Focus on Rights

Whither goes the 'co-operative of the poor'?
The revival of the Co-operative Wholesale Establishment (CWE) under the rubric of taking this 'co-operative of the poor' back into the folds of the Government as per the recently announced ministerial objective, is certainly laudatory.

However, if this badly ailing giant, (once the mainstay of the less economically privileged sections of our society), is to be enabled to recover, even to some extent, its former reputation as a profitable retail and wholesale dealer in reasonably priced consumer products, much more needs to be accomplished than the mere issuance of populist promises of revival.

The corruption and inefficiency plaguing the CWE is often taken as symptomatic of the malady affecting government institutions to which privatisation has been offered as the immediate and apparently logical solution. While the first part of that assertion is undoubtedly correct, the same need not be so of the second. Corruption and inefficiency are not eternal phenomena that are incapable of being eliminated from government institutions provided that a process of genuine resurgence is initiated.

Insofar as the CWE is concerned, though attempts will inevitably be made to pass the buck as it were from one side of the political divide in this country to the other, the blamegame cannot be confined to one party alone. Analysis of the Auditor General's Reports in relation to the CWE would reveal that up to the year, 1994, the CWE was a profitable institution wherein the wholesale turnover, (the main business contributing factor to the profitability of the CWE) was seventy percent of the total turnover. Subsequently, the decline in profitability was so stark as to amount to the wholesale turnover contributing only thirty percent of the total turnover in 2002 (see Auditor General's report for 2002).

Thereafter, the process had not changed appreciably for the better. The purported restructuring of the CWE by a new political regime in early 2002 resulted in the formation of seven companies under the Companies Act No 17 of 1982, (with the objective being to establish four more companies later), but allegations of mismanagement continued to bedevil the establishment.

While these new companies formed included an entity titled the Sathosa Management Services Company, (established apparently in order supply specialised management services to the CWE on a commercial basis), the Auditor General's report unequivocally states that "it was not possible to be satisfied in audit that the deployment of officers of this company had contributed to the overall efficiency of the establishment", despite payments of a considerable nature being made to the company by the CWE for its services. The capability and educational qualifications of those employed into the company has also been queried by the said report.

In addition, if one takes the audit report for 2002 as an example, this points to various irregularities that continued to occur during the period under review, including unapproved borrowings from banks amounting to Rs. 495.7 million, sale of imported rice at a lower price without proper authority and the purchase of inferior quality paddy from local purchase centres with the connivance of officers of the CWE while genuine farmers had been unable to sell their paddy to the establishment and under the title of 'uneconomic transactions.'

Other irregularities include expenditure amounting to Rs. 23,350,439 on a supposed renting of premises has been highlighted, as a result of the failure of 'lawyers who executed the agreement to point out' that in fact, the company that rented out the said property had no legal authority to do so.

In similar vein, the Auditor Generals Report of 1999 refers to 'lack of evidence for audit', 'non-compliance with laws etc' and 'uneconomic transactions' as separate sub-headings in its report. 'omissions in the accounts' which refer to certain detected understatements, 'fruitless expenditure' and 'idle and underutilized assets'. These reports bear succinct testimony to the extent of the fundamental problems affecting the once premier co-operative institution in the country.

The other hugely worrying impact of the degeneration of the CWE has been the human cost. As a result of the purported restructuring of the CWE, this country has been witnessing ongoing agitation campaigns by CWE employees over the recent years. They complain that they were being forced to resign from the CWE consequent to the restructuring with only their EPF, ETF and gratuity but without reasonable compensation being offered to them. Some three thousand, six hundred employees of the CWE have also pointed out that their right to natural justice has been violated inasmuch as they were not substantially involved in the decision making process at any stage despite the process concerning matters affecting the fundamental basis of their employment.

While some of these employees are in currently in court on these issues, their legal complaints also include the question as to whether the formation of the companies under the Companies Act was contrary to the CWE Act, read together with the provisions of the Conversion of Public Corporations or Government Owned Business Undertakings into Public Companies Act No 23 of 1987 and the legislative intent contained in those acts.

The essential basis for their objection is that the two laws stipulate a clear procedure for the restructuring of the CWE whereby the CWE would be converted into a public company in terms of the provisions of the said Conversions Act No 23 of 1987 and subsidiary companies would be subsequently floated to take over the activities of the CWE and which procedure had not been followed in the instant case. They allege that the entirety of the process of the said restructuring, (in effect a 'privatization'), has been flawed due to lack of transparency and irregular transactions.

The recently announced objective of the current political regime in halting the re-structuring (or, as some would prefer to call it, the privatizing) of CWE would undoubtedly impact on these issues. However, the question of accountability for corruption and mismanagement remains outstanding. While one does not mean by this that a witch hunt should be engaged in for the purposes of political mileage, it is important that if the government commitment to revive the CWE is genuine this time around at least, it should ensure that the future working of this giant establishment is free from such startlingly high levels of corruption and inefficacy.

In the alternative, its mere return to the state sector would only accomplish very little other than a continuing drain on public resources notwithstanding grandiose ministerial pronouncements.

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