State hatches plot to destroy 15 million member cooperative movement

CAK CEO David Marube

By Gitahi Ngunyi

Kenyan government has set up an insidious scheme that will kill the country’s 15 million member strong cooperative movement and hand over assets valued at more than Sh1 trillion to a few connected individuals.

The scheme involves changing the structure of cooperative societies governance to introduce new category of privileged members to be known as Social Impact Members.

So special will the Social Impact Members be that they will be allocated special kitty to be managed by a Special Fund in which they can borrow to fund individual businesses.

And that is not all. The Social Impact Members will also be the trustees of the Special Fund where they will have an investment committee that will design the policy on how to lend themselves the funds.

Further, any profit from the lending activities of the Special Fund will only be shared by the social impact members and the cooperatives will not accrue any benefit.

In the set up, the only role the cooperatives will have is to guarantee loans to the Special Fund and also make recoveries in case the Social Impact Members are unable to repay their loans to the Special Fund.

In other words, the cooperatives will use the funds of its ordinary membership to guarantee loans to the new class of members and take up losses in cases the new privileged members fail to pay up their loans.

The scheme has echoes of a similar plot by former President Daniel arap Moi’s to destroy the then growing economic muscle of coffee farmers in the mid-1980’s.

In Moi’s government scheme, Kenya Planters Cooperative Union (KPCU) was made to guarantee loans to government officials and well connected big land owners for loans under the guise of supporting coffee development.

Eventually, the borrowers under the Stabex scheme who included ministers, assistant ministers, members of parliament and millionaires who were funding then ruling party did not pay up their loans leading to the auctioning of KPCU assets.

Coffee farmers in the country have never recovered from the Stabex scheme todate, more than three decades later.

The new scheme is contained in an omnibus amendment bill introduced to parliament which seeks to amend both the cooperative societies act and Sacco’s Societies Act to introduce the new privileged category of members and establish the Special Funds organs as entities that are autonomous to the cooperatives.

In a strongly worded memorandum to the Attorney General and Parliament cooperative leaders have come out to fight against the scheme which they say seeks to turn international cooperative principles upside down.

“The Movements’ National leadership in its Consultative forum on this 14th day of May 2018 has rejected in its totality the proposed amendments and accordingly advised that the so-called Social Impact members do form their own Society and run it as they wish,” said Cooperative Alliance of Kenya (CAK) in the memorandum signed its Executive Director David Marube.

CAK raises critical questions on the intentions and the sponsors of the bill. Crucially, the umbrella body of the movement seeks answers as to why the bill was being sneaked behind the movement’s leadership and regulators.

The umbrella body says it sought clarification from both the cooperative department at the  Ministry of Trade and Industry and Sacco Societies Regulatory Authority (SASRA) as to whether they were privy to these amendments in their capacity as the regulators of the sector when word on the proposed amendments came out.

“Why was the Co-operative movement left out in the consultation process (if there were) of coming up with the proposed amendments?  It shockingly occurred to us that neither of the regulators seemed aware of the proposed amendments,” says CAK.

The movement who the proponent of the bill is if it has not originated from any of the co-operative sector regulator.

“Who then is the proponent of this bill?  Who wants to make a backdoor and illegal entry into the co-operative sector by riding on the SLMA bill? Who wants to profit and make capital out of the hard earned savings built in the co-operative sector over a long period?” Poses CAK.

CAK wants parliament to reject the bill in total to reject the bill in total to protect the movement interests and assets from the destructive scheme.

At the heart of the umbrella body’s opposition is the fact the bill is seeking to adulterate international cooperative principles and there by expose the movement to imminent losses and destruction of assets.

“This proposed amendment, in our view, completes distorts this arrangement which has since time immemorial been based on the co-operative principles. If this amendment were to be allowed, the co-operative spirit, which does not thrive in a discriminative environment, will eventually die. We urge you to reject these amendments.”

CAK amendment were to pass in its current form, it will mean that members of the same co-operative society will be discriminated against each other based on their contribution to the society.

“The members exercise of democracy as a tool of control of the co-operative society will be affected because their right to vote is curtailed in matters to do with Special Fund, the Investment Committee, the Special Fund Trustee and matters incidental thereto,” CAK says in the memorandum.

CAK says even it is possible that the proponents of the changes one may argue that the proposed amendments are timely since they come to breach the gap of funding to the Sacco societies by introducing new sources of funding.

“But nothing can be further from the truth. Apart from traditional sources of funding of Saccos (shares, deposits, savings, capital reserves, earnings from investments, operational income from interest and other sources) Saccos have access to external sources of funds like banks and capital venture companies. The traditional sources of funding are cheap and sustainable to the growth of Saccos,” says CAK.

CAK has also questioned why the changes are being introduced through an omnibus bill.

The established practice within the commonwealth is that the legislative process through the statute law miscellaneous amendment or commonly known as omnibus bills is a process applied by the government to make minor and non-controversial and general house-keeping amendments.

“Who is/are this that wants to sneak major amendments that would have far reaching ramifications on the gains of over a century crumbling our heritage?” Poses CAK.


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