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Co operative Banks Development Agency

Strategic PlanFor the fiscal years

2018/19 – 2020/21

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January 2018

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Official sign offIt is hereby certified that this Strategic Plan:

Was developed by the board and management of the CBDA.Takes into account all the relevant policies, legislation and other mandates for which the CBDA isresponsible.Accurately reflects the strategic outcome oriented goals and objectives which the CBDA willendeavour to achieve over the period 2018 2021

MS OLAOTSE MATSHANEMANAGING DIRECTOR

MR DESMOND GOLDINGACCOUNTING AUTHORITY

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Contents

Part A: Strategic overview.............................................................................................................. 4

1. Vision ..................................................................................................................................... 42. Mission .................................................................................................................................. 43. Values .................................................................................................................................... 75. CBDA Vision 2020 ................................................................................................................... 96. Situational analysis................................................................................................................117. SWOT analysis.......................................................................................................................128. Strategic imperatives: Implementation of “Vision 2020” .......................................................16

Part B: Strategic objectives ...........................................................................................................26

10. Programme 1 (Administration) ..............................................................................................2611. Programme 2 (Capacity Building)...........................................................................................2712. Programme 3 (Central Support Services) ...............................................................................28

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Part A: Strategic overview

1. Vision

To facilitate financial inclusion, economic transformation and sector competitiveness to grow the cooperative banking sector.

2. Mission

The mission of the Co operative Bank Development Agency (CBDA) is to develop the co operativebanking sector through the:

Provision of innovative capacity development and support to CFIs and their members.Promotion of co operative banking and the co operative philosophy and principles.Enhancing operational capability and discipline in the CFI sector.

High-Level Log Frame

UltimateOutcome/ impact:

Outcomes

Intermediate Outcomes

ImmediateOutcomes

Economic and Social Well-being of Financial Co-operative Members and their Communities

To facilitate financial inclusion, economic transformation and sector competitiveness to grow the co-operative banking sector.

Growing, sustainable, well managed CFIs

Improved financial services access and utilisation

Effective and growing

membership & deposits

Effective banking platform

system facilitatingelectronic banking

Development of existing and new

CFIs

Diversified,appropriate

products and service

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3. Values

The CBDA values:Passion: to be driven and dedicated with a sense of urgency and encouraging full participationand a spirit of celebration;Integrity: to be honest, frank, accountable and transparent;Mutual respect: to be trustworthy, selfless, willing to serve and compassionate with sharedvalues and a respect for decisions;Commitment to solidarity and co operation: to be committed to teamwork, which includesbeing supportive, having a common purpose, sharing information and taking responsibility;Excellence: to be value adding, diligent, professional, punctual and competent. It includesgiving attention to detail and having a commitment to knowledge and learning; andConfidentiality: in dealings with all stakeholders.

4. Legislative and other mandates

4.1 International conventions

There are currently no international conventions which the CBDA must comply with. However, theCBDA does endorse a number of initiatives including the following:

4.1.1 International Co operative Alliance: Blueprint for a Co operative Decade

The International Co operative Alliance (ICA) is a non governmental co operative federationrepresenting co operatives and the co operative movement worldwide. It is the custodian of cooperative values and principles and makes the case for their distinctive, value based economicbusiness model. In January 2013, the ICA launched the blueprint for a Co operative Decade. The planin the blueprint the “2020 Vision” is for the co operative form of the business to become:

a) the acknowledged leader in economic, social and environmental sustainability;b) the enterprise model preferred by people; andc) the fastest growing form of enterprise.

The “2020 Vision” seeks to build on the achievements of the International Year of Co operatives andthe resilience demonstrated by the co operative movement during the global financial crisis. TheBlueprint has 5 interlinked and overlapping themes that represent priority areas for the ICA globally.The themes are outlined in Diagram 1 below:

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Diagram 1: Summary of the “Vision 2020” Blueprint Strategy

Source: Blueprint for a Co operative Decade (ICA: 2013)To pursue the 2020 Vision the Blueprint strategy therefore involves concentrating on these five criticalinterlinked themes. The ICA states that “the challenge now is for the ICA, national bodies, sectorgroups, co operative societies and individual members to take this blueprint forward intoimplementation”. These themes are relevant for the CFI sector in South Africa, and the CBDA is anintegral part of the network of stakeholders that needs to make this strategy a reality. According tothe ICA, implementation of this strategy entails:

a) Elevating participation within membership and governance to a new level.b) Positioning co operatives as builders of sustainability.c) Building the co operative message and securing the co operative identity.d) Ensuring a supportive legal framework for co operative growthe) Securing reliable co operative capital while guaranteeing member control

4.2 International Labour Organisation: Promotion of Co operatives Recommendation 193, 2002

The International Labour Organisation (ILO) is a specialised agency of the United Nations with the aimto promote rights at work, encourage decent employment opportunities and strengthen dialogue onwork related issues. Recommendation 193 provides a framework for co operatives and applies to alltypes and forms of co operatives and provides guidance on co operative policy framework and the roleof governments, implementation of public policies for the promotion of co operatives, and the role ofemployers' and workers' organisations and co operatives and the relationship between them. It isimportant to note that South Africa is a member of the ILO and therefore bound by this agreement.

