Good morning, everyone. Thank you for the opportunity to appear before the committee.
I'm the CEO of the Acadian Fishermen’s Co-operative. The Acadian Fishermen’s Co-operative Association was formed in 1955 in Abrams Village, a small fishing community on the south shore of Prince Edward Island. This area of P.E.I. is well known for cooperative movements, and the creation of AFC followed the rural trend of farmers, fishers, and other groups banding together for economic reasons.
We owe our success to those pioneers who plowed the waves before us, namely Jean Gallant in Mont-Carmel and Phillippe Arsenault in Egmont Bay. Jean and Phillippe had two cooperatives, both in existence since 1944. They amalgamated in 1955 to form what we know today as the Acadian Fishermen’s Co-operative Association.
We've been successful for the past 57 years, with our business growing exponentially, and AFC is now one of the largest processors of seafood on Prince Edward Island.
Here are a few facts, just to give you an idea of what we do.
AFC is a seafood processing company specializing in lobster and crab, but it also produces several other species, such as scallops, herring, mackerel, etc.
AFC is 100% owned by 99 shareholder member fishermen. All member fishermen are from several ports in area 25. These fishermen have been hit very hard by the decline in the shore prices over the last several years. Figures from the Department of Fisheries and Oceans indicate that the average net income of fishermen from area 25 is 87% lower than that of north-side fishermen in area 24.
Sales for our co-op for 2011 were close to $24 million. Plant payroll for 2011 was $3 million, and an additional $1 million was paid out to fishermen's helpers, for a total of $4 million.
The total number of T4 slips issued to plant workers and fishermen helpers totalled over 400. We have had fishermen retire lately with over $40,000 in share capital that they've invested in our co-op. Fishermen investment stands at close to a million dollars.
Some of the challenges that not only we as a co-op but the seafood industry in general face right now.... The main things we've faced over the last three or four years, and many of you have probably heard it in the media...we've had a very difficult time, especially in the processing sector, with the many challenges that every exporter has, I guess, the obvious ones being the exchange rates and the world economy.
Another issue we face is with tariffs on processed products. That's something we've been trying to push for as much as possible. We'd really like to have more markets opened up to more products, especially in Europe, where some of the tariffs are as high as 17%, 18%, and 20%, especially on certain forms of processed lobster. That cuts off a lot of trade for us at a time when the landings are really high in the lobster industry in general. The more areas we can open up to get into, the better, obviously.
In terms of the landings in both Southwest Nova and the U.S., but especially this year in the U.S., they're having a very difficult time. Lobster is down to a low of around $2. I could probably buy lobsters today delivered into Prince Edward Island for $2.50 or $2.60 a pound. That's putting a real downward pressure on the industry in general. Obviously when the price goes down that low, the price for a finished product follows it. So it's pushed down the value of the product, obviously, and caught within Canadian waters as well.
In terms of some of the issues for our co-op, the owner-operator issue in the new fishery reform is certainly something my members are looking at. Obviously if bigger companies down the road can buy up lobster licences especially, it certainly goes against the whole co-op movement and what we stand for.
We also have other issues as far as having an uneven playing field. Certain provinces pay subsidies to their processors, and that allows those companies to sell product cheaper into the marketplace and it drives the price down for the finished product in general. We would like to see the provincial governments stay out of the subsidy business altogether.
As far as being a co-op ourselves, we would like to make it more beneficial for members to keep more money in the company, even though they are struggling themselves. We have fishermen who probably only stock $70,000 to $80,000 per year. Out of that comes their boat payments, their hired men, which is generally $750 a week during the season, their bait, their fuel expenses—all of that. So we have people who only clear in the area of $20,000 to $25,000 a year.
When it comes time to get every penny they can out of the product, from the co-op itself, unless they are very good members, it's very difficult to try to convince them to leave money in the co-op where it can grow the business. That's certainly a challenge, especially in our business.
We pay out huge amounts of money to buy the product for the payrolls, and it's in a short period of time—within a four- to six-month period—yet that product takes a whole year to sell. When you're putting out at any given time.... Our company, for instance, would probably borrow anywhere from $11 million to $12 million just to service the cost of being in business.
Certainly we've had tremendous help from our credit union system in general. We certainly would not be in business today if it wasn't for the support of our credit unions on P.E.I. They've done a tremendous job keeping us in business. To be perfectly honest with you, with the margins that we've made and the difficulties that the industry in general has had over the last three or four years, if we were dealing with a regular bank, our 57 years would probably have ended within the last few years.
It's very important that the credit union system stay strong for the co-ops because it's very difficult to get the interest with the low margins that we have in this industry. The interest from the commercial banks is very difficult to achieve.
As for co-ops in general, processing co-ops have had a very difficult time in the last few years. At one time there were probably eight to ten processing co-ops between P.E.I. and New Brunswick. There have been several of them closed over the last three to five years. So we are getting down there, as far as the number of co-ops that are still actually processing lobster.
I don't think that's a very good thing. We have a situation right now, for instance, with the two co-ops on Prince Edward Island. When the season opens this fall, on August 9, if it wasn't for the co-ops, there would be a lot of fishermen who would not have a home for their product. There are a lot of companies that are not even going to buy the product out of the season that starts August 9. We, ourselves, will take a fair amount of that product, along with—
Thank you, Mr. Chairman.
Mr. Chairman, committee members, my name is Bryan Inglis, and I am vice-president of the agricultural division of Co-op Atlantic. I'm very pleased to be here today to represent my organization in front of the House of Commons Special Committee on Cooperatives.
This year, Co-op Atlantic celebrates its 85th year of operation. Our roots date back to 1927, a period of economic hardship when farmers needed a better and more profitable way to market their livestock. Federal and provincial agricultural fieldmen, as they were called, provided guidance and support from the beginning to lift farmers out of poverty by using the co-op model. Very early on, our founders' vision was one of an interprovincial cooperative organization that would meet the needs of both producers and consumers. Co-op Atlantic focused on understanding the needs of its members and acting proactively to find solutions.
Today Co-op Atlantic continues to partner with growers, producers, processors, and suppliers by developing reciprocal business arrangements whereby all functions of the supply chain remain local and strengthen our local economy.
