THE EAST AFRICAN COMMUNITY CO-OPERATIVE SOCIETIES BILL 2014 AND ITS IMPLICATIONS ON PARTNER STATES CO-OPERATIVE LEGISLATION
NKUHI, Mathias Sylvester*
Great discoveries and improvement invariably involve the cooperation of many minds. I may be given credits for having blazed the trails, but when i look into the subsequent developments I feel the credits is due to others rather than myself.1
Private sector has a great role in economic development. If well regulated, the sector can contribute, tremendously, in the economic development of any nation. Almost seventeen years after its establishment, the East African Community is seeking to widen and deepen its integration through the use of the private sector. The start is with the co-operative societies. Co-operative societies have been preferred as model organisations in exploiting business opportunities, as well, making the East African Community a people centred community. The passing of the East African Community Co-operative Societies Bill, 2014 by the East African Legislative Assembly (EALA) is an important step towards the strengthening of the private sector. The Bill, once an Act of the Community, will take precedence over the East African Community partner states co-operative legislation in respect of the provisions to which they relate. Similarly, co-operative societies’ formation and regulation will be across and beyond Partner States borders. There will be a possibility of having co-operative societies with operations in more than one partner state. It is also promising that the private sector, through the use of co-operative societies, will explore the business opportunities in the East African Community integration process with fair procedures and less administrative, legal and financial costs. However, challenging would be the process of harmonizing disparities in the Partner
*LL.B (Mzumbe); LL.M (UDSM); PGD – LP (LST) Assistant Lecturer, Moshi Co-operative University [MoCU], Advocate of the High Court of Tanzania and courts subordinate thereto. e-mail: firstname.lastname@example.org / email@example.com
1 Alexander Graham Bell, (http://www.quotesdaddy.com/author/Alexander+Graham+Bell (31/03/2015)
States co-operative legislation. This article discusses the salient provisions of the Bill and the implications they raise to the Partner States co-operative legislation, the Tanzanian in particular.
The East African Community (EAC) integration is progressing on the legal framework for private sector. It is just recently, that the East African Legislative Assembly (EALA) has passed a Bill for new legislation namely the EAC Co-operative Societies Act, (hereinafter to be referred to as the “Bill”). The Bill, once signed by the Heads of States of the EAC Partner States will be an Act of the Community2 (i.e. the EAC) for the regulation of the co-operative societies (hereinafter to be referred to as “societies”).
The Bill’s salient features and the implications on the Tanzanian Co-operative societies’ legislation3 is the main focus of the authors’ discussion. Foremost in the discussion is the Bill’s adherence to the co-operative principles and values. Thereafter, the discussion will be on the way the Bill addresses formation and management of societies. Societies’ access to land, tax exemptions and lending, as addressed in the Bill, will also be discussed. And furthermore the way the Bill has addressed the handling of the cases of loss and misappropriation of societies’ properties and funds.
Significantly, the discussion encompasses the Bills position on the area of settlement of societies’ disputes. The discussion will be concluded with a reflection on the effect of the provisions of the Bill, once an Act of the EAC, to the Tanzanian co-operative legislation and the rest of the EAC Partner States. A brief overview of societies and the insights on their legal framework, both at the EAC and Partner States level, will open the discussion.
2.0 CO-OPERATIVE SOCIETIES: AN OVERVIEW
2.1 A Co-operative Society
Co-operation has been a human feature throughout ages with flexible changes to suit the environment and the time concerned. It is, indeed, co-operation which has brought societies
2 Article 62(1) of the Amended Treaty for the Establishment of the East African Community, 1999.
3 Co-operative Societies Act, 2013, Act No. 6 of 2013, [CAP 211 of the Revised Laws]
into existence as well as shaping them.4 Societies’ description is made in the International Co-operative Alliance (ICA) Statement on the Co-operative Identity.5 The statement, apart from offering a uniform definition of societies, also provides for the values and principles governing societies.
According to the ICA statement, a co-operative society signifies an association of persons who have voluntarily joined together for the purpose of achieving a common need through the formation of a democratically controlled organization and who make equitable contributions to the capital required for the formation of such an organization, and who accept the risks and the benefits of the undertaking in which they actively participate.6
In Tanzania, the Co-operative Societies Act, 2013 has loosely defined a co-operative society as a society which has been registered under the Act and it includes a primary society, a secondary society, apex and the federation.7
On their face, societies are associations similar to companies. However, that is not absolute. Societies’ purpose of formation and the modus of operandi make them unique and different from companies that we know of. The modus of operandi is governed by long time and firmly established values and principles. The following section discusses, briefly, the co-operative principles and values.
2.2 Co-operative Values and Principles
Societies are governed by long established values and principles. In their traditional stand, societies were governed by the ethical values of honesty, openness, social responsibility and caring for others.8 Modern societies have moulded these ethical values to come up with the values of self-help, self-responsibility, democracy, equality, equity and solidarity.9
4 Societies have a long history but credit is given to the Rochdale Pioneer Society as the first formal co-operative society for having developed the co-operative principles and values.
5 The statement adopted during the Manchester Conference organised by the ICA in the City of Manchester in 1995 page 1
7 See: Section 2 of the Act
These values are put into practice by established co-operative principles. The ICA Statement (supra), identifies seven principles which all societies in the world are supposed to conform to. The principles are: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education training and information; cooperation among cooperatives; and concern for community.