Identity

Participation Sustainability

LegalFrameworkCapital

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4.3 Legislative mandates

4.3.1 Co operative Banks Act (no 40 of 2007)The Financial Services Laws General Amendment Act was passed by Parliament on 12 November 2013and was promulgated in Gazette No. 37237 of 16 January 2014. The Financial Sector Regulation Act(FSRA) was signed into law on 21 August 2017. The FSRA brings into effect the “Twin Peaks” frameworkfor the establishment of a prudential regulator, which will be known as the Prudential Authority (PA),and amarket conduct regulator, whichwill be known as the Financial Sector Conduct Authority (FSCA).As a result of these changes, the CBDA Supervision Unit relocated to the South African Reserve Bank(SARB) where the PA will be located. This relocation took place on 9 October 2017 and the relocationof the actual function is envisaged to be 1st April 2018.

The CBDA and the Supervision teams at the SARB are busy with the development of a new regulatoryframework for CFIs envisaged to be finalised by the end of this calendar year. That means the currentregulatory framework for CFIs (including co operatives) will change.

4.4 Policy Mandates

The CBDA’s policy mandates are embodied in the Co operative Banks Act (No 40 of 2007) in terms ofwhich the CBDA was established. It is expected that co operative banks and other CFIs will contributetowards (i) government’s financial inclusion1 policy priority and (ii) creating diversity and therebypromoting competition within the banking sector4.

4.5 Planned Policy Initiatives

There are a number of National Treasury policy initiatives that will impact the future work of the CBDA.

During 2014, the National Treasury and the CBDA embarked on the second round of revisions to theCo operative Banks Act (No 40 of 2007) to provide for the consequential changes brought about bythe Financial Services Laws General Amendment Act. One of the main revisions will be the removal ofthe clause that makes provision for the establishment of the Deposit Insurance Fund for co operativebanks within the CBDA. National Treasury and SARB are working on the establishment of a singledeposit insurance fund scheme that protects all bank depositors including those of co operative banksand CFIs.

4.6 Co operative Banking Strategy for South Africa

In the 2018/19 financial year, the CBDA will work on the development of a well founded, supportedand defensible Co operative Banking Strategy for South Africa. The strategy will clearly map, the roleof co operative banking in the transformation of the financial sector but also the economy broadly;how co operatives can be used as tools to tackle poverty, unemployment, and inequality in thecountry and how co operative banks can be used as conduits to create synergies between the formaland the informal sectors of the SA economy. The strategy will also outlive Vision 2030 for the sector.

1 Financial inclusion is about ensuring that all South Africans have access to financial services that encouragethem to manage their money, save for the future, and obtain credit and insurance against unforeseen events.This is especially important for low income households.

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Informed by this national strategy, a business case will need to be developed that will lay out the roleand design of the CBDA. This business case will detail themost appropriate functions of the new CBDA,the most suitable corporate form, and human, operational and financial resources needed to executethis strategy. This business case will also include a new and viable business model for the CBDA goingforward. This work is in the process of being costed by the Government Technical Advisory Centre(GTAC) with the intention to outsource to a service provider.

4.7 National Development Plan & Medium Term Strategic Framework

The National Development Plan (NDP) is a broad strategic framework for the country towards vision2030. It sets out a coherent and holistic approach to confronting poverty and inequality. It aims toreduce poverty and inequality by broadening opportunity and employment through economicinclusion, education, skills and specific redress measures; promote mutual respect and inclusiveness.

The Medium Term Strategic Framework (MTSF) is Government’s strategic plan for the 2014 2019electoral terms and reflects government’s commitment to implement the NDP.The MTSF highlights government’s support for a competitive economy, creation of decent workopportunities and encouragement of investment. The introduction of a long term plan brings greatercoherence and continuity to the planning system and means that the MTSF now becomes a five yearbuilding block towards the achievement of the vision and goals of the country’s long term plan. TheMTSF outlines 14 key outcomes and associated activities and targets.

Alignments of the CBDA objectives with the MTSF are in the following areas:

a) Theme: Radical Economic Transformation:A macro economic and financial framework to support employment creating growth.

On this outcome, the framework asserts that Banks will be encouraged to broaden access tofinancial services to enable people to build up their assets, small businesses to emerge and grow.Furthermore it states that measures will be introduced to address poor lending practices andexcessive charges in some parts of the financial sector and make the financial sector moreinclusive and accessible. Government will further continue to strengthen the regulation offinancial institutions to ensure that savings are protected and customers are treated fairly.

Expanded opportunities for historically excluded and vulnerable groups, small businesses and cooperatives. On this outcome government commits to strengthen support for co operatives. It istherefore important to view the CBDA strategic objectives in line with the MTSF since financial cooperatives have a key role to play in achieving the outcomes outlined in the MTSF.

