Special Committee on Cooperatives Committee on July 25th, 2012

[Hélène Simard]

The $4 million certainly helped provide technical support for creating a cooperative. There was an innovation component, which had more to do with business projects. Assistance was provided for start-up and business plans. Support was given for part of the risk and innovation in cooperatives. We could see in the part related to support—especially in communities with fewer experts—that a cooperative is not started up like another company. Starting up a cooperative is an activity recognized by the United Nations.

The first thing that must be done is establishing a community entrepreneur. They must be provided with support and understand properly the governance rules that will apply to their work. Their entrepreneurial spirit must be allowed to flourish. They are not people who, at some point, have that spirit of individual enterprise. That is another way to support company start-ups.

It is certain that the support provider must be someone who is familiar with the cooperative culture and life, and with the company development business environment. That is why expert support is needed. This is recognized around the world.

I can talk about francophone communities because I have been a member of the Conseil canadien de la coopération et de la mutualité. In many communities, the Co-operative Development Initiative helped cooperatives pool their tools, but they could not necessarily afford to hire experts to support new companies.

That initiative helped create new companies in New Brunswick, in sectors like services for seniors. In the energy industry, a nice example was provided earlier. There have been some examples in New Brunswick's wind and business services sectors.

Many companies were able to start up thanks to that more specialized support, which is always complementary to the economic development support that may be available elsewhere. That's a key tool. It is something of a cornerstone—in its absence, companies cannot start up or will be much fewer.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I now go to Mr. Richard or Mr. Harel.

[Denis Richard]

In connection to what Mrs. Simard said, we have introduced La Coop fédérée to you. That company has a network, $6 billion in sales and a 90-year history. Ninety years ago, cooperatives were created with the help of the agriculture, land and forestry department's regional agrologist or the village priest. To start up, a cooperative needs someone to organize the collective entrepreneurship. Studies show that those companies have a better survival rate, but the start-up process is less straight-forward than when entrepreneurs have an idea, acquire some money and create the company themselves. Their idea is sometimes poor, and the company disappears.

Cooperatives are based on a collective need that requires organization. As you were told earlier, Canada's economy needs cooperatives and social economy, but cooperatives need help starting up. Once they have taken off—like La Coop fédérée—they no longer need assistance to operate. As a company, La Coop fédérée can take on the world. Through Olymel, we sell in 50 countries, but 90 years ago, La Coop fédérée could not do that. Ninety years ago, it needed help to start up its cooperatives.

[Jean-François Harel]

I want to add something to what Mr. Richard said. La Coop fédérée is also a federation of cooperatives. It plays both roles. It supports cooperatives and provides them with consulting services for their strategic planning and business turnaround. Once the cooperative has been created, it is La Coop fédérée's job to support it in its growth. However, its role is not the establishment of cooperatives, especially since it is already working in mature industries.

[The Chair, Conservative, Blake Richards]

Thank you.

For our next round of questioning, we have Mr. Lemieux. You have the floor for the next five minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you, Chair.

I want to thank the witnesses for joining us today.

I think it's very important to hold meetings on cooperatives because, this week, Canadians have an opportunity to learn about cooperatives and their success stories. We have heard a lot of testimony highlighting the successes and the strength of cooperatives in communities across Canada.

I would like to ask a question about some of the comments we've received on a number of days regarding government programming and the challenges that co-ops sometimes face in accessing the government programming.

I was going through some examples yesterday. There seems to be fair treatment between businesses and co-ops. For example, both co-ops and businesses benefit from the lower business tax rates that are now in effect, and from accelerated capital depreciation, particularly if they're in the manufacturing industry. The preferred dividend tax rates apply to businesses as they apply to co-ops. So there didn't seem to be any disconnect there.

But there was a comment here from the Ag Energy Co-operative. Rose Marie, you made a comment about modifying existing programs that appear arbitrarily closed to co-ops due to a lack of understanding or a narrow scope by custodians.

We've had a number of co-ops make, I'll say, general comments, but not really specific examples. I understand it's difficult, because if you discuss a particular project, it just may not have ranked high enough. I can tell you from programs in my riding that oftentimes there's a certain amount of money available and the demand usually exceeds the money available by a factor of seven to 10 times. So if there's $1 million available, you get demands for somewhere between $7 million and $10 million worth of projects, and you simply can't approve them all.

I'm wondering if you could perhaps provide us with some concrete examples, with or without naming particular projects, of what you perceive to be roadblocks. I would think that government programming would not set out to exclude co-ops. I would think it would be open to any business enterprise, that they would be evaluated in a comparable manner and then ranked, and then funded where possible.

[Rose Marie Gage]

It's very difficult to provide comparable, apple-to-apple types of examples. Really what we're looking at is just being points of mind alongside any type of program that allows for funding of the co-op sector.

For instance, a point was raised here about angel investing matching programs, where if you have accredited investors, which is a specific category, as I'm sure you're familiar with, looking at investment.... If you can garner that type of investment and have the FedDev program open up comparable types of opportunities, that would be good. But at this point in time this particular program goes strictly through angel investment entities. As such, it actually excludes the co-op sector, because it's strictly to angel investors.

Now, one could open it up so that the angel investors also are from a co-op entity of angel investors, but that's not been comprehended as of yet, and perhaps that's just merely a new thought.

So it's really just thinking differently from how we have, and rather than having very a narrow focus to opportunities for granting, have a little bit wider focus.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

What I'm thinking of is in terms of economic development. We're very focused on jobs and job creation, for example.

Here in Ontario we have FedDev Ontario. They have programs running. They focus their priorities on job-creating projects and initiatives, I would think put forward either by cooperatives or by industry, put forward by business. In other words, the project has its own merit, whether it's being presented by a cooperative or being presented by a business.