On voluntary and open membership, societies are open to all persons who are willing to accept responsibilities of membership.10 This is regardless of their gender, social and political background, race and religion.11 Democratic member control entails the democratic nature of societies which allows the members to freely and actively participate in policy and decision making.12 As far as the members’ economic participation is concerned, societies’ members contributes to the capital equitably, thus, the capital is their common property.13
Societies are autonomous, self-help and independent organisations. They are controlled by the members themselves in a democratic way. Societies’ movement is supposed, in in all cases, to be independent from any outside influence and interference. On education and training, societies are principled in the provision of education and training for their members, elected representatives, managers, and employees. The provision of such provision is regarded as necessary for them to be able to contribute effectively to the development of their societies. Besides the provision of education and training, societies inform the general public, particularly the youth, about the nature and benefit of co-operation. With the principle of co-operation among co-operatives, societies serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures. Co-operation is a continuing process under which one society may unite with another society/societies at the national, regional and international levels that they may realise their goals under the common bond.
Finally, societies’ role on the surrounding communities is also reflected in the principles. The last principle, though not in terms of significance, is that of concern with the
10 ICA Statement on Co-operative Identity at page 1
community. Societies, among other things, work for the sustainable development of the surrounding communities through policies approved by their members.
It should be noted that the values co-existence with the principles is so vital. So to say, the cornerstone of the management of the affairs of societies is the values and the principles.14 All co-operative legislation, therefore, are required to adhere to these values and principles. When enacting a co-operative legislation, the major consideration should be the values and the principles for they carry the identity of societies.
The discussion on the Bill, carries with it the discussion of the principles. Let us begin with an overview of the position of societies in the EAC by highlighting the respective EAC and its Partner States Treaty and legislation governing societies.
3.0 THE EAC AND CO-OPERATIVE SOCIETIES
3.1 The Treaty for the Establishment of the EAC, 1999 and the Co-operative Sector
Before the idea and ultimately the development of the Bill, the EAC had no specific legislation addressing societies. The regulation of societies was one handled by the Municipal laws of the Partner States. There are, however, general provisions on the Treaty for the Establishment of the EAC, 1999 which can be looked at as making an inference to, inter-alia, societies.
The provisions cater for the position and role of the private sector in the economy of the EAC and the particular Partner States. Thus, it is important to analyse the provisions and establish the base for societies in the EAC.
The EAC is established under the Treaty for the Establishment of the EAC, 1999.15 Currently, it is composed of the five Partner States.16 As regional economic integration, the EAC is established to inter-alia, widen and deepening co-operation among the Partner States
14 See: Nkuhi, M.S., The Effect of Co-operative Structure on Co-operatives: An Experience from Tanzania, a paper presented to the Representatives of the Lagos Co-operative Federation who visited Tanzania, at the Ushirika Conference Centre of the Moshi Co-operative University on 2nd August 2013.
15 See: Article 2(1) of the Treaty
16 These are: The Republics of Burundi, Kenya, Rwanda, Uganda and the United Republic of Tanzania which commonly they are referred to as the Partner States.
in the social and economic spheres of life.17 In order to realise the aforementioned goal, the EAC Partner States have agreed to establish a customs union, a common market, a monetary union and ultimately a political federation.18
Similarly, the Partner States have agreed to provide for an enabling environment for the private sector and the civil society to take the full advantage of the EAC.19 To that end, the Partner States undertaking is one dedicated to the formulation of a strategy for the development of the private sector.20 Alongside such formulation, the Partner States have agreed to address two other important aspects.
Firstly, it is the promotion of a continuous dialogue with the private sector and the civil society both at the National and EAC levels.21 The promotion of the dialogue is with a view of helping to create an improved business environment in all economic sectors.22 The second aspect is one on providing opportunities for entrepreneurs.23 The Partner States intention is to formulate strategies which would provide opportunities for the entrepreneurs to participate actively in the improving of the Policies and the activities of the institutions of the EAC which have effects on them.24 For the purpose of enabling the environment for the private sector and civil society to take full advantage of the EAC, the Partner States have undertaken to promote inter alia, the proper regulation of the private sector.25 Similarly, the Partner States have agreed to strengthen the private sector.26
The strengthening of the sector is through adoption of programmes which would make the sector an effective force for the economic development of the Partner States.27 In the strengthening of the sector, the Partner States have committed themselves to encouraging
17 Article 5(1) of the Treaty for the Establishment of the EAC, 1999 (As amended)
18 Article 5(2), So far the Partner States have established and operationalised the Customs Union and the Common Market. The Monetary Union is underway.
19 Article 127 (1) of the Treaty for the Establishment of the EAC, 1999 (As amended)
21 Ibid paragraph (a)
23 Opcit, Paragraph (b)
24 Ibid. this is done so as to increase their confidence in policy reforms and raise their productivity and consequently give room to lower costs of production.
25 Article 127 (2) (a) of the Treaty for the Establishment of the EAC, 1999
26 Article 128 (1) of the Treaty for the Establishment of the EAC, 1999
the efficient use of the scarce resources in promoting the private sector organisations.28 Such use is dedicated to all types of economic activities including agriculture, manufacturer, farmers, traders and service providers.29 Besides, the Partner States have a commitment in the encouragement and sponsorship of the practical and resourceful methods of income generation in the sector;30 and the commitment to establish a quality information system which will allow collection, harmonised processing and timely dissemination of data and information31.
Societies forms part and parcel of the private sector. They play a very vital role in the economic development of the Partner States. Thus, the provisions and the undertakings as highlighted from the Treaty of Establishment of the EAC, 1999, inter alia, apply mutatis mutandis to these societies.