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5. CBDA Vision 2020

Strategic Objectives for 2016/17 and beyond

Financial co operatives offer diversity of financial services in South Africa by offering amember ownedand controlled empowerment based model as an alternative to the highly concentrated formalfinancial banking sector. Through the development of new CFIs and supporting the growth of existingCFIs, the CBDA intends to target close to 150 000 potential members and mobilising R500 millionworth of savings within the next five years or so. This will result in a more inclusive banking modelwhere the financial sector is within the reach of ordinary South Africans control reflecting a broadbase of ownwership.

Diagram 2: Targeted membership growth and savings growth by 2020

The strategic focus of the CBDA from 2014/15 onwards is to attract salaried andmiddle income groupsinto the CFI sector in order to build models with a strong capital base that can support the smallerrural based CFIs. This approach will enable the CBDA in collaboration with the sector itself to build anintegrated National Co operative Banking System consisting of primary financial co operatives linkinginto a network of secondary co operative banks at provincial level in the short to medium term andpossibly a tertiary co operative bank at national level in the longer term. See diagram No 4.

A strong network of CFIs is necessary for the sector’s viability. The co operative banking network willbe made possible with the formation of CFIs for public sector employees, employees of large stateowned and private companies, metropolitan municipalities, any other large groups such as religiousorganisations. This initiative will be complemented by the development and roll out of an IT basedbanking platform which is already one of the key strategic projects for the CBDA.

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Diagram 3: Co operative Banking Network

Diagram 4 depicts several types of CFIs at a provincial and municipal level e.g. a CFI for public sectoremployees, one for municipal workers (could be several municipalities within a province), another foremployees of state owned companies (e.g. Transnet, Eskom etc.) a CFI for certain industries e.g. motorcar manufacturers etc. All these CFIs may come together to form a secondary co operative bank atprovincial level. The idea is for the network to be replicated in each province however each provincewill be unique as they will have different groupings that suit the provincial dynamics in terms of thecommon bonds. In the long term it is envisaged that the secondary co operative banks will cometogether to form a tertiary co operative bank.

The secondary co operative bank will provide banking services for all the CFIs in the province, provideliquidity assistance, link up the CFIs to the National Payment System, provide auditing services for CFIsetc. The secondary co operative bank will be a distinct and autonomous entity from the CFIAssociation but will work closely together. Once again it will be for each province to decide on thenature and type of relationship to have with the Association. The role of the Association will beadvocacy, pre registration support and related services.

The following strategic objectives are an addition or a modification to the current CBDA strategicobjectives.

Provincial

Secondary Co-op Bank

Industries Co-op Bank

SOC Co-op Bank

Municipal co-op bank

Rural CFI

Rural Co-op Bank

Public SectorCo-op bank

Provincial

Secondary Co-op Bank

Industries Co-op Bank

SOC

Co-op Bank

Municipal co-op bank

Rural CFI

Rural Co-op Bank

Public Sector Co-op Bank

National co-operative bank

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Summary: Strategic Imperatives

(Refer to section 7 below for the proposed strategic imperatives towards achieving Vision 2020)

6. Situational analysis

Performance environment

Reflected below are the sector figures as at year end February 2017

Table 1 Total Sector Metrics February 2017

2016 2017 2016 2017 2016 2017 2016 2017

Numbers Members Deposits Assets

Co op banks 2 2 2 258 2 392 R94.5m R104.0m R107.4m R112.0m

Eligible CFIs2 14 16 21 978 24 066 R136.3m R122.6m R162.6m R167.9m

Other 14 12 5 516 3 360 R3.0m R987K R9.6m R3.2m

Total 30 30 29 752 29 818 R233.8m R227.6m R279.6m R283.1

2 These CFIs meet the minimum requirement for registration as a co operative bank i.e. 200 members and R1 million in deposits, but fall short in terms offinancial, human, prudential and/or operational requirements.

MOUs with relevant stakeholders

• CBDA as an institution

• CFI model• Marketing

Packaging the CBDA and CFI value proposition

Build strategic partnerships to enhance financial sustainability

• Institutional Strengthening • Build Systems• Effective monitoring of CFIs

Build an Integrated National Co-operative Banking System

• Further strengthen strategic partnership and enhance research capacity

• CBDA publications

Knowledge management to become the repository of CFI Wisdom Informing Sector

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SWOT analysis

It is important for every organization to understand the environment in which it operates. This entails understanding andappreciating the major strengths and weaknesses as well as opportunities and threats faced by the organisation. It is theaim of the CBDA to enhance the strength and opportunities and devise strategies to address the weaknesses and threats.

STRENGTHS WEAKNESS

INTERNAL CBDAAn established qualified and committed staff:

Competent, committed and hardworkingstaff.Employees have scarce skills and areexperienced about the industry.

Business reputation of being innovative:Business that is more advanced alwayscomes with new ways of doing things.

Strong internal communications system:

All Units working together toreach/accomplish one goal.Strong, transparent and Informedleadership.Experienced and skilled management.

INTERNAL CBDABudget constraints:

Programs are not sufficiently funded

No resources to market CBDA and the CFImodel.

