The process of reviewing Kenya’s outdated Co-operatives Act Cap 490 is expected to enhance counties capacity to manage and supervise co-operatives. Once the Cabinet approves the Sessional Paper will go through Parliament for debate and enactment.
A task force appointed by outgoing Agriculture, Fisheries and Co-operatives Cabinet Secretary Peter Munya to operationalize the National Co-operative Policy and review Cap490 looked at the entire Co-operative structure; self-regulation to improve co-operative governance; streamlining of finance and investment procedures; co-operative research, education and training; youth and gender; and environmental concerns, amongst others in the co-operative sector.
According to the Fourth Schedule of the 2010 Constitution, the management of Co-operative Societies has been devolved. Interestingly, there are no legal instruments to make this happen.
Once the Sessional Paper is introduced in the National Parliament, it will trigger the review process of Cap 490.
Industry sources told this publication that the Council of Governors has been lobbying to be given more control of co-operative societies by the parent Ministry concerned, including their supervision or registration.
Most County Governments have no capacity to develop or regulate Co-operatives or even organise training workshops due to the absence of a law to enable counties to perform this responsibility.
There are those who hold the opinion that regulation of co-operatives should not be fully transferred to counties. This is because most County Governments do not have this capacity. For instance, it is still unclear how these devolved units will deal with co-operatives that operate branches outside the County.
While the constitution has devolved Co-operatives to the counties, not all functions have been devolved.
Most of these county governments view co-operatives as possible tax avenues and thus need to proceed carefully when handling co-operatives, including understanding the concept of the co-operative sector, what funds these societies hold, in what form, and how their revenues are generated.
For instance, funds that financial co-operatives hold are net incomes of members, which have already been subjected to taxation. The largest portion in the balance sheet of any co-operative society is loans and advances to members, cash that is already in the pocket of individuals and not society coffers.
There are already fears that some counties will introduce levies on after-tax revenues of co-operative societies. This move could kill operations of many co-operative societies in the County.
In the case of large co-operatives, with operations spread across several regions, it is foolhardy for any County officer to engage a branch office of the said Co-operative.
In executive order No. 1/2018 of June 2018, the Government conferred the State Department for Co-operatives with the mandate of formulating a new co-operative policy.
This new policy paper, which is anchored on the theme, “Promoting Co-operative Societies for Industrialization,” focuses on the unique role that will be played by the County Governments as envisaged in the supreme law of Kenya 2010, which recognizes co-operative societies as a devolved function.
The State Department for Co-operatives argues that a review of the Co-op Act, Cap 490, has been necessitated by increased incidences of poor governance in some co-operative societies leading to mismanagement and collapse of these institutions.
Nyeri Governor Mutahi Kahiga recently called for the amendment of the Co-operatives Act to address the existing gaps in the supervision of co-operative societies.
“Co-operatives are devolved but there is a gap that needs to be addressed. We cannot have people from Nairobi purporting to regulate co-operatives in counties,” he said
He termed co-operatives as drivers of the Nyeri economy, noting the sector has contributed significantly to the development of the County.
“We cannot develop the County without co-operatives. Saccos offer affordable loans compared to other financial institutions,” he said.
He said the County had allocated Ksh100 million to support dairy co-operatives and revived nine coffee societies. “Some coffee societies are paying up to Ksh125 per kilo,” he said.
