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The national development plan (NDP) clearly states that communities should take initiatives to solve their own problems. One of the socio-economic problems faced by communities in South Africa is the effects of inequality, which is largely the apartheid era is responsible for. In trying to deal with the socio-economic problem of inequality, many communities in South Africa have resorted to forming and running cooperatives in different sectors of the economy. However, these cooperatives are reported to be facing numerous challenges, and in some cases, many of them fail or close down. The challenges mentioned range from a lack of capacity to manage, poor economic performance in the country, heavy reliance on government grants and many others. Despite the challenges faced by cooperatives in South Africa, they are still believed to be a very important tool in dealing with the problem of inequality, which mostly affects rural areas where most of these cooperatives operate. To understand the potential impact of cooperatives in dealing with inequality, this paper uses a qualitative approach. Secondary sources of published information by government agencies and cooperatives themselves will be used, as well as literature published by experts in the area of study. Preliminary findings of the paper are that cooperatives in South Africa are very small in size, and the majority of them are in primary sectors of the economy. If cooperatives are to play a significant role in dealing with inequality, there is a need for them to be capacitated to grow and also participate in upper value chains of the economy.