As earlier noted, each of the Partner States has its own legislation on societies. The next section highlights on the particular principal legislation of the Partner States. The legislation are for the regulation of societies in the territories of the Partner States.
3.2 The EAC Partner States Co-operative Legislation
For the regulation and promotion of societies, Partner States have domestic legislation. There are principal co-operative legislation and subsidiary ones. The principal legislation are crucial for the current discussion. In the Republic of Kenya, co-operatives are regulated by the Co-operative Societies Act.32 The Act regulates the constitution, registration and regulation of co-operative societies and other incidental purposes.33
Co-operatives, in the Republic of Uganda are governed by the Co-operative Societies Act.34 This was enacted so as to amend and consolidate the law relating to the constitution and regulation of co-operative societies in Uganda.35
28 Article 128 (2) of the Treaty for the Establishment of the EAC, 1999
30 Article 128 (2) (b) of the Treaty for the Establishment of the EAC, 1999
31 Article 128 (2) (c) of the Treaty for the Establishment of the EAC, 1999
32 Cap 490 RE 2012 
33 Refer to the long title to the Act
34 Of 15 November 1991, Cap 112
In Tanzania, co-operatives are not a union matter. Hence there are two pieces of legislation, one for Tanzania Mainland and the other for Zanzibar. In Tanzania Mainland, there is a Co-operative Societies Act, 2013.36 In Zanzibar, co-operatives are governed by the Co-operative Societies Act No. 4 of 1986.
In the Republic of Rwanda, the establishment, organisation and functioning of societies is governed by law no. 50/2007.37 For the Republic of Burundi, the regulation is by, inter alia, Law No. 1/23 entitled “portant cadre organique des groupements pre-cooperatifs”.38 The latter is a law bearing organic framework of pre-cooperative groups in Burundi.
The discussion of the Bill salient features, as earlier pointed out, will go hand to hand with its implications on the Tanzanian Co-operative Societies Act, 2013. In certain circumstances, the implications are general to all the EAC Partner States co-operative legislation.
The substance of the discussion is in the next section. It is, however, preceded with a brief discussion on the justification and the Bill development process.
4.0 THE EAC CO-OPERATIVE SOCIETIES BILL 2014
4.1 Justification for the Bill
As noted earlier, the development of the Bill was with a view of implementing the provisions of Article 128 of the Treaty for the Establishment of the EAC.39 In order to encourage the development of the private sector, societies were identified as model organisations. The identification is justified by several reasons. Foremost is the need for such organisations to exploit the opportunities in the regional integration process.40 In this, societies are looked at as organisations which can make the EAC a people-centred
35 Refer to the long title of the Act
36 Cap 211 of the Revised Laws
37 The citation of the law is Law No. 50/2007of 18/09/2007 determining the establishment, organisation and functioning of co-operative organisations in Rwanda
38 The law was enacted on 30th December 2011
39 On the development of the private sector and the encouragement of the efficient use of the scarce resources available
40 Mugoya, M., (2014), East African Community Co-operative Societies Bill 2014: Presentation to Tanzania’s National Stakeholders Workshop and EAFF (2014), East African Community (EAC) Co-operative Societies Bill 2014 Background Paper at pg. 1
Community. And the target is the EAC common market on which they can freely move goods and services from one Partner State to the other.41 Societies are expected to service the large regional market population of about 140 millions.42
Apart from the exploitation of the resources aforementioned, the Bill is justified by the need to adopt best practices in co-operative legislation in the EAC region.43 In this, the Bill was thought as a necessary tool for the development of the uniform co-operative legislation throughout the EAC. It was thought that the latter would be achieved by taking the best practices in the laws of the Partner States and harmonise them at the EAC level.44
Lastly, the Bill was developed with a justification on its ultimate provision of incentives to co-operative businesses.45 Co-operatives have been touted as the model organisation for business development across all sectors.46
4.2 Towards the EAC Co-operative Societies Bill
The development of the Bill involved a number of processes, which for the sake of this discussion, are worth explaining. Notably, the Bill has its genesis from what was known as “the Analytical Study of the Co-operative Societies Bills of Eastern Africa”.47 In 2010, the East African Farmers Federation (EAFF) commissioned the aforementioned study.48 The nitty-gritty of the study was the analysis of the Co-operative Societies Acts of Ethiopia, Kenya and Uganda.49
43 EAFF (2014), East African Community (EAC) Co-operative Societies Bill 2014 Background Paper at pg. 2
45 Ibid, page 3
46 Ibid, according to the author, in 2013 in Tanzania, Savings and Credit Co-operative Societies (SACCOS) held savings of up to USD 23 Million. In 2012 in Kenya, total loans from SACCOS to members were USD 2.6 Billion. It is also pointed out that co-operative sector growth is very promising. In four EAC states (Kenya, Rwanda, Tanzania and Uganda), the number of registered co-operatives has increased by 33% from about 24,000 in 2005 to 33,000 in 2008.
47 EAFF (2010), The Analytical Study of the Co-operative Acts of Eastern Africa (Ethiopia, Kenya, Uganda) EAFF: Kampala
48 Ibid, the commissioning of the study followed the EAFF project on “Support to Farmers’ organizations and agricultural policy processes in Africa’’ which inter-alia aimed at strengthening the role played by farmers organisations in the making and implementation of different Policies on Agriculture, Rural Development and Trade at National, Regional and Continental level.