The slowing growth in CFIs can impact CBDAgrowth:

EXTERNALNon compliance of CFI’s:

CFIs struggling to comply or meet the setrequirements e.g. prudential regulations.

OPPORTUNITIES THREATSINTERNAL CBDA

Open agency banking:Advancement and Growth in Technology.

Regulated business environment:CBDA together with the SARB are workingon a new regulatory framework.

Stakeholder relations:Embracing of partnerships with otherorganization and stakeholders.

INTERNAL CFIChange of policies, legal framework andTechnology in the financial and businesssector:

EXTERNAL ENVIRONMENTCompetition from other financial institutions

Competition from commercial banks.Regulatory arbitrage.CFI operating unregulated, withoutsanction and failing.

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.

The administration unit is responsible for strategic leadership, governance; human resource

management, general management and the overall co ordination of the activities of CBDA and

ensuring that adequate resources are provided for the other units to function optimally. The

administration unit is also responsible for stakeholder management and ensuring compliance with the

PFMA and Treasury Regulations. It co ordinates the CBDA’s marketing efforts and will house the

Stabilisation Fund, and research activities of the CBDA.

The administration unit has a need for additional resources, in the areas of research and monitoring

and in overall compliance management.

The capacity building unit is responsible for supporting, promoting and developing CFIs and

promoting the establishment of representative bodies and support organisations. In fulfilling this

responsibility the unit determines the training needs for the sector and develops appropriate capacity

enhancement programmes in conjunction with relevant stakeholders such as representative bodies,

BANKSETA, other development agencies and universities. In this regard it focuses on ensuring the

design and accreditation of CFI specific courses, as well as developing and/or adopting appropriate

training material for such curricula. The number of CFI staff and board members needing training

keeps on increasing for the following reasons:

a) one third of CFI Board members retire annually and new members are elected and need

training;

b) as new CFIs get registered new staff members and new Board members need training;

c) skills levels within CFIs are very low, therefore members require a lot of repeat training to

grasp the concepts; and

d) When CFI Board members leave, some CFI members are co opted into the Board hence the

need for more training.

The need for continuous training is also critical in the rural based CFIs, due to low skills levels some of

the CFIs need close mentorship, coaching and monitoring. The impact of this training and

development can only be realised in the long term.

The unit will outsource some of its capacity building work to registered support organisations as

service providers through a transparent supply chain management process. The unit is headed by a

Director, three Technical Analyst positions and three Junior Technical Analyst two of which is funded

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by the CBDA and one is project funded. The aim is to convert this position to three Assistant Technical

Analyst (ATA) positions.

The Supervision unit is responsible for the regulation and supervision of CFIs. The CBDA Supervision

Unit relocated to the South African Reserve Bank (SARB) where the PA will be located. The physical

relocation took place on 9 October 2017, but the relocation of the actual function is envisaged to be

take place from the 1st of April 2018 when the newly established PA resumes its operations.

The Central Support Services (CSS) The Central Support Services (CSS) The business unit provide a

Shared Services Solution which include a Core Banking System to the Co operative Banking Sector.

The service The Shared services provided by the Central Support Services Business Unit creates the

“Bank" Back office environment that allows the sector to function in a similar fashion as commercial

banks on an equal footing whilst enjoying economy of scale. The integration of the CFIs into the

National Payment System are managed by CSS as well as the relationship with the Partner Bank and

service provider of the banking technology.

The Central Support Services and the Shared Services is defined as a set of services that enables CFIs

to improve management of their organisations and offers their members fully automated banking

products and services. The Technology in the form of a Core Banking Systemwill assist CFIs to improve

their operational capacity, improve data management and reporting, and improve their service

offering by enabling additional product and service offerings and enabling access to the national

payment system.

Shared Services include: Reconciliations, System support, Training, Accounting, Business process

improvements, Credit Processes, Batch Processes, Liquidity management, Product development,

Settlement, Compliance management, Ancillary products, etc. responsibility of the unit is to

implement and support the Banking Platform and provide integration into the National Payment

System (NPS) for CFIs. The resourcing of the Central Support Services is managed on the basis that

volume and the components that are operational at a given time dictate the rate of engaging

additional staff.

CSS is a relatively newly formed unit at its start up phase within the CBDA. The responsibility of the

unit is to implement and support the Banking Platform and provide integration into the National

Payment System (NPS) for CFIs.

The proposed structure will be implemented in a phased approach in terms of the critical needs andfunding resources. Certain senior position will not be filled immediately to contain cost and

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determined the anticipated workload. The unit currently comprises of the CSS: Head, a consultantproject manager, an Accountant as well as the five Helpdesk Agents on a three year contract. Threetemporary staff have been employed to assist in the on boarding of CFIs. In addition a Business Analysthas been appointed.Strategic imperatives: Implementation of “Vision 2020”

To achieve the goals and targets outlined for Vision 2020 (see Section 5 above) requires the CBDAto modify and improve on their current strategic objectives. This section highlights the discussionsemanating from the CBDA Board strategic planning workshops. These strategic objectives wereidentified as important additions/enhancements to the current strategic objectives.

