. More than 50 percent are based on agriculture, and owned and managed by women. The sectors we're promoting in the co-operatives programme are agriculture, clothing and textiles, arts and crafts and tourism. We're encouraged by the interest and commitment shown by the ordinary people of this province towards the co-operative's programme. This clearly shows that with an enabling business environment created, people will grab the opportunity with both hands.
There are, however, challenges that we're grappling with in the roll out of co-operatives.
Training and skills development is inadequate in areas. There's a need for the training of people to manage co-operatives and the acquiring of skills necessary to provide the services that their businesses offer. Another concern is the duration of training. Co-operative members need to continue to learn as their businesses grow because the intention is that these co-operatives would eventually graduate to small, medium and micro enterprises (SMMEs). The management of interpersonal relationships is an issue that must be addressed because it has been the cause of co-operatives collapsing because of the dynamics between individuals. Poor administration skills must also be attended to because we want to invest very significantly in training programmes to sustain the co-operative movement.
When it comes to access to finance we've taken steps for people to get access for their co-operatives. Again the challenge is the ability to provide sound business plans. On the other hand financial institutions have not quite bought into the support of co-operatives as we would like them to. Therefore co-operatives still requires government intervention which we provide through Ithala Development Finance Corporation and also the Apex Fund and the Micro Agricultural Finance Institutions of South Africa (MAFISA), which I will talk about more. The challenge we've found is that that funds that government has made are not adequate for the demand for co-operatives. Thus it becomes very important for financial institutions to support this sector in business. If we want to meet the objectives of achieving broad-based black economic empowerment (BBBEE), creating jobs and growing the economy, then things have to change. Even the issue of supply chain management must be embraced by both government and big business as our joint contribution to the growing of this sector.
Another concern for us is that co-operatives tend to lose out when it comes to making profit because production costs for would-be competitors are often better. On these bases we've embarked to create secondary co-operatives because then co-operatives with similar interests would benefit from the bulk buying opportunities this presents.
We say that if a person lives in a rural area, then business economic opportunities must become available there. Those days of people having to go to the cities to earn a living are over. In KwaZulu-Natal we have beautiful land which can be cultivated for crops; people in rural areas also need food, clothing, books and transport. In other words the potential for business is already there. What you may ask is government doing to assist co-operatives in these areas? Well, let me tell you.
The Apex Fund
The Department of Trade and Industry established the South African Micro Finance Apex Fund (SAMAF) as a vehicle to address poverty and unemployment. The fund was launched nationally last year and we launched in KwaZulu-Natal in July 2006. SAMAF is government's intervention to activate and energise microfinance in remote, rural and poor urban areas in line with Millennium Development Goals (MDGs) celebrations of the United Nations (UN) year of micro credit and the 50th celebrations of the Freedom Charter.
The Apex Fund works through partner organisations such as Financial Services Co-operatives (FSCs), to carry out its mandate to reach the target at as close a local level as possible, for impact and outreach. I will talk about these FSCs a little later. The Apex Fund aims to achieve its target through affordable access to financial services, institutional and client capacity building and savings mobilisation. 1. Affordable access to finance for many co-operatives and other business is through the Apex Fund's Micro Credit Loan Fund. This programme provides for loans of up to R10 000 to households and micro-entrepreneurs who depend on these micro enterprises for their livelihood. This fund comprises two products:
* micro credit for micro enterprise development
* the poverty alleviation fund for clients whose household income is less than R1 500. The partner organisation will use a poverty targeting tool for assessment.
2. Institutional capacity building under this programme's funds is provided to strengthen the institution and ensure its long term sustainability.
3. Savings mobilisation, this serves to promote and encourage the creation of financial co-operatives and other indigenous savings establishments such as stokvels and burial societies for the accumulation of locally owned and invested wealth.
Micro Agricultural Finance Institutions of South Africa (MAFISA)
Again with the rural communities in mind, MAFISA was established. Agricultural microfinance is defined as finance required for developing economic activity in profitable business operations. As a guideline these businesses usually (but not necessarily) have a turnover of less than the Value Added Tax (VAT) threshold of R300 000 per annum.