Co-op Atlantic operates in five provinces in Atlantic Canada and is engaged in four business sectors: agriculture, food, energy, and social housing. Last year our sales were over $600 million, and as a combined system with retail and wholesale, we were over $2 billion. Our agricultural sector operates four feed mills, a poultry processing plant, and a commodity brokerage service for eastern and western Canadian farmers. We have 15 country farm stores, a wholesale farm supply business, and we're a member of Cooperative Research Farms, which is an international agricultural research group for feed.
The food sector, which we are very much involved in, provides procurement and marketing services to our retail member co-ops, as well as to small, independent retail business owners in Atlantic Canada. We're also a member of one of the largest food-buying groups: UGI.
Our energy sector operates 41 gas bars, 13 co-op energy stores, and bulk fuel storage and delivery operations.
Our fourth sector, which we don't talk enough about, is our housing sector. Co-op Atlantic manages 1,700 housing units, and these include housing cooperatives, non-profit housing, and housing for the elderly, the disadvantaged, and low-income families. We also provide management services for other housing groups in Atlantic Canada.
In the Atlantic Canada region, cooperative organizations number more than 750 in total, and together they provide 12,000 direct jobs. To give you a sense of the current realities of the Atlantic Canadian economy, which I'm sure you're aware of, I'd like to share the following.
Public spending reduction is a reality in all of our provinces. Federal government spending cuts will lead to employment reductions in Atlantic Canada, and this could represent as many as 2,300 jobs. The unemployment rate varies between 9.5% and 13%. More regulations will create new challenges for workers to qualify for EI.
Agriculture is facing international competition and deregulation, which will continue to put pressure on the economic viability of our farms. Young and educated workers are continually seeking opportunities outside our region. The aging population fosters the need for specialized health and housing services. Depopulation of rural communities in Atlantic Canada is taking place in favour of urban centres. Aging rural communities in Atlantic Canada are struggling to maintain essential services. Finally, urban centres are straining to meet ever-increasing infrastructure and social needs.
Due to these economic realities, we believe that cooperatives can play an important and strategic role. Given that cooperatives are enterprises that seek to meet member and community needs, which can be both economic and social, they're ideally positioned to meet the needs of both rural and urban communities. When conditions worsen, citizens look for opportunities to work together to come up with workable solutions.
Cooperatives can appropriately address the following emerging needs: employment, through the formation of worker co-ops where private businesses are pulling out or business succession and ownership transition is difficult; stability for the agricultural sector; continued provision of retail and banking services left behind by large corporations in an increasing number of communities; home care for the elderly who wish to remain in their own home as long as possible and not be a burden to the public health system; social housing solutions for the elderly, the low-income, the disadvantaged, and those with special needs; and solutions for energy generation to complement the services of major public utilities and to assist individuals in reducing their energy consumption.
Co-op Atlantic supports the Canadian Co-operative Association's recommendation to forge a new government-cooperative sector partnership. In our Atlantic region, the federal government agency responsible for creating opportunities for economic growth is ACOA. We recommend that ACOA be given an expanded role to support cooperatives.
Citizens prefer solutions that are locally owned and controlled. Co-ops are the ideal form of business enterprise for these initiatives, and as such, they deserve the same level of consideration, attention, advice, and support as conventional businesses.
We recommend that the federal government establish support for co-op business initiatives. The federal government could follow the Quebec example, where they have established a funded cooperative regional network called CDR, which provides expert advice to individuals forming and developing cooperative businesses. It also provides assistance to start-up and expanding cooperatives in order to access government and private funding.
Another example is in Newfoundland and Labrador. They provide training to economic development agency personnel in support of business initiatives emanating from cooperatives and equal status for access to funding programs. Economic development officers must come to view cooperatives as a legitimate form of business in today’s changing business environment.
Co-op Atlantic supports the Canadian Co-operative Association’s recommendations regarding access to federal funding programs. We recommend that the federal government provide the same access to capitalization programs for cooperatives as for private and shareholder cooperatives.
Some provinces have introduced legislation to provide incentives for citizens to invest in community development projects through the creation of community economic development investment funds, commonly known as CEDIFs, in some provinces. We recommend that the Canadian government look into this financial instrument to stimulate community investment.
While on the subject of capitalization, one cannot overlook the fact that during the recent market financial crisis, cooperative shares did not lose any value, since they are owned locally by the people who use their products and services and have a long-term commitment to ensuring the success of the business endeavours.
The federal government should encourage the development of a cooperative curriculum for schools and educational institutions in recognition of this valuable form of business and social enterprise.
I will conclude my presentation by reminding the committee that cooperatives have played a significant role in growing the economy of Atlantic Canada. Now is not the time to take your foot off the gas pedal. We must find ways to grow the cooperative sector to strengthen the Atlantic economy.
I would like to leave you with a reflection from Joseph Stiglitz, former chief economist for the World Bank and Nobel Prize recipient in economics. Mr. Stiglitz clearly stated that to achieve a more equitable distribution of wealth and to experience sustainable growth, nations need to find a balance between markets, government, and the social economy—that is to say, cooperatives.
I want to thank you for your attention.
I'll be very happy to answer any questions as we go along.
Good morning, and thank you for the opportunity to appear before the committee.
I'll give you just a very quick background. I have worked as a senior manager in a cooperative, I have sat on co-op and credit union boards, and I have worked as a consultant to cooperatives in Canada, the U.S., the U.K., Australia, and New Zealand. So I'm not just an academic. I have some mud on my boots.
Since 2000 I have been involved in creating a master of management in cooperatives and credit unions degree in the Sobey School of Business at Saint Mary's University. We created that special degree because managing a cooperative business is significantly different from managing an investor-owned company.
I would say that the key difference, first of all, is the business purpose. The purpose of a co-op is to meet member and community need. By contrast, the purpose of an investor-owned company is to provide maximum returns to the shareholders or investors. That, of course, creates a very different dynamic in terms of running the business, how it operates, and the kinds of pressures it feels and the kinds of pressures it responds to. We created the master of management program in co-ops and credit unions to apply the cooperative values and principles and business purpose to every aspect of cooperative business, and to assist cooperative managers in doing that.