7. Packaging the CBDA and CFI Value Proposition

The CBDA is a new institution that is not widely known, and the CFI model is relatively poorlyunderstood in South Africa. The CBDA’s strategic imperatives therefore include a need to market theAgency more widely, while also improving understanding of the CFI as an attractive financial servicesmodel.

8. CBDA as an institution

The CBDA needs to clearly and effectively communicate its mandated service offering. The CBDA willin the short to medium term develop promotional materials such as booklets and brochures andmakethem readily available to enable the public to learn all about the CBDA, why it was created and all itsactivities. With the assistance of the National Treasury ICT unit, the CBDA will revamp its website tobe a source of information on the activities of the CBDA.

9. CFI Model

The CFI as a model is attractive to wide sectors of society. However due to limited resources, theCBDA has chosen to target specific groups that should have the largest impact or quickest lead timeto implementation. These target groups include public sector employees and professional groups suchas Teachers, Nurses, and the Police. The CBDA intends to sell the CFI model, highlight how the modelworks, the principles and values underlying the co operative model as well as the economic, financialand social benefits of belonging to a CFI. These benefits will be communicated via booklets, brochuresand the website. As part of the initiative to market the CFI model and its benefits, the CBDA needs toidentify champions within the government sector, co operative sector and communities, NonGovernmental Organisations (NGO) that work with savings groups, worker representatives etc. Therole of these champions will be mainly to promote the CFI model and its benefits.

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During 2016/17, the CBDA embarked on an exercise to explore ways to enhance the current CFI modelto make it more attractive and relevant. As part of this exercise, the CBDA conducted internalworkshops and sourced the services of Gibs Business School for a more intense exploration of options.

Diagram 5: What the CBDA needs to build – Vision 2020

Source: Team CBDA through Gibs FacilitationThe box above highlights what the CBDA needs to build in order to achieve its Vision 2020 goals. Someof the highlights:

a) CBDA (and the CFI sector) needs to build a strong recognisable brand and a marketing strategy tobuild awareness about the sector. Part of this will entail the CBDA together with the CFIs creatingcompelling success stories on CFIs and how they are helping their members improve their lives.

b) CFI ambassadors to sell the CFI – Customer value proposition.c) A strong stakeholder network as CBDA cannot do everything on its own; some of the areas are

core competencies of other government agencies and departments.d) The CBDA is already working on a roll out for the IT based banking platform.

The exploration exercise also highlighted critical components that would enhance themodel andmakeit more attractive. These are some of the components:

a) Products specifically targeted at small business including facilitating the provision of nonfinancial services that would enhance the small business such as record keeping, businessmentoring, financial management, investment options, business insurance etc.

Technology Platform

Building a strongCFI Sector brand

Creating stories fromlocal peopleRope in Millennials

Strongstakeholdernetwork

CFIAmbassadors

MarketingStrategy

CFI in a Box

What CBDAneeds tobuild?

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b) Debt rehabilitation and debt management services emerged as critical components since themajority of people over indebted and find themselves in a spiral of debt.

c) Financial education, investment options for wealth creation, insurance products andtechnology were also highlighted as critical to the enhancement of the model.

Build strategic partnerships

The CBDA builds strategic partnerships to ensure financial sustainability of the CBDA and CFIs. TheCBDA works mainly with the Department of Small Business and Provincial Departments of EconomicDevelopment (DED) since they share a mandate with regards to the support and development of cooperatives. Furthermore the CBDA has strategic partnerships with other regulatory institutions suchas the SARB and the National Credit Regulator (NCR). With regards to funding and support for cooperatives the CBDA works closely with other government agencies such as the Small EnterpriseFinance Agency (sefa) and the Small Enterprise Development Agency (Seda). In the area of trainingand capacity building the BANKSETA has emerged as a key stakeholder. In the short to medium term,the CBDA will review its current stakeholder management strategy and identify new partnerships thatare significant to the CBDA strategy implementation and strengthen existing partnerships where theremight be gaps.

Build an Integrated National Co operative Banking System

The CFI sector will only be successful if supported by strong and stable systems that engender trustand a sense of reliability. The CBDA has therefore included the following activities in its strategicthrust.

Institutional Strengthening

The following goals and activities are meant to enhance and augment the current CBDA objectives.Institutional strengthening will focus on:

a) Providing technical start up support, eg. Providing guidance on the important elements ofstarting and managing a CFI and bookkeeping. The CBDA will also work closely with theDepartment of Small Business Development – Co operative Incentive Scheme unit to arrangefunding the proposed “operational start up package” for small rural based CFIs.

b) Providing support for sustainability and capitalisation strategies, e.g. provide advice on thedevelopment of new products, working towards meeting the prudential requirements,reporting requirements, alternative capital structure and alternative revenue generatingstreams

c) Continuous training of CFI management boards, committee members and generalmembership in partnership with a variety of stakeholders inclusive but not limited toBankseta, FSB etc. The Capacity Building unit has received the certificate course in CFImanagement to include product development and pricing, it will articulate to a diploma in Cooperative Banking under the University of Fort Hare alternatively articulate to a BCOM in Cooperative Banking. CFI managers will also be in a position to accumulate continuousprofessional development points towards a Retail Banking qualification.