49 Ibid. Page 4
The study was expected, inter-alia, to come up with the reasons why the Ethiopian Co-operative Societies Act was regarded as the best co-operative legislation was amongst the study legislations. 50 The study was also expected to come up with the model Co-operative Societies Act from which feasible recommendations would be made to the study countries.51 On its findings, the study indicated that the Ethiopian co-operative legislation was the best model because it cherishes the member driven co-operative movement.52 The study made a specific recommendation to the EAFF to promote a regional Co-operative Policy to be embraced by the Heads of State of the EAC Partner States and the African Union.53
The recommendation aforementioned motivated the EAFF to advance its further efforts towards the EAC law on societies. In 2011, the EAFF commissioned a committee of experts to draft a Bill. The committee of experts indeed drafted the Bill. After a draft Bill was prepared, the EAFF worked hand to hand with the member organisations, including the National co-operative movements in adding input to it.54 Following various workshops and inputs received therefrom, the EAFF presented the Draft Bill for the first time to the EALA in 2012.55 The Draft Bill, namely the EAC Co-operative Societies Bill, was received and discussed by the EALA Committee on Agriculture, Tourism and Natural Resources.56
Because of the procedural requirements, the Bill was tabled in the EALA as a private members Bill.57 Later on, national stakeholders’ workshops were conducted for awareness creation and further input additions.58 There were think-tank workshops to further the discussion on the Bill. The latter included the national umbrella organisations, co-operative universities of Kenya and Tanzania and government ministries.59 It was for the first time in
52 Ibid, page 37
53 Ibid, page 43
54 EAFF (2014), East African Community (EAC) Co-operative Societies Bill 2014 Background Paper at pg. 2
57 Ibid, a bill in the EALA can either be a Community or a private members’ Bill. Thus, one member of the EALA sought a leave of absence to develop the Bill and the same was granted.
58 Mugoya, M., (2014), East African Community Co-operative Societies Bills 2014: Presentation to Tanzania’s National Stakeholders Workshop, A Paper presented at the Royal Hotel, Dodoma in 30th June 2014. The workshop was organised by the East African Farmers Federation (EAFF)
January 2014 that the Bill was read by the EALA in Kampala, Uganda. A year later, i.e. in January 2015, the EALA passed the Bill. And as earlier noted, the Bill is awaiting the signatures of the Head of States for it to become an Act of the Community.60
4.3 The Salient features of the Bill and the Implications on the Tanzanian and Other Partner States Co-operative Legislation.
Generally, the Bill provides for the objectives of societies; formation and registration process; rights and duties of the members; the organs responsible for the management of societies; assets and funds; audit and inspection; dissolution and winding up; settlement of disputes and other miscellaneous provisions. Only the select features are ones under the current discussion.
4.3.1 The Bill and the Co-operative Principles and Values
As earlier noted, the Bill has been crafted with a view of providing a legal framework for societies in the EAC.61 It is noteworthy to state that the drafters of the Bill have taken aboard the co-operative principles and the ethical values.62 The Bill caters for the guiding principles which all societies to be registered thereunder, once the Act of the Community, are required to abide with.
The principle of voluntary and open membership;63 democratic member control;64 member economic participation;65 autonomy and independence;66 education training and information;67 cooperation among cooperatives;68 and concern for community69 have been included. Even though the wording is not the same, the provisions of the Bill on co-operative principles and values are in pari-materia with those under the Co-operative
60 Article 62 (2) of the Treaty for the Establishment of the EAC provides that when the Bill is passed by the Assembly, the speaker has to submit it to the Heads of State for assent.
61 See: the Long title to the Bill
62 Clause 4
63 Ibid, sub-clause (2)
64 Ibid, sub-clause (3)
65 Ibid, sub-clause (4)
66 Ibid, sub-clause (5)
67 Ibid, sub-clause (6)
68 Ibid, sub-clause (7)
69 Ibid, sub-clause (8)
Societies Act, 2013.70 Thus, the Bill, once an Act of the Community, will not substantially affect the provisions on societies’ principles and values.
4.3.2 Objectives, Formation and Registration of Societies
Societies are formed for various reasons. The objectives of forming societies are numerous but the major of all is that of solving problems collectively.71 This is for the problems which the members cannot solve in their individual capacities.72 Besides the solving of the members problems, there are other objectives enumerated by the Bill. At the EAC level, societies can be formed for purposes of coordinating knowledge, skills and wealth of the members for better results.73
Similarly, societies may be established for the promotion of self-reliance amongst members, their collective protection and solution to economic problems.74 And societies may also be formed with a view of improving the living standards of the members.75 Other objectives on which societies may be formed at the EAC level targets the expansion of the mechanisms on which technical knowledge can be put in practice,76 the developing of the saving and credit societies,77 developing the social and economic culture of the members78 and empowering members to have ownership along commodity value chains.79
The objectives, as highlighted above, expands the general object under the Tanzania Co-operative Societies Act, 2013 which is based in the promotion of the economic and social interests of the members.80 Consequently, the expansion of the objectives, as provided for in
70 See: Section 3 (2) of the Co-operative Societies Act, 2013. The section provides for the Co-operative principles and methods which are supposed to be used in the operation and administration of societies.
71 See: Clause 3
73 Ibid, para (b)
74 Ibid, para (c) and (d)
75 Ibid, para (e) According to the Bill, the reduction is by the reduction of production and service costs. The aforesaid reduction is by provision of input or service at a minimum cost or by finding a better price for societies’ products or services.
76 Ibid, para (f)
77 Ibid, para (g)
78 Ibid, para (i)
79 Ibid, para (j)
80 See: section 3(1) of the Co-operative Societies Act, 2013
the Bill, will have impact on the Tanzania co-operative legislation, once the latter becomes an Act of the Community.