At Saint Mary's we also created the Centre of Excellence in Accounting and Reporting for Co-operatives, which is funded by the Canadian Institute of Chartered Accountants. This fall we will be holding an international conference, in conjunction with the international cooperative summit, on cooperative economics. In other words, what would happen if we rethink economics, if we stop thinking of it just narrowly in terms of wealth creation and think of it instead as meeting human need? We might not turn to the economy and look at it simply in terms of its health being indicated by growth and the gross national product; rather, it's a healthy economy if it is providing its citizens with a decent income, with health care, with education, with the necessities of life. How well is an economy doing that as opposed to our simply having economic growth?
These are questions that are particularly germane for cooperatives, because unlike publicly traded investor-owned companies, cooperatives can do quite well, reasonably well, in an economy that is not growing, as we saw in 2008. Cooperatives did not produce any of the toxic paper that brought the global economy down. Cooperatives and credit unions, the financial institutions, continued to lend through the 2008-09 recession without having massive government subsidies and inflows of cash to encourage them to lend. They lent because their members needed loans, and they continued to grow. Cooperatives and credit unions around the world continued to grow in the face of the 2008 great recession. Again, they did that without the massive infusions of government funding that the global banking community needed.
So we have set up these programs, and we are looking at the global economy. Cooperatives have strong implications for public policy.
Often people will say that cooperatives need a level playing field, but too often what happens is that the playing field is defined as the playing field of investor-owned companies. In other words, let's give everybody the same playing field. What policy-makers need to ask themselves is what is needed for the encouragement of healthy cooperative development, which is a very different question.
If you think of the level playing field argument, you might think of it this way. Let's say I had a classroom of 100 students, and half of them were blind and half of them were deaf. If I said, “I'm going to treat you all equally; I'm going to write everything on the board and I'm not going to say another word”, it might be equal, but it sure as heck wouldn't be fair.
It is the same with cooperatives. They are a different kind of business. It's a different business model. It has some very positive public policy implications, such as its stability through the economic crisis. Cooperatives don't easily up and leave communities. Their failure rates are lower than private business failure rates, as studies in Quebec and across the country have shown.
So there are very strong public policy benefits from cooperatives. What we don't have is appropriate public policy support for cooperatives across the country. For example, if I were to look at my self-directed registered retirement savings plan, it is very difficult for me to put any of that in cooperatives and follow the rules of Revenue Canada. The government has lots to do in terms of coming up with a regulatory and policy framework for cooperatives that encourages them, and that is different but appropriate.
There are also regulatory issues concerning cooperatives. For example, in the recent couple of decades we've seen the need for harsher and harsher regulation around accounting standards. But cooperatives have not had the same problems with accounting. We haven't had the Enrons and the WorldComs and the Arthur Andersens. Cooperatives haven't had those kinds of business experiences. They haven't produced those kinds of business manipulations. Yet every time we tighten up, we ask cooperatives to jump through the same hoops as if they were Arthur Andersen.
So cooperatives need appropriate policy, appropriate legislation, and appropriate regulation. That will be a continuing challenge.
I'm open for any questions you might have, but I guess the thing I would end with is that the cooperative business model is the sleeping giant in the world. There are 100 million people working in cooperatives around the world. That is more than all the multinationals in the world put together. This is clearly a business model that works. It's clearly a business model, if we look at post-2008, that works very well in crises, that works very well in times of difficulty. In fact, one can argue that it even works better. This is an area where government needs to do some serious thinking in terms of how they create....
As a last point, we take our students to visit the co-ops in the Mondragón region of the Basque Country each year, and it's very interesting. When we were there in 2011, we asked officials what the gap was between the lowest paid and the highest paid. The gap was one to nine, as opposed to one to several hundred in the investor-owned companies in Spain.
We asked them how many people they have laid off as a result of the 2008 recession...in which Spain is not faring well. They have laid off none of their members. They haven't laid off anybody. As a result, in the three valleys where the co-ops are concentrated, the unemployment rate would be close to a structural unemployment rate of zero. In addition to that, in the Basque Country the unemployment rate as a result of the co-op presence is around 12%. In Spain it's 23%.
So in the midst of a staggering economy, the industrial cooperative base, with about 80,000 jobs in the Basque Country, is doing very well and is very strong. We could only wish that we had a similar cooperative industrial base in Atlantic Canada.
I'll leave it at that for now. If there are any questions, I'm sure all of us would be pleased.
I'm delighted to see you, Bryan and Jeff. It's very good to hear from you.
I think there are a number of ways. The one that is an obvious good starting point would be capital formation. Cooperatives need capital in order to survive and to do well. But in a cooperative business, the capital is not rewarded in the same way. It is not “capital take all”, in terms of the profits or the output of the business.
The profit from the business—if I can call it that—is distributed to the workers, to consumers, and in the community, and it's invested in the cooperative. What we lack is an appropriate investment strategy, and I think the federal government could play a very strong role in creating that, in fostering the creation of cooperative development funds, for example.
If I take a typical registered retirement savings plan, it's very difficult to invest in cooperatives within it because they don't often qualify. I think there's been a recent change in the regulations that makes it even more difficult, especially with regard to start-ups of new cooperatives, where you can't have eligibility for an investment—even through a CEDIF—if it is more than a certain percentage of the capital share of the cooperative. So starting a worker cooperative becomes more difficult under those arrangements.
Cooperative capital can be a very attractive investment for people. For me, for example, I would very much like to have all of my retirement savings plan available for investment in housing cooperatives, in day care cooperatives, in worker-owned cooperatives, as opposed to having it go out and end up funding an investment in the arms industry to build land mines to blow people up somewhere. If I had my druthers, I would rather have all of my investment capacity devoted to building society, and yet it's very hard to do that.
The returns, interestingly enough, if you go back.... Cooperatives aren't a natural place for people to look for high returns. You're not going to get a 20% return. You're not going to get 16% or 15%, but you can get a reasonable rate of return. When I look back over the last decade or decade and a half, one of the things that's clear is that if I had a modest rate of return from a cooperative investment fund, I would be better off than I would have been in the mutual funds market. I would have made more money in the long run.
Cooperatives have to compete against that lure of windfall profits. They have to compete against that. What government needs to do is to create the incentives for people to put their money in stable, sound, cooperative investment funds that will produce returns for the whole community, and not just for some investors far off somewhere. I think that's very doable.
Thank you very much, Chair.
Thank you to our witnesses for being here.