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Build systems

Achieving the co operative banking network depicted on Diagram 4 will entail more than justinstitutional strengthening but will also require CFIs to adopt and use robust and well supported ITsystems. The banking platform is defined as a set of services that enables CFIs to improvemanagementof their organisations and offers their members fully automated banking products and services. Theplatform will assist CFIs to improve their operational capacity, improve data management andreporting, and improve their service offering by enabling additional product and service offerings andenabling access to the national payment system.

Effective monitoring of the CFI Sector

The Supervision unit (under the newly established PA) will continue the regulation and supervision ofthe CFIs which entails more effective and efficient operations. The Capacity building unit will continuewith monthly effective monitoring of CFIs to ensure correct reporting, compliance with legislation,preparations for external audit etc.

Knowledge management to become the Repository of CFI Wisdom Informing Sector Development

The CBDA can play a critical role as the holder or repository of all information concerning the CFI sector– both in terms of knowledge and training tools as well as statistical data and history. Due to thebudgetary constraints, the CBDA intends to act as a portal that can focus the research efforts of others,while a long term goal remains to build up the necessary capacity to dedicate to this strategicimperative.

Further strengthen strategic partnerships and enhance research capacity

a) Further strengthen strategic partnerships with research institutions such as Finmark Trust,Universities and FET colleges to conduct surveys and research in the sector.

b) Compile international research on developments in the sector, lessons to be learnt, challenges,trends etc.;

c) Compile case studies on the current local CFIs successes and failures and compile diaries on thelives of the members of CFIs.

d) Conduct monitoring and evaluation of registered CFIs to determine growth trends, impact ofcapacity building programmes and impact of regulatory compliance.

CBDA publications

a) Ensure wider circulation of the CBDA publication eg. libraries, nearby schools, offices of all thecurrent and potential stakeholders, offices of government departments etc.

b) Invite articles and inputs from a wide variety of participants within and outside the cooperative sector.

c) Write articles about the CBDA and the CFI model in other publications aimed at sectors suchas the micro finance sector, universities, and the public sector eg. Public Sector Manager.

The CBDA’s overall goal statement is to be facilitating a vibrant and growing CFI sector that broadensaccess and mobilises savings at community level.

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No Goal Statement Strategic objective Output1

To facilitatefinancial inclusion,economictransformationthat enhancessectorcompetitiveness

CBDA that is adequatelycapacitated

Build Strategic Partnerships

Provide strategic leadership, sound governancestructures and adherence to laws andregulations.

2 A CFI sector that is financiallystable

Operational stabilisation fund

3 CBDA brand and CFI modelthat is widely known andrecognised

Create awareness of the CBDA brand and CFImodel – Communicate the CBDA and the CFIvalue proposition

4 A CFI sector that isinstitutionally safe andsound.

Registration of representative bodies, supportorganisations and CFIsMonitor registered CFIs

5 An adequately capacitatedCFI Sector.

Implement programmes to promote andsupport the growth and development of the CFIsector.

6 An enhanced operationalcapability in the CFI sector.

Implementation of a banking platform solutionto enable CFIs to use the system and operateprofessionally.

Institutional Sustainability

Long term financial sustainability is a serious consideration for any entity and the CBDA is no different.It is important for the Board and management to keep the conversation on sustainability alive at astrategic level. In order for the CBDA to increase capacity to deliver on its mandate it needs to broadenits funding base.

In terms of section 68 of the Co operative Bank Act, the CBDA is funded by the collection of fees fromCFIs and the money appropriated to it by Parliament. However given the size of the institutions thatthe CBDA regulates, the fees collected contributeminimally to the budget of the CBDA. Although fundsappropriated by Parliament (through National Treasury) remain an important source of funding forthe CBDA they are not sufficient to fulfil the mandate of the CBDA.

As a result, the CBDA has in the past relied on its strategic partners for funding, particularly theBankSeta, the Small Enterprise Finance Agency, and the Provincial Departments of EconomicDevelopment for training and development programmes.

To ensure that the CBDA increases its funding base and therefore remain financial sustainable, it willneed to consider embarking on the following strategies:

a) National Treasury – The CBDA will continue to engage the National Treasury to increase theallocations to the CBDA. This approach needs to take cognisance of the overall constraints on the

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fiscus and taking into account that government finances are under pressurewith a lot of importantcompeting priorities that need funding.

b) BankSeta Over the past few years the CBDA has enjoyed funding support from the BankSeta thatenabled the CBDA to stretch its capacity building programmes beyond its allocated resources.There is however an imminent risk of this support drying up. There is also talk in government ofscrapping the Setas and/or merging the Setas and/or directing Seta funds towards funding tertiaryeducation. It is uncertain when exactly this imminent threat will materialise but the CBDA Boardand management needs to prepare for this possibility.

c) CFI Sector Another source of funding that the CBDA will consider is from the CFIs themselves. Inother countries, capacity building programmes similar to what the CBDA offers are carried out bythe industry and paid for by the CFIs themselves. CBDA’s current operating model of paying forthe development of training material, delivery of the training, accommodation, food and in someinstances transport to the venues is unsustainable. Going forward, CFIs needs to takeresponsibility for at least some portion of the training programme costs. It needs to be taken intocognisance that affordability of some of the CFIs will be a serious challenge and this approachmust be dealt with responsibly.