For the formation, the Bill has made it possible for a society, based on its nature, to be established at different levels.81 The establishment aforementioned is as may be determined by the members themselves.82 However, the Bill contains a provision which suggests for the establishment of a national apex co-operative organisation in the territories of the Partner States.83 Societies formed are supposed to be registered at the appropriate authority in the Partner State.84
For the society to be registered, it is required to submit minutes of the founder meetings, the bye-laws of the society and the names, addresses and signatures of the members.85 Together with the aforementioned, a society is also required to submit the particulars of the Board of Directors, a detailed description of membership compliance to Acts and documents showing the capital of the Society and its deposit to a bank account or any other designated place.86 The appropriate authority is required to register a Society and issue the certificate of registration within fifteen (15) days after the authority satisfaction on societies’ fulfillment of requirements for registration.87
Under the Bill, power is conferred to the appropriate authority of the Partner State to suspend a registered society.88 Where a Society is dissatisfied by any of the decisions of the Authority regarding its registration, its General Assembly may appeal to the High Court.89
81 Clause 5. Under sub-clause (2) societies level may be Primary and National. Thus, societies may be established at the Primary level and the National levels in the Partner States.
83 Ibid, sub-clause (3), the establishment of societies apex organisation is with a view of organizing the key roles in terms of promotion, policy and legislation formulation and review and serving as a platform for societies at the national level.
84 In accordance with the provisions of Clause 2 of the Bill, an appropriate authority is construed as an organ established at any level in a Partner State, to organise and register cooperative societies and to give training, conduct research and provide other technical assistance to cooperative societies.
85 Clause 7 (2) (a and b)
86 Ibid, para (d, e and f). There may be a specification of other particulars or documents to be submitted as provided for under para (g) of the same Clause.
87 Clause 7(3)
88 Clause 7(8), the suspension is for the causes related to operating out of the established objectives
Under the Tanzanian Co-operative Societies Act, 2013 societies may be formed at the grass root and the top level.90 Formation of societies is at the primary level and the federation.91 In terms of registration, the relevant authority is the Registrar of societies.92 Societies are required to submit, to the Registrar, copies of the by-laws, a report of the feasibility study or project write up and any other information, as may be prescribed by the Registrar.93 The application is to be considered within sixty (60) days from the date of its submission.94
If the Bill is passed into an Act of the Community, there will be changes in terms of the requirements for registration in the Tanzanian co-operative legislation. The list of documents necessary for registration, as provided for, in the Bill will replace the one required under the Co-operative Societies Act (supra).
Similarly, the Partner State authority, in the Tanzanian case, the Tanzania Co-operative Development Commission, time limit for consideration and issuance of the certificate of incorporation will be subject to the Bill. This is to say, the fifteen (15) days rule will apply.95 However, what remains a puzzle is the time under which the Partner State authority satisfaction that a particular Society has fulfilled the conditions for registration. 96
4.3.3 The Management of Societies
Management of societies is one of the pertinent and critical area in co-operative legislation. The Bill has provisions pertaining to the management of societies. According to it, societies are to be managed by the General Assembly, the Board of Directors and the Control Committee.97 The General Assembly is the top organ of societies and the Board of Directors and the Control Committee are responsible and accountable to it.98 For the Board of
89 Clause 7 (1)
90 See: Section 19 (1) of the Co-operative Societies Act, 2013
91 Ibid, however, under the provisions of section 19(2), middle level and secondary societies may be formed at the wishes of the members.
92 See: Section 30 of the Co-operative Societies Act, 2013
93 Ibid, 1 (a, b and c)
94 See: Section 31 (1)
95 For the issuance of the certificate of incorporation by a Partner State authority upon a satisfaction that the Society has fulfilled the requirements for registration.
96 Opcit, note 88
97 See: Clause 21 and 23
98 See: Clause 21 (1) and 23(1)
Directors, the Bill has left the manner of election of the members to be determined by the bye-laws of the society itself.99 After being elected, their term of office, according to the Bill, is three years.100 It limits, however, their election to two consecutive terms.101 Interesting is the requirement of submission for inspection by the vacating board members. It is provided that where a member of the Board of Directors vacates office, for whatever reason, he is required to submit for inspection, the activities which he performed during his term of office.102 The Bill vests powers to the General Assembly to dismiss, at any time, the members of the Board of Directors.103
The Control Committee, on the other hand, is established and regulated by the provisions of Clause 23 of the Bill. The Bill, however, does not prescribe for the number of the members who are to constitute the Committee. It leaves the same to be fixed by the bye-laws of societies.104 The members of the Committee are supposed to be elected for the term of three (3) years.105 However, their tenure is limited to not more than two consecutive terms.106 Predominantly, the Control Committee is required to ensure that the Board of Directors is carrying out its responsibilities properly; the funds and property of the society is properly utilised; and that the various activities of the society are carried out pursuant to the bye-laws and the regulations of the society.107
The Bill has left room for societies to establish other sub-committees as circumstances require. However, the sub-committees have to be established pursuant to the bye-laws of the society.108 The Bill does not cater for the qualifications of the members to the Board and the Control Committee. It has left it as a matter to be addressed by the Partner States legislation and societies’ bye-laws.
99 Clause 21(2)
100 Clause 21 (3)
101 The implication brought by the provision is that someone may be re-elected but not to the third consecutive term.
102 Clause 21 (5)
103 Clause 21 (4)
104 Clause 23(2)
105 Clause 23(3)
107 Clause 24, together with the functions, the Committee is required to perform other duties which may be assigned to it by the General Assembly.