I'm really glad that we're focusing on co-ops. I think there's important testimony that's coming out that Canadians need to be aware of, and this is a good forum for them to learn about the strength of co-ops and how well they're doing across Canada. Certainly some of the witnesses we've heard from have indicated that co-ops are in a strong position. They're more than twice as likely to survive an economic downturn as a regular business. Asset values are high, revenues are high. We had a witness from a financial co-op at our last meeting saying their balance sheet has never been better.
This leads me to want to correct something that Madame Brosseau said. She said the government has cut funding. I think it's fair to point out that funding wasn't cut. There was a program that reached its natural conclusion, its natural end. It had been in place for ten years, and I think it's fair and reasonable that Canadians expect governments to review their programs to determine if those programs have achieved their aims and goals. So the funding wasn't cut. The program just came to a natural conclusion, and it wasn't launched again for another five years. It's important to point that out, because there is a difference between the two.
I think it's important that the testimonies we're hearing, which is where I started my comments, actually substantiate that co-ops are doing very well. They've been doing very well over these past five to ten years.
I want to follow up on something Mr. Webb was saying. Mr. Webb, you and other witnesses, like Mr. Inglis, were talking about some of the credit challenges that face co-ops--for example, when you seek loans or financing to expand operations and that type of thing. I know you're doing a research program on accounting within co-ops, so I wonder if you could explain what the challenge is here. Does it have to do with the members owning the assets, and not necessarily the co-op?
I have a second question I'd like to ask quickly. Do financial co-ops—people who are co-ops themselves and who are in the business of lending money—have the same challenge when they look at loaning money to co-ops, or do they see co-ops completely differently? Do co-ops have better access to funding through a financial co-op because they are a co-op and they understand exactly what the challenge is?
Let me start at the end of the question.
One of the models we should be looking at very carefully is the one in Italy, where cooperatives are taxed at a different rate. They're taxed at a different rate in recognition that the objective of the business is not to maximize return to shareholders, but to meet community and member need.
They also, then, have a different expectation. The expectation is that a percentage of the surplus or the profit they produce in a year will go into a cooperative development fund. There is also an expectation that a percentage of their surplus or profit each year will go into reinvestment in the cooperative.
Cooperatives in many ways are no different from investor-owned companies, except with regard to where the return or that surplus is going. If you think about it, you can have the situation—we very often do have the situation—where you have an investor-owned company that is not reinvesting in its company; it is simply sucking the money out, paying it to shareholders, and allowing the company to collapse and wither and die.
You had that, for example, in the case of the coal mines and the steel mills in Sydney, Nova Scotia, where Hawker Siddeley just sucked money out for years and years. You had mines and steel mills that were inoperable, really, and the government moved to take them over.
So the problem of where the surplus goes, whether it gets reinvested in a way that's sustainable, is the same for all business. The advantage of cooperatives is that because the business is locally owned, people have a greater tendency to look at it and ask the question, “What do we need to do?”
That's part of the essential question for our Centre of Excellence in Accounting and Reporting for Co-operatives. It's to have cooperatives develop a systematic way of saying “What is it that we need to invest in the co-op to have it viable for our community for the future?” That's an important question.
In terms of outside investment, where I think we have many co-op members, people like me, who would like to invest in cooperatives.... We have the UFA, for example. If I lived in Alberta—and I'm not sure exactly what the conditions would be—I could become a member of UFA and I could buy UFA preferred shares. But I don't live in Alberta. If I did that, I'm not sure whether they would be eligible to be part of an RRSP investment. I wouldn't likely be able to take my RRSP and invest it in UFA preferred shares. I would get a tax break for investing it in something else, but not in the co-op in which I had an interest.
Those are the kinds of issues that need to be looked at, and there's no question in my mind....
Securities legislation is another example. Bryan will remember that Co-op Atlantic used to offer preferred shares for sale. It got out of the business of doing that. It got out of the business because they didn't want to raise $100 million; they wanted to raise $1 million. To raise $1 million, they had to spend $100,000 in preparing a prospectus, the same as if they were Enron. Well, this doesn't make any sense. This is just not appropriate. This is not appropriate regulation and it's not useful, and what it meant was that they got out.
Mr. Brad Butt: [Inaudible--Editor]
Mr. J. Tom Webb: Yes, I agree.
Thank you, Mr. Chair and committee members.
I appear before you today on behalf of the Prince Edward Island Co-operative Council, representing 108 island cooperatives and their 80,000 members. Fully 60% of the population of Prince Edward Island belongs to a cooperative.
On Prince Edward Island, the beginning of the cooperative movement can be traced to 1864 and the Farmers' Bank in Rustico. The bank was started by the poorest of the poor, the Acadian farmers of South Rustico, people who had too little land, too little money, and very little education, but ended up running what was probably the first people's bank in North America, a precursor to today's credit union.
For the next 150 years, the cooperative movement continued to gain ground on the island, strengthening communities and the people who lived in them.
Over the past few years there has been change taking place in Canada. We have entered a new era, an era characterized by fundamental reassessment of government spending at all levels. People who over many years have learned to look to government for assistance in many areas of their lives must now learn to look to each other.
In his book Cradled in the Waves, John Croteau, an American economist who had worked on Prince Edward Island in the 1930s and 1940s, described the community of North Rustico as a hamlet sunken in misery. Families existed on one small meal a day, two if they were very lucky. Tuberculosis was rampant. Buildings consisted of a collection of unpainted homes. There was an ancient cold school and a very small church. When he returned to the island in the early 1950s he found a community transformed. It had a paved road and electric lights; there was an up-to-date school with an auditorium, a library, and a radio in every classroom. There was now a credit union, a cooperative lobster factory, and a co-op store.
The cooperative movement had infused new life and new hope into that community.
In the early 1900s, very few fishermen in the Tignish area of Prince Edward Island owned their own boats or gear. They were forced to rely on boats owned by a private company and to give that company one half of their catch in return for the boat rental. The fishermen rarely saw cash, because the company, which also owned the local store, used currency refundable only at the store. In 1920 the fishermen of Tignish got together to form the very first fishermen's cooperative, which today operates under the Royal Star Foods brand and employs 300 people.
