South Africa's new Cooperatives Act: A missed opportunity for small farmers and land reform beneficiaries

Abstract

Agricultural cooperatives are often viewed as appropriate vehicles to facilitate vertical coordination with, or horizontal integration between, small farmers who would otherwise be excluded from value-adding opportunities and discerning markets. In South Africa, renewed interest in development-oriented cooperatives saw the introduction of a new Cooperatives Act in 2005, along with support measures dedicated to ‘emerging’ cooperatives. This paper contends that the architects of the new Act discounted important trends in international legislation that would have made development-oriented cooperatives more versatile and given their members better access to capital and expertise through equity partnerships with private agribusiness firms. It is concluded that the new Act should be amended to admit non-patron investors as members, and to allow for non-redeemable and hence appreciable and tradable shares. Such innovations are emerging internationally, usually with a cap on non-patron voting power.

Keywords:

• Agricultural cooperatives
• small farmers
• new institutional economics
• strategic partnerships
• land reform beneficiaries