The cooperative movement in South Africa: Can financial cooperatives become sustainable enterprises?

• Author: Nyankomo W. Marwa,Thankom G. Arun,Master Mushonga
• DOI: http://doi.org/10.1002/jsc.2268
• Published date: 01 July 2019
• Date: 01 July 2019

RESEARCH ARTICLE

The cooperative movement in South Africa: Can financial

cooperatives become sustainable enterprises?*

Master Mushonga

1

| Thankom G. Arun

1,2

| Nyankomo W. Marwa

1

1

University of Stellenbosch Business School,

Cape Town, South Africa

2

Essex Business School, University of Essex,

Colchester, United Kingdom

Correspondence

Master Mushonga, University of Stellenbosch

Business School, PO Box 610, Bellville 7535,

Cape Town, South Africa.

Email: master.mushonga@yahoo.co.uk

Abstract

The co-operative movement in South Africa came a long way, but the results of such a

long revolution are yet to be seen despite an enabling legislative environment and gov-

ernment incentives which increased their formation from 4,000 in 2004 to 132,000 in

2016. The sustainability of these cooperatives outside government grants is very doubt-

ful, with most of them just appearing on paper without any meaningful economic activity

happening on the ground. For cooperatives to be sustainable, they need to work toward

full implementation of the cooperative movement principles and values through the

bottom-up approach to cooperative formation by reducing their overdependence on the

state. Financial cooperatives in South Africa can become sustainable in their role of

addressing the financial market failure at the grassroots as the majority of the population,

including the working class, are using informal financial schemes based on social ties as

sources of their financial services. Financial cooperatives have a long history as a

grassroots movement that has played an important role in addressing socioeconomic

challenges facing the marginalized communities around the world in a more

sustainable way.

1|INTRODUCTION

There are quite a number of concerns that are raised when it comes

to the study of cooperatives as a form of business enterprise, such as

how vital are cooperatives in our communities and the entire econ-

omy, whether cooperatives are a disappearing form of business,

important only in developing economies and imperfect markets, or

they are sustainable business ventures that equal stockholder-owned

entities, how sustainable financial cooperatives.

All these concerns appear to be answered by the declaration of

the year 2012 by the United Nations as the “International Year of Co-

operatives”. This was a notable development, putting cooperatives

squarely back on the political, economic, and social agenda to

empower ordinary citizens. This was followed by International Sum-

mits of Cooperatives hosted by the International Cooperative Alliance

(ICA) and held in Quebec City, Canada, every 2 years starting from

2012. It celebrates cooperatives as one of the global interventions for

the attainment of some of the United Nations' Sustainable Develop-

ment Goals by 2030. The cooperative sector is large, with the world's

largest 300 cooperatives having US$2.53 trillion of annual turnover in

2014 (ICA, 2016), which is nearly equal to Italy's gross national product.

Mayo (2012) did a statistical comparison of cooperative and usual busi-

ness ownership globally, and found that there are a billion people who

are member-owners of cooperative businesses compared with 328 mil-

lion people who own shares. These statistics show that cooperatives play

a significant role in the global economy to stimulate entrepreneurship,

which is sometimes the only way to survive and try to get out of poverty

(Attuel-Mendès, Caseau, & Bonescu, 2014). Thus, we believe it is worth-

while to pay attention to this distinct form of enterprise.

Although economic conditions look challenging for markets in

Africa, agriculture and financial cooperatives play an important role in

addressing market failures, and have a track record of resilience

in tough times. However, the growth pattern of the cooperative

industry in the continent has demonstrated a rise and fall that

*JEL classification codes: D71, G21, H81, L13, P13.

DOI: 10.1002/jsc.2268

Strategic Change. 2019;28:259–271. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 259