In Tignish today, an Acadian fishing community of 800 with an area market of approximately 4,000 people, there is a co-op store selling groceries, hardware, lumber, and clothing. The only financial institution is a credit union. The health centre is a cooperative. The seniors home is a cooperative, as is the local transportation provider. The Tignish Fisheries Co-op Association sells its Royal Star seafood worldwide.
What is notable about Tignish is that it persists, at this point in time when the global financial crisis has resulted in downsizing by government and private sector, with the resulting financial and emotional pain for so many communities of this great land. Its cooperatives are looking after its people, and its people are looking after their cooperatives.
Ten years ago, a national bank in Mount Stewart, Prince Edward Island, closed its only financial outlet in that tiny hamlet. The branch was not making a profit. It was nothing personal; it was just business.
The credit union moved in, and continues to serve the people of Mount Stewart today. Like the bank, it does not make a profit, has not made a profit, but profit is not the reason cooperatives such as the credit union exist. They are there to help the community. They are there to help the people.
In Tyne Valley, Prince Edward Island, with a population of 226 and an area market of approximately 2,000 people, the very same thing happened 15 years ago. It was a different bank, the same reason, and the same result. The credit union, the people's bank, moved in. Today the Tyne Valley credit union sponsors minor hockey, the school breakfast program, and scholarships for the high school, and most recently contributed $10,000 for a new rescue truck for the volunteer fire department.
Over the years, Prince Edward Island agriculture and fishing cooperatives have worked with governments to abolish poaching, increase inspections, develop regulations, and provide expertise to produce quality products. The relationship between governments and cooperatives on the island has resulted in tremendous successes in agriculture and fishing and has helped put Prince Edward Island on the global map.
In the modern sense of the word, a cooperative is a business or a service owned and operated by the people who buy its products or use its service. It is truly a democratic organization open to all. Each member has an equal say in how the organization is run. Cooperatives are essential to our country's smaller rural communities, communities like Tignish, Tyne Valley, Mount Stewart, and North Rustico, communities that survive because of the cooperative business model.
The Prince Edward Island Co-operative Council fully supports the Canadian Co-operative Association and the six points for a government and cooperative sector partnership put forward by Denyse Guy in her appearance before this committee. We encourage you to incorporate her presentation into your report, not just for the good of Canadian cooperatives but for the good of the people they serve.
Thank you for your time and attention.
Thank you, Mr. Chair and committee members.
My name is Dianne Kelderman. I am the president and CEO of the Nova Scotia Co-operative Council.
I thank you for the opportunity to come before this very important committee during this historic year, the International Year of Cooperatives.
I understand that you have already heard from many of our national cooperative and credit union partners, and you have no doubt heard, and they have shared with you, our impressive Canadian story.
I am pleased to share with you today the results of the economic impact of the Nova Scotia cooperative system. I am also pleased to share with you the impact we have had on the lives of ordinary Nova Scotians and on the cultural and social fabric of our communities.
If you extrapolate the Nova Scotia results you're going to hear across every region, every province, and every territory, with some give and take, you will get a national picture of why the cooperative sector is fundamental to the economy of Canada and, equally important, is fundamental to who we are as a nation. I will refer back to this point later in my comments.
The Nova Scotia Co-operative Council is the provincial economic development arm of the cooperative and credit union sector of Nova Scotia. We are owned, governed, and financed by the 431 cooperatives and credit unions that do business in our province. In other words, we are owned by the people of Nova Scotia.
We are a very significant economic player, with 431 businesses and $5.3 billion in assets. We employ 7,361 Nova Scotians. We provide housing for over 6,000 Nova Scotians. In 34 Nova Scotia communities, a credit union is the only financial institution. In 27 Nova Scotia communities, a cooperative is the main economic driver. Take those two out of those communities and think about the economic impact.
Sixty-five percent of all agriculture done in Atlantic Canada is done through cooperative enterprises.
We are strong and we are stable.
One out of every five cooperative enterprises fails. One of out of three private sector businesses fails.
We have a strong, historic, and proud commitment to rural communities.
To be exact, 309,012 individual Nova Scotians are member-owners of our cooperatives and credit unions. That is one out of every three people, or 33% of the population. We are bigger than any political party, any religious denomination, and any special interest group.
We are leaders in innovation, in building communities, in growing the economy, and in supporting people.
Our small-business support and lending programs over the past seven years have financed 1,158 small businesses, with loan losses of less than 3.5%. These are businesses, by the way, for which we have done financing at high-risk levels.
We have created over 7,500 jobs, as a partnership with these businesses, at a cost of $238 per job to the Province of Nova Scotia. Our motto is “Great Jobs Close to Home”.
Connecting People for Health Co-operative is Canada's first and only online health care clinic. It connects patients and doctors via the web. It is an enhanced health care service, but an uninsured health care service, and it is in total compliance with the Canada Health Act. It is a system that can change and have an impact on wait times. It is a patient portal. It is patient-centric, not government- and big-system-centric. It is a Nova Scotia innovation. It has export potential. And it is financed by the cooperative and credit union sector; it is not financed with taxpayer dollars.
Next is youth, our future.
Our partnerships in Nova Scotia are touching approximately 14,000 young people a year with cooperative leadership, business development, training, and leadership opportunities.
Nova Scotia's first social enterprise fund is our innovation and our capital. We are providing financing, term loans, working capital, and lines of credit for not-for-profits, for-profits, and cooperative societies that operate business enterprises that have a common social and economic goal.
We are a growing sector. On average, 18 new cooperative enterprises are incorporated on a yearly basis in Nova Scotia. In 2011, we had a record year, with 29 new incorporations across all industries and across all sectors.
We have a mentoring program, where cooperative leaders continue to give. It is a network of retired business professionals, cooperative credit union professionals, who mentor existing businesses and new start-ups in our province.
Cooperatives introduce corporate social responsibility to Canada, now widely emulated by the private sector. Credit unions were the first to introduce ATMs, automated teller machines. In fact, the first ATM in Canada was in Petit-de-Grat, Nova Scotia. Cooperatives are business enterprises, democratically owned, governed for the people by the people.
Cooperatives grew by 1.8% last year in Nova Scotia, despite the economic crisis. Our membership grew by 2%. Our top ten cooperatives paid a patronage dividend equal to 11% return on investment. I would suggest that's a good place to put your money.
