Turning your stokvel into a cooperative

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Stokvel Talk spoke to Sizwe Twala, from the Small Enterprise Development Agency (SEDA) he explained that Co-operatives are different from any other businesses, as they aim to further both the economic and social interests of their members, whilst other businesses focus primarily on profit. Stokvels were the first step towards the development of formal co-operatives in South Africa. Stokvels and similar associations based on cooperation are still very much a part of many communities in South Africa.

According to Sizwe a stokvel can be turned into a cooperative if it was not originally registered a co-operative. However, the change from a stokvel to a cooperative has to backed up by a strong business case, since stokvels are of a social endeavour and co-operatives have economic, environmental, social and cultural considerations. SEDA warns though that a close corporation cannot be converted into a co-operative.

Sizwe also emphasized that if the stokvel wants to turn into a co-operative, the stokvel has to re-establish its common bond, objectives which will be similar or different depending on the reasons to want to convert into being a cooperative.


SEDA recommends that people should not convert stokvels into a co-operative, unless it is for pure business that is, to make it a Co-operative Financial Institution (CFI) for example or if it’s a buying stokvel to make it a consumer coop- but this requires a lot of management and compliance which might not be advisable for stokvel given the calibre of people who are typical members of stokvels. They need to comply in terms of the Co-operative principles and community upliftment. For example, if the stokvel is about exchanging cash every month between its members, there is no need to turn such a stokvel into a cooperative.

How a co-operative differs from a company

A co-operative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations” Sizwe said. Co-operatives are people-centred enterprises jointly owned and democratically controlled by and for their members. As enterprises based on values and principles, they put fairness and equality first allowing people to create sustainable enterprises that generate long-term jobs and prosperity.

The basic objective of a co-operative organisation is to provide essential service for the benefit of the member. Managed by producers, users or workers, co-operatives are run according to the “one member, one vote” rule.

A private company (Pty Limited) has a separate life from its owners and is required by the Companies Act to perform rights and duties of its own. The owners of a private company are shareholders. A company is a business organisation to earn a profit.

About SEDA

The Small Enterprise Development Agency is an agency of the Department of Small Business Development which provides non-financial support which includes training, access to markets, supplier development, technology transfer, and incubation to small enterprises and co-operatives. Seda has by far the biggest network of offices in South Africa with 53 branches, over 40 co-location points and supporting 96 incubation centres.
Registering a co-operative

Please visit the CIPC website for information on registering your cooperative and for a definition of the different types of co-operatives: http://www.cipc.co.za/index.php/register-your-business/co-operatives/.

SEDA Branches

A full list of SEDA branches and contact details is available on our Seda website under contact: http://www.seda.org.za.