Government CapacityproposedLong TermSmall Business Development

Cooperative Development: Outcome-Based Redesign

Theme: cooperative_economy

First raisedOct 2022Last discussedSept 2023Dormant — not discussed in 12+ months

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Assessment

Growth Impact2/5

Feasibility2/5

Responsible: Department of Small Business Development

Feasibility Assessment

Government cooperative programmes have very poor track records globally and in SA. The ideological preference for cooperative development often overrides the economic evidence. A more outcome-based approach (MOU with German Raiffeisen Confederation in 2023 offers an interesting model) would be honest about failure rates and focus on survivors. Politically this requires courage to challenge ANC cooperative policy orthodoxy.

Description

South Africa's cooperative development programme, administered by the DSBD through the Cooperatives Incentive Scheme (CIS) and SEDA incubation, has disbursed hundreds of millions in grants since the Cooperatives Act (2005) yet produced few sustainable, scaled cooperative enterprises — a DSBD evaluation found an 80-90% failure rate within five years. The proposed outcome-based redesign replaces upfront capital grants with patient development capital linked to revenue milestones, restricts support to cooperatives in sectors with demonstrated market demand (particularly construction, waste, and community services), and mandates technical skills development alongside financial support. The IDC's cooperative financing window provides a model for scaling to smaller entities under DSBD's remit.