Another important initiative that the CFI sector will need to fund is the Stabilisation Fund. Unlessthe CFIs are prepared to contribute to the capitalisation of the Fund, this initiative will not takeoff. National Treasury has already contributed R1, 4 million towards the establishment of theFund.

d) Multilateral and Donor Funding Institutions – the CBDA will need to approach multi lateral andinternational donor institutions dealing with co operatives, issues of financial inclusion, and ruraldevelopment to fund specific initiatives or programmes. It needs to be highlighted though thatsome of the donor institutions approached in the past have stated that donor funders no longerclassify South Africa as a needy country and now focus on poorer and more needy countries.Without spending too much time and effort on this, it is still a worthy initiative to pursue, as andwhen the opportunity arises.

e) Other government departments and Development Finance Institutions. The CBDA will continueto engage other government departments and Development Finance Institutions (DFIs) to partnerwith the CBDA on some of its initiatives. The CBDA currently has MOUs in place with theDepartments of Economic Development in some provinces as well as Sefa.

of

29Tofacilitatefin

ancialinclusion,

econ

omictran

sformationan

dsector

compe

titiven

esstogrow

theco

operativeba

nkingsector.

Administration

Capa

city

Build

ing

1)CB

DAisadeq

uately

capacitatedto

meetits

mandate

5)An

adeq

uately

capacitatedCFISector

Ope

ratio

nalStabilisationFund

2)Afin

anciallystableCFI

sector

Build

strategicpartne

rships

3)CB

DAbrandandCFI

mod

elthat

iswidelyknow

nandrecognise

d

Create

awaren

esso

fthe

CBDA

brandandCFIm

odel

Commun

icatetheCB

DA&theCFI

mod

elvalueprop

osition

Implem

entp

rogram

mes

toprom

oteandsupp

ortthe

grow

thandde

velopm

ento

ftheCFIsector

CSS

6)To

EnhancetheCFIs

operationalcapability

Implem

ent,manageand

supp

ortthe

Banking

Platform

IntegrateCFI’s

into

National

Paym

entSystem

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Three programmes are in place to achieve these strategic objectives:

Administrative services aims to ensure that CBDA is adequately capacitated to meet its statutorymandate and accomplish its vision and mission and members deposits in CFIs are protected.Furthermore, the unit provides strategic leadership, financial management, research and othersupport functions.

Capacity Building provides institutional development and organisational strengtheninginterventions to promote and support the growth and development of the CFI sector.

Central Support Services provides the banking platform to enhance the CFIs operational capabilityand integration into the National Payment System (NPS) as well as banking support services forthe CFIs.

10. Risk managementIn terms of section 51 (1) (a) of the PFMA, read in conjunction with Treasury Regulation 27.2.1 theAccounting Authority (Board) of the CBDA is expected to have and maintain an effective, efficient andtransparent risk management system, whose purpose is to identify risk profile to which the entity isexposed.

The risk management process involves an annual assessment process which involves the managementteam and the NT ERM to interpret the CBDA objectives and identify the risk profile flowing from thestated objectives. The risk profile is then quantified and mitigation strategies developed. Thereafterthe risk register is prepared from all the risk information that was deliberated during the assessmentprocess. The NT ERM risk analyst will send a compiled risk register to the CBDA management teamfor review and confirmation. The NT ERM risk analyst compile an assessment report and generaterecommendations based on the content of the risk register. The risk assessment report (includingthe risk register) is submitted to the NT Chief Risk Officer and Manager Director for final review andsign off. On a quarterly basis, the management team monitors the risk mitigation proposed and theprofile is updated accordingly to provide a true reflection as dictated by the effect of the mitigationaction and changes within CBDA operations.

CBDA defines risk as anything that may prevent it from achieving its objectives or otherwise have anadverse impact on it. The CBDA has identified the following risks that may impact the achievement ofits strategic objectives. The risks and their treatment are detailed in CBDA’s Risk Register andAssessment Report.

Risk Identified Risk definition and source MitigateStrategic risk Risk that the CBDA will not achieve its

mandate due to insufficient resourcesand lack of statutory powers to enforcecompliance.

Strategic planning process includingenvironmental (sector) scanning.Active involvement of board andmanagement in the development andimplementation of monitoring processes.

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Risk Identified Risk definition and source Mitigate

Leveraging relationship with NationalTreasury to address threats and exploitchange or opportunities.

Reputation risk The risk of impairment of CBDA’scredibility and image in the communityor with its stakeholders.

Regular reporting to the Minister and theBoard.Continued monitoring of compliance ofCFIs.Non compliant CFIs and co operatives tohave defined programmes of correction.Stabilisation Fund in place.