In my riding we have the community futures development corporations, CFDCs, that deal with more local use of federal money. We just had a cooperative structure get funding to launch a feasibility study on a project they put forward.

Again, perhaps on this angel investor, I'm not aware of that one. Perhaps that program is targeting one sector and not another. But in general when we look at job creation programs or something along those lines, have you detected a difference that you can put your finger on?

[Rose Marie Gage]

We have not had one specifically. I've just had exposure to this angel investment opportunity, and I saw that it did not include co-ops. It really was specific to an example that was in terms of angel investments, and it was through angel investment entities. So the funding would come, if there were angel investors, through an angel investor group.

It's really looking at and asking whether you can do something comparable and provide dollars attributed to growth that would allow for, perhaps, angel investment for cooperatives. It's just really looking at parity.

But we have not found specifically at this point in time, through our past, anything that has been a tremendous boundary. We have been fairly narrow in terms of our scope, which has really been in the offering of commodities to our membership, as well as looking into some green-energy opportunities. And we have successfully garnered some granting opportunities when we've partnered with local universities.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

All right. Thank you.

[The Chair, Conservative, Blake Richards]

Thank you.

Next we have Mr. Harris for five minutes.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, Mr. Chair.

Thank you to the witnesses. Merci d'etre ici.

Ms. Gage, I'll start with you. Just to follow up on that, are you familiar with any co-op programs that are making use of investment or opportunities through FedDev?

[Rose Marie Gage]

We have actually gone ahead and worked in conjunction with a couple of cooperatives. I have been exposed to them, but I can't remember, truth be told, what the specific ones were. I do believe they did get some form of granting. I don't believe it was exceedingly large, but it was some form of relief for their cooperative to get structured.

I also am of the impression that the Ontario Co-operative Association has received funding—I'm not sure whether it's federal or provincial—to allow for training programs. That has allowed us to successfully garner a recruit via Ontario Co-op's employment base, and that individual is now part of our full-time staff.

So yes, there have been opportunities to be able to use...and gain support—and job creation as well.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you. That's certainly something for us to look into a bit more.

I want to move on to your recommendations, and then I'll also ask the same question to La Coop fédérée.

Your sixth recommendation is to move the co-op secretariat to Industry Canada or Service Canada. I'll just focus on Industry, because many other witnesses have brought this idea forward as well.

Why do you think it should be moved to Industry Canada?

[Rose Marie Gage]

There is a limiting aspect to where it currently is. On a conference call with other cooperatives, it was very evident that those in the non-agricultural sectors felt that was a hindrance.

For us, as long as opportunities in terms of expertise and skill sets are still provided, there is no reason why it should not go to Industry Canada, where a wider platform of services is actually available, whether they're perceived or not. Perhaps it's just a matter of perception that, in terms of cooperatives, individuals feel they are not getting as much value from the current entity.

[Dan Harris, NDP, Scarborough Southwest, ON]

Okay, thank you.

My question is for the representatives of La Coop fédérée. I have with me a copy of your presentation because I would like to read an excerpt from it.

I will read it in English.

just to get the quotation right:

Transferring the Co-Operatives Secretariat to Industry Canada could also be a positive initiative if it were supported by sufficient resources to ensure the fulfillment of its role.

You are in favour of that transfer, and you also say that sufficient resources are required. Do you think the secretariat currently has sufficient resources to play its role properly?

[Denis Richard]

We at La Coop fédérée think it is important for the Rural and Co-operatives Secretariat to be transferred to Industry Canada. That belief is based on Quebec's experience. Cooperatives should be the responsibility of Industry Canada, which develops businesses. That body often establishes policies. It presents programs to the House of Commons for developing companies in Canada and stimulating the economy. It has budgets for developing companies. Cooperatives are another form of business and are attached to an agricultural department. We could end up with different policies.

Let's consider Quebec's experience. That province put its department of industry and commerce in charge of relations with cooperatives. That enables department people to develop policies that apply to all types of businesses. We see that as an advantage because some of Industry Canada's budgets may be distributed among cooperatives and other companies.

However, I understand why, historically, the Canadian government has put the department of agriculture in charge of cooperatives. One hundred years ago, the country's development actually went through the agri-food industry. The Fathers of Confederation felt that cooperatives were part of the agricultural industry. That was logical then. However, in 2012, issues related to energy cooperatives have little to do with the department of agriculture. The reality has changed along with the era.

[Dan Harris, NDP, Scarborough Southwest, ON]

Do you think the Rural and Co-operatives Secretariat has sufficient resources?

[The Chair, Conservative, Blake Richards]

Sorry, unfortunately your time is done.

[Dan Harris, NDP, Scarborough Southwest, ON]

It was just to have him briefly respond to the second part of my question.

[The Chair, Conservative, Blake Richards]

I will allow it, but be very brief, please.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you.

[Denis Richard]

As several people—including Mrs. Simard—have said many times, we need a mechanism if we want to have dynamic cooperatives. You will call it what you want, but the mechanism will consist in supporting and counselling cooperatives, so that the government can understand what goes on in them.

[The Chair, Conservative, Blake Richards]

Thank you.

We'll move now to Mr. Preston.

You have the floor for the next five minutes.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Thank you very much.

Thank you all for your presentations and your recommendations. We're compiling quite a list here of things to look at, and sorting through them may or may not be easy. Many of you are hitting on some of the same things.

I heard something new, Mr. Ravensbergen, in your piece of presentation. You talked about your organization and expanding your offering to include managed cooperative services for other co-ops. Can you give me a quick version of what that means? Are you helping other people start co-ops, or manage their co-ops after they've started? Are they associated with the co-op you have, or are they at arm's length?