Critical factors for business success in co-operatives

Many countries that have achieved economic development have a dynamic co-operative sector which contributes substantially to the development of these economies. From a global perspective, co-operatives have been proven to be flexible in meeting a wide variety of social and economic human needs such as job creation, alleviation of poverty and building of communities. With the drive to decrease poverty in South Africa, there has been an increased interest to support co-operatives with the intention to provide employment, social development and building communities/ community care. It seems, however, that South Africa has not yet reached the same momentum in the co-operatives movement as elsewhere in the world and the economy is still characterized by a high unemployment rate and a low growth rate (Van der Walt, 2002). This study is an attempt to determine the factors for business success in co-operatives by assessing the strengths and weaknesses of co-operative businesses within the Nelson Mandela Metropolitan Municipality in the Eastern Cape. The study includes an extensive literature review on the nature and prevalence of co-operatives in South Africa where challenges faced by South African co-operatives and particularly those in the Eastern Cape Province, are indicated. It also highlights international best practice and reveals that for co-operative success, apart for functioning by the International Seven Cooperative Principles, knowledge and expertise in business management are absolutely necessary so that co-operatives can be profitable and sustainable. With this knowledge, an adapted form of the Small Enterprise Development Agency (SEDA) Small Business Assessment Tool was used to formulate the questionnaire and to review business management literature. A survey conducted involved fifty-one co-operative members on the database of the Nelson Mandela Metropolitan University Business Unit. The opinions of the respondents were compared with the guidelines provided by the literature in the study in order to identify the strengths and weaknesses of these co-operatives, which then determine the critical success factors for business success in co-operatives. The empirical results show that the co-operative members understand co-operative principles and function through them. They have a fairly general knowledge of business management. The results also show significantly positive correlations between Marketing Management, Financial Management, Operations Management, Human Resources Management and General Management, on the one hand, and the business success of co-operatives, on the other hand. This indicates that these respondents recognize the importance of these business functions in the success of their businesses. However, failures and weaknesses experienced in these areas lead to the recommendations that they need to be mentored as they cannot put this knowledge into application, and secondly, they need financial assistance and support to sustain the co-operative businesse