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Co-ops drive SA economy in good times and bad

Business

Take a closer look at the South Australian businesses that are surviving and thriving and you’ll find they have something in common, writes Reece Kinnane.

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The West End Brewery has been part of the fabric of Adelaide since it was established in in 1859. Growing up in Hindmarsh, I remember holding my nose at the smell of the malt as we lined up for our spring water refills. And in the restless summer nights I would listen to Vulcan’s metronomic hammer blow heralding Christmas.

In 1993 the chimney wore the colours of my team – the brewery’s neighbourhood team, Woodville and West Torrens – for the first time in their modern history. That same year West End Brewing was sold to New Zealand’s Lion Nathan, leaving Coopers as the only Australian-owned brewery in the state.

In the intervening years, there have been many more changes both within and outside of those walls. The most recent, is the sad announcement that West End is no more. It will close in 2021 and, as fate would have it, the chimney again wears the rare outfit of gold and green and blue.

The decision to close the brewery, at the cost of more than 90 local jobs, was likely made between Sydney and Tokyo. This historic local brand long-owned by a subsidiary of Japan’s Kirin Holdings.

It is not the first, nor the last occasion that time will be called on our beloved brands. This is familiar territory for South Australians watching many businesses that have been sold off or simply outgrown the state and taken their headquarters and high-quality jobs interstate or overseas. Sometimes we even pay to bring them back.

But there are is a breed of businesses that are owned and governed locally, and bound in a mutually beneficial relationship with everyday South Australians. They are co-operatives and mutuals and they are here for the long haul, in the good times and, importantly, for the hard times too.

As a South Australian, I have always been proud of the determination, resilience and innovation that are synonymous with our culture. We will always rebuild and create new success stories we hope to fill their place.

But our shared goal should be to create sustained, long-term economic growth for our state and our communities, rather than watch as carefully cultivated businesses are replanted for the fruits of our labour to be enjoyed elsewhere.

South Australians recognise this. They back local products and services and they expect businesses to have their back too.

The challenges of 2020 are real and at our doorstep. And we will face them together. It is collective action that will see us emerge from this crisis stronger. A strong recovery must be built by making decisions for the good of the group whilst building stability and self-reliance for a stronger future.

South Australians have a long and established history of working together. Co-operation is a commitment that is the secret to success for many of the state’s most resilient businesses. This state is a stronghold of co-operative enterprise across areas as diverse as financial services, mobility, health insurance, housing, pharmacy, retail, agriculture and disability care.

InDaily’s SA Business Index reveals that four co-operative and mutual enterprises rank in the top third. These companies: RAA, Almondco, Beyond Bank and People’s Choice Credit Union are owned by their members – South Australian customers, farmers or workers.

SA generates around 6 per cent of Australia’s GDP, yet it is home to 13 per cent of the nation’s top 100 Co-operative and Mutual Businesses with a collective turnover of over $2billion.

Others include Health Partners, National Pharmacies, KeyInvest, Credit Union SA, Lenswood Apples, CCW, and The Barossa Co-op. They all demonstrate the impact that SA owned and controlled economic activity can have in creating long-term prosperity and quality jobs for South Australians. And South Australians return the favour with the highest per capita membership of credit unions and mutual banks in the nation.

These co-operative brands sponsor community events and sporting teams large and small. The Port Adelaide Football Club and the Adelaide Strikers, the Hutt Street Centre and the Christmas Pageant. They are invested in our community and bound to it. Their boardrooms are local – on King William St and The Parade, in Richmond or Wingfield, in Nuriootpa, the Riverland and Robe. With few exceptions, their directors and executives live here.  Without exception, they make decisions in the interest of their South Australian members, the state and its communities.

Tens of thousands of every day South Australians own these businesses. Whether you’re an RAA member, bank with a credit union or have a policy with a member-owned health fund, you’re not just a customer – you’re an owner – and you have a stake.

For all that South Australia lacks in large businesses, it more than makes up for in a thriving small business sector.  The co-operative and mutual business model also enables small businesses to work together, adopting the benefits of scale without forgoing their independent ownership. In turn, these small businesses utilise and uplift local supply chains and ancillary businesses, putting money directly back into their communities. SA has co-ops owned by high street pharmacies, butchers and even hairdressers. This is true and sustainable ‘economic stimulus’, a natural output of the co-op model.

This model is a pathway to sustainable growth but it is also one that lends itself to innovation.  One advantage of a small business co-op is that each enterprise is simultaneously small enough to understand the real challenges on the ground but collectively they are big enough to address structural challenges and take on new opportunities.

South Australia, for so long a centre of Australian manufacturing is well placed to leverage strengths in food and beverages as well as defence and space. Co-operation could be SA’s secret weapon in the much-heralded revival of Australian manufacturing spearheaded by the Federal Government’s Modern Manufacturing Strategy.

Take Master Butchers Co-operative Ltd (MBL). Established in 1905, they provide low-cost inputs to butchers, process their collective waste product and export value-added pet food ingredients to the US. This century-old collaboration of SMEs employs 120 people.

Most butchers could not dream of buying in bulk, manufacturing waste or exporting globally. But as a collective, 450 local independent butchers and meat processors are undertaking manufacturing and export activity at scale and creating real economic value for members and SA.

MBL has survived through the depression and world wars and is currently helping members manage the impacts of COVID-19. But it is also supporting the local SME sector in general. Its individual members are more economical and resilient, and less likely to go under in the crisis. It helps build our economic resilience from the bottom up, meaning South Australia has the advantage of a truly independent, high-street butcher sector. Co-ops challenge monopolies and their impact on the supply chain keeps the high street local.

Many of South Australia’s co-ops and mutuals are longstanding enterprises. The average lifespan of these businesses is 35 years in SA – longer than in any other state. In part due to their resilience, they are somewhat back in vogue in these tough times. SA is also home to two of Australia’s newest co-ops and mutuals. The Limestone Coast Fishermen’s Co-operative is owned by independent lobster fishers of the South East.  This venture is in its second year and about to open a second processing facility at Beachport, creating new jobs for the region. Another new kid on the block is Kudos Services, Australia’s first public service employee mutual, formed in 2019 by over 100 public servants to spun-out from government as an employee-owned enterprise operating in the NDIS.

To ensure that more South Australian are able to see the benefits of the co-operative business model, Government’s have a role to play, and it begins with understanding co-ops and mutuals, their unique needs and better resourcing their efficient regulation, which for co-ops, is a state responsibility.

This approach to economic development is community-led, locally grounded, place-based and supports successful local firms to access markets, scale and undertake advanced manufacturing and other value-adding. With food and beverage manufacturing as well defence and space industries prioritised across State and Federal Government, SA businesses are prime candidates for investment and co-operative enterprise could be a key to success.

In the meantime, South Australia’s longstanding co-operative and mutual businesses will continue to support the resilience and growth of the state’s economy.

Reece Kinnane is chief operating officer of the Business Council of Co-operatives and Mutuals

 

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