Co-op Apex Tries Second Hail Mary Pass

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It’s not exactly a secret that Co-operatives and Mutuals Canada (CMC) has asked the federal government for $50 million. Not a secret but not widely publicized, either. CMC directors knew of it, a few others, but not altogether easy to defend and a bit embarrassing actually. It was a pre-budget submission e-mailed to Finance Minister Bill Morneau on January 18, 2016. The same request was made of the previous government back in 2014. It was ignored by Conservatives. Odds on it will get the same non-response from Liberals.
When the pitch was first made two years ago, I wrote a scathing report. I didn’t publish it, much now to my regret. If I had, perhaps the second cap-in-hand approach to the feds could have been avoided. You can get a sense of what I didn’t print in 2014 from the opening:
Puerile. That’s the word that best describes the co-op sector’s pre-budget submission in Ottawa last month (Oct. 2014).
The presentation starts with nothing short of bravado and follows with one bold request.
“Today,” says the rep from Co-operatives and Mutuals Canada (CMC), “I’ll be speaking directly to the topic of how the Canadian co-operative sector can increase the competitiveness of Canadian enterprises through research, development, innovation and commercialization.”
(I don’t name the rep because this embarrassing incident was a team effort by senior management.)
It was a wow of an opening, involving just about every buzzword, every hot button, every call to action that commands government attention. Research, development, competitive, innovation, commercialization. Who could ask for anything more?
Fortunately nobody did ask for anything more because there is no scintilla of evidence in the submission that CMC has ideas on any of these topics. In fact four of the five words never recur in the presentation. The word that does recur — development — is cleverly transformed from economic development, the notion first introduced, into the core ‘ask’ of the submission, development of “our own national investment fund.”
Then CMC gets right to it. Thirty seconds into its presentation it’s asking the federal government “to provide concrete support to co-operative development by investing $50 million in our Canadian Co-operative Investment Fund (CCIF).”
I admit my prose was somewhat over-the-top (perhaps the reason I didn’t publish at the time), but the most recent submission basically repeats the rationale of the first, and includes a similar, though not exactly the same, set of numbers. The entreaty to Minister Morneau reads:
“The Canadian Co-operative movement has committed over $25 million to the Canadian Co-operative Investment Fund, to loan capital to co-operatives.”
Let’s stop for a moment. If I may employ the most parliamentary of terms, this is a terminological inexactitude. CCIF had slightly less than $25 million in pledges, not over $25 million, and had been stuck there for many months as potential investors waited to see whether and what the government might provide.
The brief to the Minister continues:
“With a $25 million initial contribution, it is anticipated that CCIF will positively impact approximately 180 enterprises by providing $45 million in capital investment over a ten year period. If the fund secured a total of $75 million in pledges, it would positively impact 720 co-op enterprises with a cumulative contribution of $180 million to the sector over the same ten year period.”
The numbers are derived from a business case for CCIF produced in April 2015 (written about here). The biz case says (Morneau numbers in brackets) that $25 million would provide 232 (180) loans worth $58 million ($45 million) over ten years while $70 million would provide 688 (720) co-op enterprises with loans worth $172 million ($180 million) over the same decade.
It’s obvious in the first place that the pitch to Morneau lowballs what can be achieved if CCIF has to soldier on alone. The numbers are simply lowered, without explanation, from one presentation to the next, raising a real question of how CMC arrives at its estimates. Not so obvious is the shift skyward in results when government aid is factored in. The reason it’s not obvious is because CMC changes the bottom line from $70 million in 2014 and the biz case of 2015 to $75 million in the Morneau presentation. The net result is that the co-op sector looks weaker by itself in 2016 than it appeared in 2014 and stronger if government would just say yes.
So what if the numbers are fudged? A lot of numbers are fudged, aren’t they? There are professions dedicated to fudging numbers. But other questions arise.
Even if the numbers can be explained, why should the government provide funds? If the investments are meant to pay a return, why are co-op financial institutions not more involved? (Why has it taken years longer than predicted to get the fund to near-operational?) If the co-op sector really needs taxpayer assistance, what’s the case for it, what are the public benefits? Of course jobs will be created, but more jobs than the same investment in profit-churning enterprise would create? Better jobs? By what measure? The benefits are not self-evident and the public, including its government, is largely unaware of what they might be.
How CMC has come to believe that Ottawa would or should provide $50 million, or any millions, to help build co-op businesses, I do not know. Actually I have an idea but I’ll leave that to another post.