EADD project is all about cooperatives. 2012 is the International Year of Cooperatives, as declared by United Nations General Assembly. As such EADD is placing itself as a source of credible information, sharing field experiences gained in the last four years through national and regional media. Read an opinion by EADD experts as featured in Kenya Sunday Nation newspaper July 8, 2012.
By Moses Nyabila and Gerald Mutinda Katothya
The recognition of cooperatives as crucial means for poverty alleviation has been widely acknowledged. This has culminated in the United Nations General Assembly declaring 2012 as the International Year of Cooperatives, highlighting the contribution of cooperatives to socio-economic development, particularly their impact on poverty reduction, employment generation and social integration.
Coop development in Africa
Cooperative development in Africa is phased into two eras, the post independence 1960’s to 1980s and liberalisation era in early 1990’s. The first era was characterised by African government enacting policies and programmes that promoted cooperatives as vehicles for accelerating economic development and modernising the traditional economies. The 90’s were characterised by global economic reforms and liberalization.
In both phases, legal frameworks gave African governments powers to direct and manage the affairs of the cooperatives, which enjoyed monopolies in trade, were rarely truly voluntary, autonomous or independent. They were subsequently engulfed into state politics.
Whereas the first era is well documented, the second era is inadequately researched. What could be noted is that guided by the 1995 International Cooperative Alliance’s cooperative principles, many countries introduced new policies and legislations to liberalize the cooperative sector. Cooperatives have come a long way from an era of mismanagement and loss making to the new age value added organisations. Field experiences indicate that the liberalization trend offers the value added cooperative an opportunity to reinvent their business ideals. Scattered evidence suggests that cooperatives in Africa have survived the market forces and grown in number and membership. Reportedly seven per cent of the African population belongs to a cooperative. Such resilience has been attributed to; structural re-organization of the cooperatives where inefficient cooperatives lost relevance and membership support and diversification of cooperative ventures from the traditional sectors. It seems that liberalization has produced a sieve for sifting the grain from the chaff in the cooperative sector.
Value added coops
The value added cooperatives are a new concept that embraces the hub business model, popularized in East Africa by the East Africa Dairy Development Project. This model is especially successful in revolutionizing the dairy industry. The value added cooperative is exclusively owned by the producers and hires experienced managers to manage it and its facilities. It is designed to generate profits for their farmer investors. Usually based in a village/location setting where it runs its activities, the value added cooperative has become a economic stimuli in areas its located. It has become a hub of innovation. In Kenya for example, 21 such cooperatives collected over 77mio kg’s of milk and generated over USD 27 million in revenues with 23 million paid out to regular farmer suppliers of milk. Such successes are reported in Uganda and Rwanda and the model as a result of its successes will be replicated in Tanzania and Ethiopia from next year.
Benefits of hub model
The beauty of the hub model is its ability to innovate and counter the initial challenges experienced by dairy cooperatives including farmers being unable to access breeding services, animal healthcare, feeds and other production inputs remained a distance and extremely unaffordable to the small scale farmers.
Physical distance, limited infrastructural facilities and lack of relevant information also prevented farmers from attaining most of the key services required to increase their production and to operate as a profitable business. Business supports that are accessible were typically of high cost and poor quality, hence in a way affecting the social fabric that brought these communities together. The hub model approach, has proved that value added cooperatives are “the glue that holds these communities together.” With a core service being bulking of products to increase volumes and thus add the advantage of competitiveness and negotiability, this approach benefits the share holder farmers to not only access services like affordable extension services, transport, agrovet, feeds, and training but also other social services like health, access to loans and credit, profits, competitive prices.
In a value added cooperative, some farmers specialize in provision of services like in dairy fodder production; they already have a ready market in the milk suppliers thus need not worry about disposal. Youths are involved in provision of services like transport of products from farms located further away from the hub, thus freeing the farmer from the hustle of transport to concentrate in production. In the end the cooperatives make profits and pay their farmers handsome dividends, banks seeing the value are willing to lend loans for further development, so long as the cooperative scores highly in leadership and financial integrity. Such partnership with development, public and private sector players is enabling smallholder dairy farmers in East Africa to reap substantial benefits from the increased demand for milk in the region.