The MAFISA idea is to empower micro level producers, processors, working poor, micro-entrepreneurs and emerging farmers. The Land and Development Bank (LDB) works as a partner with MAFISA on their pilot projects in various provinces, one of which is KwaZulu-Natal. The others are Limpopo and the Eastern Cape.
The weakness of both the Apex Fund and MAFISA are limits on the amounts that businesses can borrow. We recommend that this allocation must be augmented and its management devolved closer to the communities. Both funds have tremendous potential to act as catalysts for local economic growth.
Financial Services Co-operatives (FSCs)
As I mentioned the FSCs earlier, may I spend a few seconds elaborating on them? We are working on forming FSCs around the province. FSCs are cost efficient structures through which high quality and affordable financial services are made available to communities and societies who usually have limited or no access to mainstream banking services provided by registered commercial banks in the country. FSCs are member owned and controlled co-operatives, which provide readily available and safe financial services in a community.
There was a time when KwaZulu-Natal had 23 FSCs spread across the province. These FSCs were started by the two companies FinaSol and Financial Services Association (FSA). Both FSA and FinaSol encountered problems which led to their demise in the year 2002. The members/shareholders of the FSCs then decided to continue despite the gap in the supervision and regulation. Because of lack of support and monitoring system 19 are no longer in operation and the National Treasury has appointed the Deloitte and Touche company to formally close them down, and the members to be reimbursed their savings. For the FSCs that have survived closure, the National Treasury has appointed SAMAF to temporarily regulate them until a formal regulatory body is appointed by the South African Reserve Bank (SARB).
Currently there are four FSCs that have survived closure and these are:
1. Ngwavuma FSC at Ngwavuma which is doing well and just broke even recently
2. Eyethu FSC at Nquthu which is struggling and operating at a loss
3. Sizathina FSC at Ixopo is also operating at a loss but has potential
4. KwaMachi FSC at Harding which is managing to grow despite the existing problems.
The products of FSCs include savings accounts, investments, transfers/pension payouts and loans.
Age of hope
When Minister of Finance, Mr Trevor Manuel, tabled the Medium Term Budget Policy Statement he said, "South Africa is in the midst of its longest sustained economic expansion. Robust economic growth supported by strong consumer spending and rising investor confidence has created over one million jobs in the past three years. While unemployment remains our most pressing social and economic challenge, for the first time in a generation, the economy is creating jobs faster than new entrants are joining the labour force. Though it is too early to claim victory in the battle against unemployment we can already see how growth and development work together to reduce poverty and improve livelihoods, how the policy choices we made a decade ago are bearing fruit."
Our people have good reason to live in an age of hope. We as government are creating an environment that's conducive to broader economic participation and we are encouraged to continue because of the response we get.
I want to further encourage you today to continue your dialogues and discussions about this co-operative movement that is certain to turn poverty and unemployment around. I wish all delegates at this Co-Operative Microfinance Workshop well.
Thank you! Issued by: Department of Finance and Economic Development, KwaZulu-Natal Provincial Government
4 December 2006
Source: Kwa Zulu-Natal Provincial government
Title: Mkhize: Co-operative Microfinance Workshop gala dinner
Address by KwaZulu-Natal MEC for Finance and Economic Development, Dr Zweli Mkhize, at a Co-operative Microfinance Workshop gala dinner at the Blue Waters Hotel, Durban
Programme Director,
MEC for Agriculture and Environmental Affairs,
Mr ME Mthimkhulu,
Dr Mjwara, Head of the Department of Agriculture and Environmental Affairs,
Senior government officials present,
Mr Ada Kidor, Chief Executive Officer of the International Co-operative Alliance (ICA),
Mr Mandla Buthelezi, National Farmers Union (NAFU) President,
All members of ICA present,
Financial co-operatives representatives,
Financial service co-operatives representatives,
Members of community-based organisations (CBOs),
Members of the media,
Honoured guests,
Ladies and gentlemen,
May I begin by congratulating the organisers for co-ordinating this all important Co-operative Microfinance Workshop. It is a pleasure and a privilege to share this occasion with you.