The cooperative sector is often the first to respond to important economic and social challenges: financing for the forestry program; financing for immigrants, including an immigrant welcoming program; business interventions; governance training for boards; worker buyouts and business succession; and health care and education solutions. We are in the forefront.
There are many opportunities ahead. Cooperatives are putting people first. Cooperatives are creating sustainable jobs. Cooperatives are investing in communities. Cooperatives are on the forefront of innovation. I think the results speak for themselves.
Cooperatives, across all party lines, represent and embody so many of the greatest attributes that define Canada: democratic, fiscally responsible, socially responsible and caring, self-help, self-responsibility, equity and equality, global concern, and commitment.
We believe that actions, choices, and decisions matter. We also believe that people must come first. And we believe that we have a responsibility to be part of the solution and not part of the problem.
In that context, the Nova Scotia context, what do we need or hope for from our federal government?
First, we request recognition, understanding, and respect as a key economic player. We ask that this respect, understanding, and recognition be shown by placing the responsibility for cooperatives inside Industry Canada, where we belong. We are much more than agriculture. Ensure cooperative enterprises are eligible for and are included in all government programs. There is currently a big gap across federal government programs as it applies to cooperative enterprises. Ensure that the public service, the people who work for the federal government, know that cooperatives exist, first of all, and then, secondly, understand that they are unique and important business enterprises. Perhaps this could be achieved through an interdepartmental committee on cooperatives.
Secondly, introduce financial support mechanisms for the cooperative sector that are consistent with those currently available for the private sector—investments, partnerships, and tax credits, as an example.
Thirdly, cease the government practice of using our tax dollars to establish government-funded entities to compete with our businesses. If it can be done and provided by the private sector, then governments should not be competing with us.
Fourthly, consider cooperatives as an exemplary model for Canadian-owned business opportunities. Consumer-owned utilities and public services are just some examples.
The future is ours to invent. Alan Kay, a Nobel Prize winner, really said it well when he said, “The best way to predict the future is to invent it.”
That's what we're about. Successful economics, successful results, successful people engagement should be ramped up; it should not be disengaged at a time when the country needs us so much.
Thank you very much.
Mr. Chair, committee members, thank you for the opportunity to appear before you today.
I am Pamela Folkins, general manager of SNB Wood Co-operative Ltd. Attending with me is Christina Keating, supervisor of finance and wood purchase.
SNB is an organization of private woodlot owners that was incorporated in 1974 with 19 charter members. In 2012 we're at approximately 2,000 members. Prior to the cooperative, private woodlot owners were organized and formed an association in 1964. Their objectives were to help wood producers receive a fair price for the forest products, to promote good forest management, and to encourage the production of quality forest products from private woodlots.
SNB's vision statement is as follows: Woodlot owners managing individually and collectively to provide the maximum sustainable ecological, economic, employment, social, and cultural opportunities for the benefit of themselves and future generations.
SNB's mission statement is that we are an organization that strives to provide the best possible services for private woodlot owners in order to help them realize the maximum sustainable value from their woodlot resources.
We also have guiding principles operating under the New Brunswick woodlot owners' code of practice.
In New Brunswick there are over 40,000 private woodlot owners. They own 4.5 million acres of forest land. That represents 30% of the forest land base in New Brunswick. There are seven woodlot owner groups in New Brunswick. At our organization we have approximately 8,000 owners who own approximately one million acres of forest land.
SNB has a sister organization called SNB Forest Products Marketing Board Ltd., which operates under legislation in New Brunswick. The co-op acts as the business arm, and the marketing board provides representation under New Brunswick's Natural Products Act.
At our co-op we employ 12 full-time employees, and depending on activities for the year, we employ 25 to 50 seasonal staff. Our full-time staff are long-time employees and provide 150 years of experience in providing services to private woodlot owners in southern New Brunswick.
Needless to say, SNB is a grassroots organization. The co-op evolved from a few concerned individuals trying to earn a living from their woodlots. They held many kitchen meetings and volunteered many hours working to establish an organization to provide a fair system for woodlot owners to gain a reasonable return for their products.
Most private woodlot owners are also farmers. They are the backbone of the rural economy. The co-op structure provides a very important role. It enhances the opportunity for working together, for lobbying government, marketing our forest products, and sustainably managing our woodlots.
At our first annual general meeting in 1975 we had 500 members, assets of $7,000, members' equity of $2,500, and in the first year a loss of $63. At this past AGM, we're at about 2,000 members, assets of $1.3 million, members' equity of $700,000, and we had a bit of a gain of $65,000 this year. The majority of our years have experienced positive financial bottom lines, and profits were distributed back to the membership based on the business transacted through their organizations.
The mandate of SNB has never been to charge exorbitant service fees, but to provide services to its members at a reasonable level, which of course, in turn, provides a return. The members are very supportive of reinvesting their profits back into their organization, which allows for good cash flow and minimal requirements for borrowing moneys to operate.
SNB members are tremendous supporters of working together and great stewards of their forest land. Wood sales and forest management programs are a very large part of operations at SNB.
Wood sales have contributed as much as $27 million in a year, directly back to the local and rural economy, not including the additional spinoffs.
Forest management programs are administered by our co-op, employing the 25 to 50 seasonal people per year, just directly within our group. As well, there are contractors employing a number of local people who also carry out work on these private woodlots.
With the downturn in the forest industry over the past five to seven years, SNB members and their staff have had to look outside of the traditional box to ensure the survival of their organization. New services and revenue-generating activities over and above selling wood—thinning and planting trees—have been initiated, and research is ongoing.
In the early 1980s SNB transitioned to a new financial institution, Bayview Credit Union. SNB was instrumental in assisting it to establish a branch office in Sussex, New Brunswick, where we are based. We remain with them to this day, and they with us of course.
Looking back once again to the strength of SNB and how we've evolved over the years, we see it's not unique. Co-ops play an extremely important part toward the success and survival of rural communities and their people. Our co-op did not evolve from a large, corporate community. It evolved from the commitment of rural people to improve conditions for each other.
As shared earlier, SNB started out from discussions around people's kitchen tables over many cups of tea. It was incorporated in 1974, because woodlot owners had a vision and a common goal. The co-op started operations in a feed warehouse with a part-time employee, moved a couple of times, hired a full-time manager, obtained contracts with industry as a group to sell its products, established crews to work on people's woodlots, and moved to a new office, working with Bayview Credit Union. Eventually we purchased a demonstration woodlot, developed a Christmas tree operation, purchased another woodlot, and then built our very own office facilities.
