2023 IN REVIEW AND 2024 OUTLOOK
The Co-operative Sector achieved significant milestones in 2023, but there’s room for improvement. Cooperators look to 2024 to build on successes and learn from missed opportunities.
Despite progress, there are many missed targets for the co-operative movement. Among issues that are yet to be resolved include a review of the Co-operatives Act, Cap 490- so that it aligns with the new constitution, a process that has been delayed for more than 10 years since 2010.
With the co-operatives sector now a devolved function, it is still unclear where the commissioner for co-operatives and SASRA supervision and mandate begins and ends. Also, there is duplication of roles between counties and the National Government when it comes to supervising Societies that have a presence in more than one county.
Due to a lack of clarity within Co-op Act Cap 490, Deposit-Taking Saccos have been paying levies to the County and SASRA.
Cap 490 and the Sacco Act clauses require a financial co-operative society to have 9 members on its board of directors. According to experts, this is a static situation, obsolete and does not reflect what is happening on the ground, especially with multi-sector DT Saccos societies that draw membership from all counties and economic sectors.
Industry insiders insist that clauses dealing with the common bond as well as definitions such as management committee members as defined within governance structures of co-operative societies, should not feature in the co-operatives law and statutes.
The Sacco industry is yet to have a Central Finance Facility that can be used to do inter-Sacco lending.
Although the industry has had a central finance facility that is run by the Kenya Union of Savings and Credit Co-operatives(KUSCCO) Limited, for the past 30 years, the lobby group has been embroiled in a tussle for control of this facility with the Co-op Ministry. On the sidelines are powerful commercial banks, who view the inter-Sacco lending facility as a rival to the dominance of the credit market.
A fully operational inter-lending facility for Sacco implies that soon, these financial societies will be able to meet their liquidity shortfalls, do electronic funds transfers as well as allow those with excess cash to lend out and earn interest through the platform, wiping out the competitive edge that banks currently enjoy.
Liquidation of Moi University Sacco appears to have slowed after the Government appointed a task force to relook at the entire process. This indicates the slow and tedious process that financially troubled Saccos undergo before they are sold off and proceeds given to members.
As matters stand, there is lack of sufficient legal safeguards to protect the assets of Societies undergoing liquidation, meaning that property belonging to Moi University Sacco could end up in the hands of unscrupulous liquidators and officials.
According to the Kenya Society of Professional Co-operators(KSPC), there are no policy guidelines and safeguards to protect the frozen assets of those co-operative societies under the liquidator’s hammer.
Many co-operatives that face liquidation, therefore, risk having the assets end up in private hands after being sold off without the knowledge of members, many of whom go to their graves without receiving a penny.
A glance at the Kenya Gazette Notices reveals many moribund Co-operatives that shut down operations years ago but are yet to be sold off and proceeds from the sales are redistributed to members.
Co-op sector experts maintain that the liquidation process involving co-operatives that have been deregistered takes too long, with many members waiting for decades before their claims are settled by the liquidator, an officer that is usually appointed by the Commissioner for Co-operatives.
There has been a push to have a time limit upon which the Commissioner must conclude the process, say four years. There should also be a report made annually to an appointed caretaker management committee, composed of and representing the interests of members of the affected Society.
At present, there are concerns that the liquidator, appointed by the Commissioner for Co-operatives, enjoys too much power and is not answerable to members of the affected Society.
Suggestions have also been made that an independent valuation should be done and a report made to this caretaker committee before any asset is sold by the liquidator.
There are numerous cases of cooperative societies that went into liquidation due to squabbles within either the board or between it and the management. In these instances, the co-operative remained solvent at the time of liquidation-some in possession of vast tracts of farmland, plant and machinery, vehicles, buildings, and office blocks, as well as share certificates, unpaid dividends or rebates, as well as cash in the bank, etc.
Due to porous and opaque regulations governing the liquidation process, most members of affected societies end up in their graves as penniless individuals after endlessly waiting for a share of the sales proceeds.
Investigations by this publication unearthed numerous cooperative societies whose liquidation is yet to be concluded despite these societies shutting down decades ago.
Analysts attribute the collapse of Kenya’s once vibrant cotton, cashew nuts, sisal and pyrethrum farming, as well as the sharp decline in the fortunes of the coffee industry, to a shutdown of many cooperative societies that once supported farmers in these agricultural sub-sectors.
As Kenyan usher 2024, all eyes will be on parliament as it seeks to pass a policy paper that will trigger a review of Co-op Act Cap 490 and set up an inter-Sacco lending facility. The Capital Markets Authority(CMA) is also set to bring the Nairobi Coffee Exchange(NCE) under its supervision and cut off curtails from the auction.
Also under close watch will be The Law of Contract(Amendment) Bill 2023, which is being sponsored by Simon King’ara, Member of Parliament for Ruiru, which seeks to amend Section 3 of this Act to shield guarantors from the auctioneer’s hammer, when those they have guaranteed fail to meet their debt obligations.
This Bill intends to protect the assets of guarantors, requiring that all lending institutions, including Banks and Saccos, first liquidate a defaulter’s properties-including shares or unpaid dividends/rebates before targeting those held by a guarantor(s).