One of the primary objectives of the co-operatives programme not only in KwaZulu-Natal, but South Africa, is to contribute to the creation of sustainable communities through promoting food security and basic income opportunities. I am determined that the co-operatives programme in this province will be a success. Ladies and gentlemen, this determination is not only shared with my colleague the honourable MEC Mthimkhulu, but by our entire Cabinet. The government of KwaZulu-Natal has endorsed the policy on co-operatives as a vital element of the province's poverty alleviation and economic alignment strategy.
And we are determined that this is the key to us achieving economic growth with broader participation in the economy.
I don't have to tell the delegates here how co-operatives have been successfully used in developing countries as building blocks of community development.
Our objective through the co-operatives programme in KwaZulu-Natal is to place an emphasis on supporting the poor, who through our history of apartheid are locked in the vicious cycle of poverty. Ladies and gentlemen, this government is constantly exploring various strategies of extricating them from poverty. This we have not done alone but together with our people, some of whom are in this room today. We have adopted what we call the stepwise rise to prosperity through the co-operatives programme, to address these needs.
Since we launched the co-operatives programme last year more than 4 000 primary and 10 secondary co-operatives have been established in KwaZulu-Natal. Most of the co-operatives in this province are in rural areas. More than 50 percent are based on agriculture, and owned and managed by women. The sectors we're promoting in the co-operatives programme are agriculture, clothing and textiles, arts and crafts and tourism. We're encouraged by the interest and commitment shown by the ordinary people of this province towards the co-operative's programme. This clearly shows that with an enabling business environment created, people will grab the opportunity with both hands.
There are, however, challenges that we're grappling with in the roll out of co-operatives.
Training and skills development is inadequate in areas. There's a need for the training of people to manage co-operatives and the acquiring of skills necessary to provide the services that their businesses offer. Another concern is the duration of training. Co-operative members need to continue to learn as their businesses grow because the intention is that these co-operatives would eventually graduate to small, medium and micro enterprises (SMMEs). The management of interpersonal relationships is an issue that must be addressed because it has been the cause of co-operatives collapsing because of the dynamics between individuals. Poor administration skills must also be attended to because we want to invest very significantly in training programmes to sustain the co-operative movement.
When it comes to access to finance we've taken steps for people to get access for their co-operatives. Again the challenge is the ability to provide sound business plans. On the other hand financial institutions have not quite bought into the support of co-operatives as we would like them to. Therefore co-operatives still requires government intervention which we provide through Ithala Development Finance Corporation and also the Apex Fund and the Micro Agricultural Finance Institutions of South Africa (MAFISA), which I will talk about more. The challenge we've found is that that funds that government has made are not adequate for the demand for co-operatives. Thus it becomes very important for financial institutions to support this sector in business. If we want to meet the objectives of achieving broad-based black economic empowerment (BBBEE), creating jobs and growing the economy, then things have to change. Even the issue of supply chain management must be embraced by both government and big business as our joint contribution to the growing of this sector.
Another concern for us is that co-operatives tend to lose out when it comes to making profit because production costs for would-be competitors are often better. On these bases we've embarked to create secondary co-operatives because then co-operatives with similar interests would benefit from the bulk buying opportunities this presents.
We say that if a person lives in a rural area, then business economic opportunities must become available there. Those days of people having to go to the cities to earn a living are over. In KwaZulu-Natal we have beautiful land which can be cultivated for crops; people in rural areas also need food, clothing, books and transport. In other words the potential for business is already there. What you may ask is government doing to assist co-operatives in these areas? Well, let me tell you.
The Apex Fund
The Department of Trade and Industry established the South African Micro Finance Apex Fund (SAMAF) as a vehicle to address poverty and unemployment. The fund was launched nationally last year and we launched in KwaZulu-Natal in July 2006. SAMAF is government's intervention to activate and energise microfinance in remote, rural and poor urban areas in line with Millennium Development Goals (MDGs) celebrations of the United Nations (UN) year of micro credit and the 50th celebrations of the Freedom Charter.
