Co-operatives are Endangered

I think the lobby groups that are required to champion for the rights of co-operatives in the country are sleeping and have been doing so for a very long time. Now with the devolution, county governments and the national government are making laws without proper consultation with the sector.

danger1We all remember the Finance Act that introduced 10% excise duty to Saccos with FOSAs. The Finance Act 2013 talked of “Saccos registered under Sacco Act 2008” which contradicts the Sacco Act 2008. The Sacco Act 2008 provides for licensing, regulation and promotion of certain Sacco societies to establish Sacco Societies Regulatory Authority and for connected purpose and not registration. Registration is the function of Co-operative Societies Act Cap 490. Now county governments are coming up with licenses or permit fees to be charged co-operatives in their respective bills/acts.

Here is an excerpt of Kiambu Government Finance Bill that touches on Co-operative Societies:

The following permit/licence fees shall be charged on the business listed in first column at the rate specified in either in the second, third or fourth column depending on categories of the urban zone

BUSINESS Major Urban Zone Medium Urban Zone Small Urban Zone
Large financial services including Saccos and cooperative societies with over 25 employees & / or premises over 300 sq.m 45000 25000 15000
Medium financial services including Saccos and co-operative societies with 6 – 24 employees & / or premises of 100 – 300 sq.m 25000 15000 7000
Small financial services including Saccos and cooperative societies with up to 5 employees & / or premises up to 100 sq.m 15000 7000 5000

Well the Kiambu Finance Bill seems to have not realized that Saccos are co-operatives by saying “financial services including Saccos and co-operative societies.” Sacco stands for “Savings and Credit Co-operative Society.”

Seems also the Bill targets the permit/license fees based on number of employees and or premises where they do business. I bet many Saccos do not have employees nor offices although they are required to. Many co-operatives officials usually store their documents at home or within the companies/institutions where they work so how will the Kiambu Government implement this?

Co-operatives are not profit oriented and some have small membership and cannot afford to employ or rent offices/places of business. The advantage of being under the national government is that this was understandable even the county councils and municipal councils were instructed not to charge co-operatives license fees or permit fees and this lead to growth of the sector hence being number one in the continent.

The Bill should have specified what does “small, medium or large financial services” specifically means. Not only based it on premises size and numbers of employees. Is the fees (license/permit) charged per business or premises of every branch and the main branch? Many co-operatives have branches in Kiambu County and therefore this is going to be costly bearing in mind the license fees charged by Sacco Society Regulatory Authority (SASRA) on the main branch and sub-branches. Also is the number of employees per branch on a particular premise or is it the Sacco or that particular business total number of employees? The Bill also should have specified between the premises size and number of employees what takes precedence. A business could be occupying a bigger space but has two employees and a business with a small space with more than 10 employees for example.

For co-operatives license/permit fees should have been based on membership or share capital irrespective of whether they are in the major, medium or small urban zones. The reason is, many Saccos are in major urban zones and smaller co-operatives in the major urban zones will suffer if this bill becomes an act and is implemented as it is.

NOTES

Major urban zones includes Thika Sub-County, Kiambu Sub-County, Ruiru Sub-County, Githunguri Sub-County and Limuru Sub-County.
Medium urban zones includes Juja Sub-County, Kikuyu-Sub County, Lari Sub-County and Kabete Sub-County.
Small urban zones includes Gatundu North Sub-County, Gatundu South Sub-County and Kiambaa Sub-County.

 

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