108 Clause 25
Management of societies is one of the critical area in Tanzania and East Africa, generally. Over time, studies have revealed the unsuccessfulness of most of societies. The latter is attributed to poor leadership.109 The Bill inclusion of the Control Committee for societies will have a positive impact on the Co-operative legislation of the Partner States, Tanzania in particular.110 The Co-operative Societies Act, 2013 provides for the management of societies in Tanzania.111 The Act vests the management of societies in the hands of the Board.112 Under it, there is no usage of the board of the directors. The Board of the Society, under the Tanzanian law is generally termed as the Board with a view of distinguishing it with those of the other corporations. The Board is under the control of the general meeting of the members.113 Thus, with the Bill becoming an Act of the Community, the Control Committee will be an organ of societies, regardless of their nature of activities.
4.3.4 Societies Access to Land
The EAC Partner States, through the Bill, have provided room for societies to access land as an incentive for the business expansion.114 Consequently, societies which are to be organised and registered under the Act, once the Bill is assented, will be entitled to access land from the government.115 The access of the land aforementioned is required to be in accordance with the national policies and laws of the Partner States.116 The incentive is not automatic for every society. There are criteria which are set by the Bill.117
There are four main criteria grounded on the existence post registration, audit, nature of society activity and the ability to pay dividend.118 So to say, to access land as an incentive, a society is required to have been registered for at least five (5) years. Alongside the five years existence, the society is required to have, at least, three (3) years of accounts audited by an
109 See: J. Banturaki, (2012), Tanzania Co-operatives: Their Role in Socio-Economic Development, at page 25; also H. Musahara, Perspectives in Co-operatives with Reference to Rwanda at page 9
110 Control committees have been there but mostly on the Savings and Credit Co-operative Societies (SACCOS). For other types of societies the committees have not been common.
111 See: Section 68 of the Act.
112 Ibid, sub-section (1)
113 See: Item 1 to the Third Schedule, the Co-operative Societies Act, 2013.
114 Clause 29
115 Ibid, sub-clause (1)
117 Ibid, sub-clause (2)
118 Ibid, paragraphs (a), (b), (c) and (d)
accredited audit company. The society is also required to be engaged in an activity for which additional land will add value to its objects and activities. And lastly, the society is required to demonstrate that it has paid dividends to its members for the past three years.
Thus, using the relevant laws and policies of Partner States societies may access land for their expansion. However, this will be challenging having in place varying land laws with provisions on non-acquisition by foreigners except for investment.119 With the land laws of Tanzania, as they stand, where a primary society is established at the EAC level and meets the criteria aforementioned, the granting of land as incentive for business expansion would be challenging. Similarly, the drafters of the Bill intention on business expansion would determine whether or not the granting of land to societies will be one suiting the prerequisite investment for societies to be established under the Act of the Community to operate on the territories of other Partner States.
4.3.5 Tax exemption
The Bill contains a provision on tax exemption for societies.120 This is, however, without prejudice to incentives permitted under investment laws or tax laws in the Partner States.121 The exemption is sole for corporate tax and value added tax.122 The previous, i.e. the exemption for corporate tax is for societies whose annual income does not exceed USD 500,000.123 The latter is for societies whose annual income does not exceed USD 1,000,000.124
From the foregoing, the Bill does not intend to predispose incentives for exemptions which are permitted under the relevant laws of the Partner States. In Tanzania, the Co-operative Societies Act, 2013 provides for duty or tax exemption.125 The exemption is the discretion of the Minister responsible for finance.126 The Minister may remit or reduce duty, tax or
119 A good example are the Tanzanian Land Laws. The Land Act 1999 bars foreigners to own land in Tanzania except for investment.
120 Clause 30
122 Ibid, paragraphs (a) and (b)
123 However, individual members are not part to the exemption as they are required to pay tax
124 Opcit, note 123
125 See: Section 67 of the Act
value added tax which may be payable in respect of the accumulated funds of the society or dividends or other payments received by the members on account of the accumulated fund. Similarly, the Minister may remit or reduce stamp duty on instruments executed by a society or a class of society.
Though the provisions of the Bill expressly provides for lack of an intention to predisposing the exemptions permitted under the relevant laws of the Partner States, yet it creates a uniform code of the corporate tax and value added tax exemptions in the EAC.
By permitting exemptions for corporate tax to societies whose annual income does not exceed USD 500,000 and value added tax for societies whose annual income does not exceed USD 1,000,000, the Bill, once an Act of the Community, will do away with the varying and discretional powers in societies’ exemptions under the Partner States legislations, Tanzanian in particular.
4.3.6 Lending and Borrowing
The Bill stipulates for lending and borrowing powers of societies’. It limits societies’ lending powers to the members and societies established under it.127 Societies are thus prohibited to extend loans other than to its members or a society to be established thereunder.128 For the case of borrowing, societies are allowed to borrow from its members and other organisations.129 However, the borrowings are supposed to be on such extent and conditions as may be specified in their bye-laws.130
The provision on restriction to lending is similar to that in Tanzania.131 The Tanzanian legislation subjects restrictions on lending in the hands of the Registrar. And unlike the Bill, the legislation allows the extension of loan services to another registered body.132 The provisions of the Bill on borrowings are similar to those under the Tanzanian legislation.133
127 Clause 34
129 Clause 33
131 See: section 72 of the Co-operative Societies Act (supra)
132 Ibid, section 72(7). The extension of loans to other registered body, is subject to the approval by the General Meeting of the members.