The Apex Fund works through partner organisations such as Financial Services Co-operatives (FSCs), to carry out its mandate to reach the target at as close a local level as possible, for impact and outreach. I will talk about these FSCs a little later. The Apex Fund aims to achieve its target through affordable access to financial services, institutional and client capacity building and savings mobilisation. 1. Affordable access to finance for many co-operatives and other business is through the Apex Fund's Micro Credit Loan Fund. This programme provides for loans of up to R10 000 to households and micro-entrepreneurs who depend on these micro enterprises for their livelihood. This fund comprises two products:
* micro credit for micro enterprise development
* the poverty alleviation fund for clients whose household income is less than R1 500. The partner organisation will use a poverty targeting tool for assessment.
2. Institutional capacity building under this programme's funds is provided to strengthen the institution and ensure its long term sustainability.
3. Savings mobilisation, this serves to promote and encourage the creation of financial co-operatives and other indigenous savings establishments such as stokvels and burial societies for the accumulation of locally owned and invested wealth.
Micro Agricultural Finance Institutions of South Africa (MAFISA)
Again with the rural communities in mind, MAFISA was established. Agricultural microfinance is defined as finance required for developing economic activity in profitable business operations. As a guideline these businesses usually (but not necessarily) have a turnover of less than the Value Added Tax (VAT) threshold of R300 000 per annum.
The MAFISA idea is to empower micro level producers, processors, working poor, micro-entrepreneurs and emerging farmers. The Land and Development Bank (LDB) works as a partner with MAFISA on their pilot projects in various provinces, one of which is KwaZulu-Natal. The others are Limpopo and the Eastern Cape.
The weakness of both the Apex Fund and MAFISA are limits on the amounts that businesses can borrow. We recommend that this allocation must be augmented and its management devolved closer to the communities. Both funds have tremendous potential to act as catalysts for local economic growth.
Financial Services Co-operatives (FSCs)
As I mentioned the FSCs earlier, may I spend a few seconds elaborating on them? We are working on forming FSCs around the province. FSCs are cost efficient structures through which high quality and affordable financial services are made available to communities and societies who usually have limited or no access to mainstream banking services provided by registered commercial banks in the country. FSCs are member owned and controlled co-operatives, which provide readily available and safe financial services in a community.
There was a time when KwaZulu-Natal had 23 FSCs spread across the province. These FSCs were started by the two companies FinaSol and Financial Services Association (FSA). Both FSA and FinaSol encountered problems which led to their demise in the year 2002. The members/shareholders of the FSCs then decided to continue despite the gap in the supervision and regulation. Because of lack of support and monitoring system 19 are no longer in operation and the National Treasury has appointed the Deloitte and Touche company to formally close them down, and the members to be reimbursed their savings. For the FSCs that have survived closure, the National Treasury has appointed SAMAF to temporarily regulate them until a formal regulatory body is appointed by the South African Reserve Bank (SARB).
Currently there are four FSCs that have survived closure and these are:
1. Ngwavuma FSC at Ngwavuma which is doing well and just broke even recently
2. Eyethu FSC at Nquthu which is struggling and operating at a loss
3. Sizathina FSC at Ixopo is also operating at a loss but has potential
4. KwaMachi FSC at Harding which is managing to grow despite the existing problems.
The products of FSCs include savings accounts, investments, transfers/pension payouts and loans.
Age of hope
When Minister of Finance, Mr Trevor Manuel, tabled the Medium Term Budget Policy Statement he said, "South Africa is in the midst of its longest sustained economic expansion. Robust economic growth supported by strong consumer spending and rising investor confidence has created over one million jobs in the past three years. While unemployment remains our most pressing social and economic challenge, for the first time in a generation, the economy is creating jobs faster than new entrants are joining the labour force. Though it is too early to claim victory in the battle against unemployment we can already see how growth and development work together to reduce poverty and improve livelihoods, how the policy choices we made a decade ago are bearing fruit."
Our people have good reason to live in an age of hope. We as government are creating an environment that's conducive to broader economic participation and we are encouraged to continue because of the response we get.
I want to further encourage you today to continue your dialogues and discussions about this co-operative movement that is certain to turn poverty and unemployment around. I wish all delegates at this Co-Operative Microfinance Workshop well.
Thank you! Issued by: Department of Finance and Economic Development, KwaZulu-Natal Provincial Government
4 December 2006
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