The commitment and support of our members was even more evident in obtaining our new office. We could have borrowed the money for the construction, but to continue on the principle of working together, in 1986 members personally invested $88,000 for a five-year period and covered off the cost of building their own facility. We continued to grow, and in 1999 we expanded our office, with members again investing $101,000 in their own co-op.
Over the years we have experienced our share of successes, but not without our share of hurdles. The co-op is not unlike any business. There are ups and downs that require a true commitment, and it will only be sustainable with our members' support.
Co-ops must be respected by our governments and recognized for their contribution to the economy as well as, in our case with a private woodlot forestry, the contribution to the sustainability of our environment—air quality, water quality, etc.—and of course jobs.
We truly believe there is strength in numbers. Working together for the betterment of all is not a new concept. We as a whole must strive to not lose sight of what works well and continuously improve upon it. We are concerned with the state of our industry, the aging workforce, the lack of training, and the sustainability of our economy.
In closing, we wish to stress the importance of maintaining initiatives and strategies for the co-op movement. We strongly urge you at the federal level to provide the framework—work with us—and support for the cooperatives, which are an integral part of the Canadian economy within rural communities as well as the urban centres. Cooperatives deserve to be recognized for their contributions to Canada—no different from big business—and have the same opportunities and avenues.
Thank you again for the opportunity to share with you how we have evolved as a co-op. We wish to continue to sustain and improve conditions for the betterment of all Canadians.
I can speak only of the island right now, but I can tell you from the experience of our most recent start-up, which is a farmers' market—which are becoming popular today because of the local produce and the healthier eating—it was a little difficult getting it going, because the forms for registration are not online, and the department looking after the registration is basically one person, and when she took holidays for three weeks she was not available to assist us or for us to ask questions of her. We've moved that now into our office so that we now have the forms and we have the regulations they would need so they can move ahead and get started up a lot faster. That's just one instance.
The smaller cooperatives don't have the resources of credit unions or co-op stores, yet they perform a very valid function. I'm talking about the seniors cooperatives that have maybe 15 to 20 residents. I'm talking about cooperative funeral homes that provide an essential service to people who don't have that high an income, and these funerals are generally 30% to 40% less expensive than in a privately owned funeral home. Cooperatives like that do not have the resources to manage themselves. They do not have an understanding of governance, of board duties, or of what due diligence they have to perform. They don't have an understanding that they should have directors' and officers' liability insurance.
What we're trying to do through the council now is provide that to them, to go out and instruct them in their responsibility as directors, to give them guidance in how to set up a board and do governance, and to show them how to do their filing so that from one year to the next the resolutions they pass are there for them, because we had an incident recently where they couldn't find some of the older resolutions.
I've only been in this position since February, but what I've understood very quickly is that there is a dividing line. There are the large successful cooperatives that are doing very well, but there are so many other small ones, every bit as essential, especially in a rural community. But the smaller ones don't have the resources, so they need something like our council to provide that to them, yet we don't have the resources.
It was the cooperative development initiative funding that allowed us to proceed with this. With it being discontinued, it's going to put us in a very difficult position, and we're scrambling to try to come to terms with that.
Terrific. Thank you. I'm very happy to do that.
HealthConnex—Connecting People for Health Cooperative is our business name—is a cooperative owned by cooperatives and credit unions in Nova Scotia. We're owned by the people of Nova Scotia, and we are, as I indicated in my presentation, Canada's first and only online health care clinic. We have created the technology, the functionality, the capacity, the ability for doctors and their patients to connect via the web--so our consumers, our subscribers, our patients in Nova Scotia, who are members of our clinic.
Now, you have to understand this is not a Nova Scotia-wide innovation; this is within our sector. So for doctors and patients who are in our clinic, patients can connect with their doctor, they can ask a question, they can get information, they can get an answer, they can get an online prescription renewal, they can go into their doctor's appointment book and book their own appointment, rather than calling six times to make an appointment and then cancel an appointment. It's a frequently asked question and answer site. There is a pre-approved Canadian medical library. So it's a way for physicians to communicate and to provide enhanced health care services to their patients.
We consulted quite heavily with the medical community in Nova Scotia, obviously, before we launched this venture three years ago, and we were told by the medical community that 70% of patients sitting in their waiting room are well patients. They're people who don't need to be in the waiting room. They need a prescription renewal, they need to have their blood pressure checked, things that a physician could do in a different kind of way.
So our technology, the service we're providing, is an enhanced health care service. It's an uninsured health care service; it doesn't compete or contravene the Canada Health Act in any way. We believe that it's a way for patients to be a part of the solution for health care, for doctors to be a part of the solution for health care. We believe that over time, as we start to track the trends of what we're doing, it's going to impact waiting times, which I know is a really important federal government issue. We believe it's going to impact the number of patients who are using emergency rooms for non-acute issues.
So it's an enhanced health care service that puts the responsibility or some ownership for health care back into the hands of the patients. It lets them be a part of their own health care, their own solutions, and connect with their doctor in a different kind of way. The beauty of this is it can happen in your own office, in your own living room, in your basement on the weekend. It's not draining on public resources. In fact, we don't have government money; it's cooperative and credit union funded. And we have every intention to replicate this across Atlantic Canada, and hopefully Canada-wide with our partners like The Co-operators, and then potentially internationally.
Right. Agreed. Some of your stories really touched exactly that. You want to be part of the solution, not part of the problem, as someone said.
Mr. Whiting, you just talked about a high school program like junior achievement for cooperatives. What a great way to teach that piece there. That's really getting the message out about how strong a cooperative can be through the hard times.
Let's assume that in great times businesses succeed. I'd like to think that they are always great times. My businesses have been through some hard times and some good times, but because we won't let them fail sometimes that's exactly what happens.
You want to improve the conditions for each other, and you know, that's not something you would hear in a private business. I think it was Ms. Folkins who said the members want to improve conditions not just for themselves but for a group of people. That's what a cooperative does.
Monsieur Bélanger asked some questions about ACOA and your dealings with it. Each of you had maybe a little bit of...kind of negative to say about your dealings with the governments, even in your day-to-day, and how maybe they don't understand cooperatives.