133 See: section 73 of the Co-operative Societies Act (supra)
Societies may receive deposits and loans from persons who are not members.134 The provisions of the Bill, on lending and borrowing, implies that societies will be able to offer loans and also to borrow from one another at the EAC level. It will be possible for societies in the Republic of Rwanda to provide loans to societies in the Republic of Burundi. The same will be possible to all other Partner States. 135
Similarly, societies may borrow from members and organisations in the Partner States. With this, Partner States legislation which limits lending and borrowing amongst members of societies and societies which they establish, will have to be harmonized to be in line with the Act of the Community, once the Bill is signed by the Heads of States.
4.3.7 Loss of or Misappropriation of the Society Property
The Bill also provides for actions which are to be taken when there is loss of or misappropriation of societies’ properties and funds.136 In case of suspicion of loss or misappropriation, there is supposed to be conducted an audit or inspection. An auditor or inspector, as the case may be, is required to report the findings of the audit or inspection, respectively, to the Board of Directors, the General Assembly or appropriate authority.137
The findings are reported when it is found that the person who is or was entrusted with the management of a society, or who is or was an officer or an employee of the society has either made any payment contrary to the law, regulations or bye-laws of the society;138 caused any damage to the assets of the society by breach of trust or willfully or negligently;139 or mis-appropriated the properties of the society.140
Upon receipt of the report, the appropriate authority is required to give the person concerned an opportunity to present his or her defence within fifteen (15) days.141 Where the appropriate authority is satisfied that a person is responsible for the loss or
134 Ibid, however the same must be subject to the Rules, Regulations or the Act.
135 Provided that they are all registered under the Act of the Community.
136 Clause 37
137 Ibid, sub-clause (1)
138 Ibid, paragraph (a)
139 Ibid, paragraph (b)
140 Ibid, paragraph (c)
141 Ibid, sub-clause (2)
misappropriation, it is required to ask him to return the property or re-pay the funds.142 The return and repayment is with interest including compensation and damages.143 The Bill prescribes for appropriate legal measures where the person concerned is not willing to return the property and/or repay the funds.144
Cases of loss, misappropriation and squandering of properties and funds of societies have been reported in Tanzania and other Partner States.145 And, indeed, societies have greatly been affected by such losses and misappropriation. In Tanzania, such cases are handled by the Registrar, upon inquiry, inspection or audit.146 The Co-operative Societies Act, 2013 provides for a government based mechanism under which the Registrar, in discharging his regulatory and promotional roles, addresses the cases.
The provisions of the Bill, as highlighted above, are intending to establish the procedure under which societies will address such cases. The procedure implies that the co-operative movement will have a forum to address its own problems with the use of the relevant societies’ authorities. With the mechanism, it is only when the movement have failed to redress the loss that the appropriate legal measures, under the relevant Partner States laws, will follow. The relevant societies’ authorities will pursue the appropriate reliefs under the Partner States laws.
4.3.8 Settlement of Disputes
Societies’ disputes is another area addressed by the Bill. It provides for the procedure for settlement of disputes regarding the organisation, management, or operations of the society to be formed at the Community level.147 It classifies the types of disputes and the mechanism towards their settlement. According to it, disputes that can be resolved are classified as disputes between members or former members and members;148 members and
142 Ibid, sub-clause (3)
145 The author has practically been involved, not as an officer or member responsible for the loss, in one case involving embezzlement of the Savings and Credit Co-operative Society at the University where he works. The case is ongoing.
146 See: Section 91(1), 95 and 55 of the Co-operative Societies Act, 2013
147 Clause 47
148 Ibid paragraph (a)
representatives of former members or persons claiming in the name of the deceased members;149 members, former members or representatives of former members or heirs of deceased members and any officer, representative of the Board of Directors or employee of the society;150 the society or the Board of Directors and any former Board of Directors, any officer, agent, or employee or any former officer, agent or employee of the nominee heir, or representatives of deceased former members or employees;151 and the society and any other society.152
The disputes aforementioned can be resolved by ways of conciliation, arbitration and ultimately adjudication. The Bill prescribes for reconciliation of parties before a dispute is submitted to arbitration.153 In so far as reconciliation is concerned, each party is required to elect a reconciliation team.154 Similarly, the parties are required to elect a chairperson in accordance with their agreement. And the chairperson of the reconciliation team shall be elected in accordance with the agreement of the two parties.155 However, on parties’ failure to reach an agreement on a chairman, the appropriate authority is required to elect one.156
The Bill prescribes for arbitration in a case where reconciliation has failed.157 The requisites for the arbitration are provided for under the provisions of Clauses 45, 46, 47 and 48 thereto. Arbitration, as provided for in the Bill, is supposed to be done by three (3) arbitrators who are of high reputation and impartiality.158 The three arbitrators are a result of parties’ nomination.159 Each party is required to appoint one arbitrator.160 The third arbitrator is appointed by both parties.161 It is the latter who has to preside over as the chairperson.162
149 Ibid, paragraph (b)
150 Ibid, paragraph (c)
151 Ibid, paragraph (d)
152 Ibid, paragraph (e)
153 Clause 44 (1)
154 Clause 44 (2)
156 Clause 44(3)
157 Clause 45(1)
158 Clause 45 (2)
159 Clause 46 (1)
In a situation where parties have failed to exercise their right of appointing the third arbitrator, who is to act as the chairperson, the appropriate authority of the Partner State will appoint for them.163
Notably, the arbitrators are required to conduct their hearing and perform their duties in accordance with the Civil Procedure Code or similar law in the Partner State.164 In arbitrating, the arbitrators are vested with powers similar to the powers vested to a civil court.165 They can thus summon witnesses, require production of evidence, issue orders and take any legal measures.166 The decisions of the arbitrators are appealable to the courts of law. The Bill provides room for appeals against the decisions of the arbitrators. The same can be instituted in the High Court or a court with similar powers to the local government where the Society is situated.167 The Courts referred to are the courts of a Partner State.168
The Co-operative Societies Act, 2013 does not provide for the similar classification of the disputes. It generalize disputes as disputes arising from co-operative societies.
