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A cooperative comeback in Agriculture

By Jeff Mbanga in Kampala and Gemma Ware
Posted on Wednesday, 18 July 2012 16:50

For decades cooperative has been a dirty word for many farmers across Africa, a term steeped in bitter memories of corruption, cronyism and mismanagement.

Take Uganda, where cooperatives were introduced in 1913. Focused around the country’s two traditional cash crops – coffee and cotton – they quickly became a central organ for organising smallholder farmers. Conservative in their management approach and with little ambition to explore regional markets, cooperatives depended heavily on government support for the capital and machinery.

Political interference led to corruption at the top levels. Leaders were chosen by ministers and stayed put for years with no accountability to members. Then came the International Monetary Fund’s structural adjustment programmes of the late 1980s, leading Uganda’s government to pull out of cooperatives in a wide liberalisation campaign.

“That was a mistake,” admits John Joseph Otim, advisor on agriculture to Uganda’s President Yoweri Museveni. “Instead of correcting the causes of the inefficiency of the cooperatives, it was just a blanket statement: cooperatives don’t work, remove them.”

Cooperatives are making a comeback. Professionalism and better management have created a new breed of farmers’ association that is well placed to bargain with big business.

In West Africa, agribusiness companies have started backing cooperatives as a way of selling their inputs to smallholder farmers. This year, the United Nations (UN) International Year of Cooperatives, a new director general at the UN’s Food and Agriculture Organisation (FAO), Brazil’s José Graziano da Silva, is pushing for more weight to be given to farmers’ organisations.

A restructuring at the FAO will include the creation of a new office at the agency for farmers’ organisations and cooperatives on 29 May.

In Uganda, cooperatives began to re-emerge in the early 2000s. Today, they have a stronger voice. “We are phasing out the middlemen,” says Lamuel Byamugisha, vice chairman of Kisita Area Cooperative Enterprise, which engages in value addition and marketing. “Our farmers now bargain for better prices.” There are at least 6,000 farmers working with Kisita, according to Byamugisha.

Unlike before, cooperatives are producing different commodities including honey, beef, potatoes and fish.

The cooperative management has changed too. “Back then, anyone would come and be voted chairman. But today, there are screening committees who carry out background checks on potential candidates,” says Leonard Msemakweli, general secretary of the Uganda Cooperative Alliance, an umbrella body for cooperatives.

Stronger bargaining power has come in tandem with high food prices – tough for consumers, but good for farmers. A kilogram of maize is now selling for USh1,200 ($0.47), up from USh400 only three months ago, according to Msemakweli. He says institutions like the World Food Programme can now buy in bulk directly from cooperatives, while firms such as Nile Breweries have signed contracts with cooperatives to supply sorghum and barley.

Private sector sharing

Current cabinet discussions on a comprehensive new legal regime for cooperatives show just how far things have come. Ministers are scrutinising amendments to the 1991 Cooperative Societies Act that seek to place cooperatives in the hands of the country’s private sector.

Fred Mwesigye, the commissioner of cooperatives at the Ministry of Tourism, Trade and Industry, says the key principles of the changes are “more about strengthening the soundness and safety of the cooperatives”.

Similar transformations have happened in Kenya. Bad management in what were once efficient organisations caused farmers to walk out of cooperatives, says John Mutunga, chief executive of the Kenya National Federation of Agricultural Producers.

Now, he says, farmers producing a range of commodities are regrouping under different banners. “They are using the cooperative principle, and are registering as producer businesses either under company law or under cooperative law. But they do not necessarily want to be called cooperatives,” he says.

Agribusinesses are now engaging with cooperatives across the continent. In Ghana, local branches of input firms Wienco and Yara supported the formation of the maize cooperative Masara N’Arziki, which means ‘maize for prosperity’ in Hausa.

Farmers set up the cooperative in 2008, and 6,000 smallholder farmers in northern Ghana are now receiving inputs, storage facilities and training through the cooperative. “We’re trying to make maize into a cash crop, not a staple crop,” says Luuc Smits, general manager of Masara N’Arziki, which sells all its maize in the domestic market.

Farmers who take inputs and hybrid seeds from the cooperative see increased yields of 400% in their first year, says Smits, and last year they repaid 95% of credit given for their inputs. Smits points out that Masara N’Arziki has been built on a ‘farmer first’ approach. There are 16 people on the board, 12 of them farmers.

“The target is that in the next few years we’re going to be entirely on our own feet,” he says. In Côte d’Ivoire, Singapore’s Olam has made investments in cocoa cooperatives. “More and more the focus has been on sourcing from cooperatives rather than middlemen,” says Andrew Brown, vice president of Olam Cocoa in the country. “We actually assist and encourage some of our former middlemen to set up as cooperatives to formalise their procurement structure,” he explains.

Brown says that the 400-500 most professionalised of Côte d’Ivoire’s 3,500 co- operatives are now partnered with trading companies.

Such moves by agribusiness companies to create associations through which they can market their products sit uneasily alongside the mantra of the cooperative movement.

Some experts are adamant that cooperatives must be founded from the bottom up, rather than the top down. “A cooperative is an autonomous organisation democratically run, membership driven and with an economic objective,” says Nora Ourabah Haddad, rural employment and institutions officer at the FAO. “It’s not sustainable to set up a cooperative from scratch and then to fill it with people, no matter who does it”●

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