As cooperative organizations, as organizations that represent numbers of cooperatives, what role are you playing in that education? What role are you playing in making, in this case ACOA, or in....? Across the country I'll keep asking other people from other federal development agencies: what role are you playing?
What role do you play on the provincial level, too, to teach the provincial economic development agencies, and what role do you play to teach just plain banks? We recognize now how superior credit unions are, but what do you do to teach them about the lending practices, the debt-to-equity ratios of cooperatives and those types of things? Can you tell me what role your umbrella organizations play in that?
That's to Ms. Kelderman, and then each of you, if I could, before the chair cuts me off.
We're very cooperative on this side. We like to share.
Ms. Kelderman, earlier on you were talking about your ATM that was down there. The credit union that I've belonged to since I was about 12 actually came up with the first debit card. You could use it in ten different locations in the city of St. Catharines, primarily around the GM plant, because they were auto workers' credit unions at the time. You could actually go and use what eventually became the debit card. They actually had one of those going back some 28 years ago, or almost 30 now, I think.
When we look at cooperatives, it seems that across the country credit unions are successful, and they are fairly plentiful across the country. But if we look at Ontario, especially when we start to look at large urban areas, we see fewer co-ops beyond the financial pieces. We see it in the insurance business. We certainly see it in the credit union business. We don't necessarily see it in other businesses.
We certainly won't find any trees in Mr. Butt's Mississauga area for forestry, and you won't find them in my end, Ms. Folkins; certainly I have a woodlot, but we don't have someone like you in terms in being able to have a cooperative. I live in the Niagara Peninsula, and we don't actually have any of those.
If you take an area like the Hamilton-Niagara area, which used to be a heavy manufacturing area, do you see opportunities for co-ops? We talked this morning about industrial co-ops in other places across the world, in the Basque region in northern Italy, for instance, where there might be opportunities for cooperatives to actually do things in very urban settings, where we see private enterprise as the primary player versus co-ops, which tend to be, in certain parts of this country, more rural players. Do you see any opportunities to come into places like Niagara, where jobs have been lost in the tens of thousands, and for co-ops to play a major role beyond the credit union, mutual fund, mutual insurance piece?
Thank you very much, Chair.
Thank you very much for your testimony today. I think it's been excellent.
There are a couple of points I want to touch on.
Pamela and Dianne, you both did a really good job of highlighting the success of cooperatives in your respective domains.
Dan, I think you made the comment, “That's why the government should keep funding them.” But we're in difficult economic times. The government is operating in a deficit.
I was thinking about cooperatives, and you mentioned about the decision-making, the good, strong decision-making processes they have, the good decisions they make. I'm almost convinced that if you had a strong and healthy cooperative that was operating in a deficit, they too would have to make very difficult decisions on getting themselves out of deficit. I think that's really all we're seeing here. I just wanted to make that comment.
I think what's more important than the CDI program is the fact that cooperatives communicate to Canadians the successes you were talking about, Pamela and Dave were talking about, and other witnesses have been talking about. Even though Canadians may be members of cooperatives, they don't necessarily know about the strength, the resilience, the growth of cooperatives throughout Canada, and the important role they play.
I also wanted to address one other point, and that is about government programming. I think you were talking about wanting to be treated fairly with businesses and to have that kind of respect shown to you. I want to ask a few questions about some other government benefits, to see if you benefit from them.
Pamela, you were talking about, for example, the wood industry. When we, as the government, lowered the corporate tax rate to where it is now, did co-ops benefit from that? Do your co-ops benefit from a lower corporate tax rate?
I think we should start timing the chair. I think he's cutting us all off.
I'll go a little further from where Mr. Boughen was going.
The real thought here, and we continue to hear it, is that there needs to be some sort of scope of awareness and education. That seems to be part of it, whether it's between any one of your project businesses or cooperative businesses and ACOA or another government department, or whether it is being recognized as a co-op and how lending or business incentives may work. We've discussed that with more than you, and we've heard that our federal development agencies need to know the differences between a stand-alone not-for-profit, a stand-alone for-profit, and a cooperative, which never stands alone; it's always with more than one person. That education needs to happen.
Dianne, I'm looking at you, because you've said some great things today. But this is for all of you, obviously.
You said that you have a great working relationship with your province on some of the economic development things they're doing. You don't go cap in hand. You say let's work together. It sounds like a cooperative to me.
How do we get the same level of education and awareness? What needs to happen for that to be the same at the federal level? I guess in our case it would be ACOA, but there certainly are other government ministries involved, in the Atlantic provinces, in Nova Scotia, P.E.I, and New Brunswick. How do we ramp up that education?
Dianne, you go first, and then I'll take it from anyone.
Thank you very much, Chair.
I don't know if anyone has seen The Incredibles, but I think Mr. Harris was monologuing. I didn't hear a question in all of that.
I'll go back to the cooperatives, because I think that's why we're all here. It's for the cooperatives, for you to talk to the committee, and I think for Canadians to listen in, particularly because this meeting is televised.
I wanted to follow up on a question regarding the role of provinces, because I think provinces have an important role to play in terms of being able to add what I would call regional flexibility. I often look at it on the agricultural side, and the federal government is there to provide what I would call a level playing field. We shouldn't be favouring, for example, on the agricultural side, a farmer in Saskatchewan to the disadvantage of a farmer in Nova Scotia. We should be levelling the playing field.
But I know that farmers also seek what they call flexibility in programming, because programming doesn't fit well for everybody under every circumstance. I often say that's where the province comes in, because the Province of Nova Scotia or the Province of Prince Edward Island understands P.E.I. or Nova Scotia. They know how best to configure their programs to provide that flexibility for what's actually happening within their province.
So I'd just like to pursue that a little bit in terms of what you see as the role of your respective provinces in supporting co-ops that are actually imbedded within their provincial economy and that are playing an active role, as you mentioned, sort of in jobs, the provision of services, and the provision of financial strength, financial services. We've heard some comments that Quebec is very involved in that regard and other provinces less so. So I'm wondering if you could fill in the committee a bit more on how you would see provincial responsibility lending a hand to cooperatives within their jurisdiction.
I'll start with you, Mr. Whiting.