The dispute settlement mechanism set above is different from that in Tanzania. Under the Co-operative Societies Act, 2013, all the disputes and complaints arising from the co-operative societies are supposed to be settled by the Tanzania Co-operative Development Commission.169 Before the Co-operative Societies Act, 2013, societies’ disputes were settled by the Registrar.170 With the new legislation, the Commission, while discharging its regulatory function, is responsible for the settlement of such disputes. Be as it may, the eyes on, hands off rule, requiring the government to observe and not to interfere, has not been practical with the government being central to the settlement of such disputes in Tanzania.
The mechanisms, as provided by the Bill will be suitable for the Partner States co-operative legislation, Tanzanian in particular. The mechanisms under the Bill will be beneficial to
163 Clause 46 (2)
164 Clause 45 (3)
165 Clause 48
167 Clause 49
169 See: Section 8 (2) (a) (V)
170 Under the Co-operative Societies Act, 2003.
societies. This is for, inter-alia, the reason that the Bill fosters the amicable settlement of disputes through the use of Alternative Dispute Resolution (ADR) mechanisms. So to say, the mechanisms offers important avenue on which the co-operative movement will have the control of its own affairs.
4.3.9 Proposed Establishments of Societies Agency
The Bill provides for the establishment of an agency which will be responsible for various aspects related to societies at the EAC and Partner States level. The agency aforementioned is one responsible for organising, registering, promoting or supporting societies. The agency is expected to be responsible for rendering training, conducting research and other technical support within the co-operative industry.171
However, the establishment of the agency is left to be a matter to be dealt with by the particular law.172 The establishment lies with the resolution to be made by societies National apex organisations.173 On the establishment, it is required that half of the members constituting the Board of this agency shall be selected from societies.174
The Bill is silence on the time of establishing the agency and the law for the establishment is noted. As it appears, the establishment of the agency depends on the resolutions of the National apex organisations. This implies that, where the Partner States apex organisations will not resolve to that effect, the agency may not be formed. However, where two or more National apex organisations resolve for such establishment, the particular law will be enacted. The principle of variable geometry may be applied in the particular context.175
4.3.10 Precedence of the Act and Regulations by Council
The Bill, being the proposed co-operative law of the Partner States, will take precedence over the Partner States’ Co-operative legislation upon its enactment.176 This is in respect to
171 Clause 52
173 Ibid, sub-clause (2)
174 Ibid, sub-clause (3)
175 See: Article 7 (1) of the Treaty for the Establishment of the EAC, 1999. The principle of variable geometry allows for progression in co-opera t ion among groups within the Community for wider integration schemes in various fields and at different speeds
176 Clause 52
the provisions to which they relate.177 This implies that the Co-operative societies’ legislation of the Republics of Kenya, Uganda, Rwanda, Burundi and that of Tanzania, when in conflict with the Act, the latter will prevail.
5.0 CONCLUSION Form the foregoing it is evident that the Bill raises some implications on the co-operative legislation of Tanzania and other Partner States. Once signed by the Head of States of the EAC Partner States, the provisions will be binding on the Partner States.178 This therefore suggests that the regulation of societies will be done at the EAC level. The formation, management, audit, dispute settlement and other matters pertaining to societies will be subject to the EAC legislation. And with the latter made possible, primary co-operatives from the different EAC Partner States will be allowed to form a regional co-operative union. Similarly, individuals from different countries will be able to form one co-operative. It is promising that forming co-operatives at the Community will be without complicated procedures and less administrative, legal and fiscal costs.179
There are, however, some observable challenges in the Bill and which are to be looked at. Some of the provisions conflicts each other.180 As well, the practicability of some of the provisions of the Bill, once an Act of the EAC will be challenging. This is in, among other areas, on the forming and regulating of the regional co-operative organisation and the primary co-operative societies by individuals from different Partner States. Certainly, variations in terms of the Partner States’ co-operative legislation will have to be addressed to suit the uniform needs of the co-operative legal framework at the EAC level. For the spirit in the drafting of the Bill were the Co-operative principles and values, the same should guide the EAC Partner States when the right time arrives.
177 Ibid, and for giving effect the provisions of the Act and for the proper carrying out of the provisions therein, the Council of Ministers of the EAC is empowered to enact Regulations (See: Clause 53)
178 This is subject to ratification and domestication.
179 Currently, it is very costly to operate business beyond border. There has to be a registration of separate business entities in each member state and compliance with differing national requirements.
180 For instance, the provisions of Clause 26 and Clause 42 create a confusing interpretation. The two provisions provides for the priority of claim and protection of creditors respectively. The previous provides that the debt owed to the society by its members shall be paid before all other debts (save as for the debts of the government). The provision on the protection of creditors, on the other hand, bars the liquidator to distribute any assets to the members of the society until and unless the creditors have been paid.
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