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Cooperatives Back into Fashion

1 July 2012

For Immediate Release

Tough Economic Times And Fonterra Success Brings Cooperatives Back into Fashion

An increasing number of new and existing businesses are turning to the NZ Cooperatives Association for advice and guidance on how to set up and run their businesses using the cooperative model.

Cooperatives Association Executive Director, Ramsey Margolis said that enquiries have been steadily building over the last six months, and has included avocado growers through to builders, software developers and a start-up electricity generation scheme.

In New Zealand cooperatives are strongest in rural areas, but are increasingly establishing in urban centres and cities, many of them as cooperative franchises. New Zealand’s cooperatives have been promoting the UN International Year of Cooperatives to their 450,000 members and 40,000 staff. In any given month virtually every New Zealander will make a transaction for a product or service that is provided by a cooperative, Mr Margolis said.

“The financial cooperatives and mutuals have absorbed the major impacts of the Global Financial Crisis and in a new era of a lower tolerance to risk, people have been thinking about their alternatives and the cooperative structure. The recent Fonterra Trading Among Farmers (TAF) debate, which goes to the heart of what a cooperative is all about, has also helped generate some of this interest,” Mr Margolis said.

“Most people who have contacted us were already aware of most of the benefits of being a cooperative, but they wanted to how the business would be structured, facilitate its governance responsibilities and train management.
“The very nature of a cooperative requires it to be democratic and have an ability to communicate, justify and sell new concepts to members before any significant change can occur.

“Many people think this is all a bit clunky, but it’s why cooperatives survive and prosper in good times and bad, “Mr Margolis said. “The average life span of a company is seven years, compared to an 80 year lifetime for a cooperative.

“A lot of people without cooperative knowledge were of the view that Fonterra’s TAF debate was not a good thing, but in actual fact it is very healthy for co-op members to examine the fine detail what it all meant, come to their own conclusions and vote accordingly.”

At a recent cooperative research conference titled ‘Building a Better World’, the deputy governor of the Reserve Bank, Grant Spencer acknowledged he was a debit card carrying member of a US credit union.
A shift from global banking to local banking will would benefit cooperatively owned banks, mutuals and credit unions in New Zealand, and he predicted cooperatively-owned financial institutions in New Zealand would were probably going to grow their market share over the next few years, Mr Spencer said.

His view was backed up by the general manager of the European Association of Cooperative Banks Hervé Guider, who said cooperatives had generally survived the global financial crisis and had even grown their business at a time when global banks were failing and needed to be bailed out by their governments.

“In 2007, the cooperative banking model was seen as old fashioned, inefficient with an inability to finance the modern economy,” Mr Guider said. “Five years later the value and ability of the cooperative to absorb the financial crisis confirmed for many people that cooperatives were more stable than traditional global banks.”

ABOUT COOPERATIVES

Cooperative and mutual businesses play a significant role in the New Zealand economy with $39.4 billion of combined revenues in 2010/11 from the Top 40 NZ cooperatives and mutuals.

Fonterra, with 10,500 farmer-members, has an annual revenue of $19.8 billion and is New Zealand’s only truly global business. The three Foodstuffs cooperatives (Auckland, Wellington and South Island) have a combined turnover of $8 billion, making them together the third largest business in the country.

In terms of the Top 40 Cooperatives Dunedin-based meat processing cooperative Silver Fern Farms is fifth with $2 billion and provides 7,500 jobs, while further south the Invercargill based meat cooperative, Alliance Group, is sixth largest with revenues of $1.5 billion and providing 5,600 jobs.

These six New Zealand co-ops are in the Global 300 list of the world’s largest cooperatives.
A cooperative, the big rural lender, Netherlands-based Rabobank, is the world’s largest rural bank and a major agricultural sector lender in New Zealand. With over NZ$1 billion in assets, Rabobank’s AA credit rating is up there with both the governments of New Zealand and Australia.

Collectively, NZ cooperatives and mutuals provide more than 43,000 New Zealanders with jobs. But not all are based in the rural heartland.

With vehicle repair shops as its members, Capricorn Society has members in New Zealand, Australia and South Africa – truly a tri-nations cooperative – and has a turnover of more than $1 billion.

Started in 1928 and now with 137,000 members, The Co-operative Bank has the largest number of members of all New Zealand cooperatives. Collectively cooperatives contribute 3 percent of New Zealand’s GDP.

On a global footing, cooperatives worldwide are owned by 1 billion people and employ over 100 million. The biggest 300 cooperatives have a combined turnover of $NZ1.9 trillion and are as large as Spain, the world’s 9th largest economy.

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