Operational riskDependency on third parties

Dependency on NT processes andshared functions.

Memorandum of Understanding in placewith a service level agreement.

Develop internal capacity.

CFI information integrity and accessgaps

Sub standard quality of data impactingthe ability to access, monitor and reportreliable information.

Manual Accounting Systems developed.

On going accounting and reportingsupport.

Implementation of banking platform.Failure to implement an effectivebanking solution

Delay in implementation of the bankingplatform system due to the technicaland complex nature of the projectwould result lack of buy in from CFIs.

Readiness assessment conducted on CFIs.

Pilot the banking platform project towilling and ready CFIs.

Sustainability to ensure the IT systemto be cost effective.

Lack of members to use the systemresulting in sustainability targets notreached.

Communication and awareness of thebenefits of the system tomembers of CFIsPartnering would other stakeholders forfunding.

The CBDA reviews its fraud policy annually and utilises the NT services to assist with awareness onfraud matters. The CBDA have implemented policies and procedures to prevent fraudulent activitiesfrom taking place. Internal and external audits are also measure of monitoring.

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29

PartB:

Strategicob

jectives

11.P

rogram

me1(Adm

inistration)

Strategicob

jective1:

CBDA

isadeq

uatelycapacitatedto

meetitsmandate

Objectiv

eMeasure/ind

icator

Med

ium

term

targets

2016/17

2017/18

2018/19

2019/20

2020/21

Build

StrategicPartne

rships

a)Num

bero

fMOUsw

ithstakeh

olde

rs(revise

d/existing)

88

810

10

b)Num

bero

fnew

MOUsw

ithstakeh

olde

rs1

12

2

Strategicob

jective2:

Afin

anciallystableCFIsector

Objectiv

eMeasure/ind

icator

Med

ium

term

targets

2016/17

2017/18

2018/19

2019/20

2020/21

Afin

anciallystableCFIsector

Stab

ilisatio

nFund

isop

erationa

lc)

Num

bero

fStabilisationFund

Com

meetin

gs3

33

33

d)AllPoliciesa

ndProced

ures

areinplace

All

Strategicob

jective3:

CBDA

brandandCFIm

odeliswidelyknow

nandrecognise

d**

Objectiv

eMeasure/ind

icator

Med

ium

term

targets

2016/17

2017/18

2018/19

2019/20

2020/21

Create

awaren

esso

fthe

CBDA

brandand

CFIm

odel**

e)Num

bero

fcom

mun

icationactivities

(e.g.

magazines,new

sletters,bo

oklets,

44

44

4

f)Num

bero

foutreachanded

ucation

activ

ities

abou

tthe

CFIm

odelto

grou

psand

institu

tions

(e.g.presen

tatio

nsand

worksho

ps)

1212

1212

12

**Bu

dgetaryconstraintsm

ayhampe

rthe

achievem

ento

fthiso

bjective

of

29

Programme2(Cap

acity

Build

ing)

Strategicob

jective4:An

adeq

uatelycapacitatedCFISector

Objectiv

eMeasure/ind

icator

Med

ium

term

targets

2016/17

2017/18

2018/19

2019/20

2020/21

Implem

entp

rogram

mes

toprom

oteandsupp

ort

thegrow

thandde

velopm

ento

fthe

CFIsector.

Num

bero

forganise

dgrou

ps(pub

licsector,

SOEs,

Union

setc.

assisted

with

the

establish

men

tofa

CFIper

annu

m.

22

22

2

Num

ber

ofne

wly

registered

CFIs

operationalized

with

in6mon

thsfrom

the

date

ofregistratio

n.

22

22

Num

ber

ofCFIs

provided

with

direct

technical

assistance

infin

ancial

and

compliancemanagem

entp

erannu

m15

1010

1010

Num

berof

CFIs

provided

with

Internal

AuditActivities

direct

technicala

ssistance

pera

nnum

-7

77

7

Num

berof

CFIbo

ard

mem

bers,bo

ard

committees,

managem

ent

and

staff

traine

dpe

rann

um

304

-12

012

012

0

of

29

12.P

rogram

me3(Cen

tralSu

pportS

ervices)

Strategicob

jective5:

Enhanceop

erationalefficien

cyintheCFIsector

Objectiv

eMeasure/ind

icator

Med

ium

term

targets

2016/17

2017/18

2018/19

2019/20

2020/21

Toen

hancetheCFIop

erationalcapabilityand

integrationinto

theNationalPaym

entSystem

(NPS)

Num

bero

fCFI’straine

dinprep

arationfor

implem

entatio

nof

thebankingplatform

system

*10

52

55

Num

ber

ofCFI’s

using

the

banking

platform

system

**10

1515

2530

Num

bero

fCFI’sintegrated

into

theNPS

105

315

20

Enhancerepo

rtingandavailCFIs

with

quality

managem

entinformation

Num

berof

repo

rtsprovided

perCFIfor

CFIsto

supp

ortop

erational,fin

ancial

and

regulatory

repo

rting.**

1010

1315

20

*Targetisn

otcumulative

**Target

iscumulative

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