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Cooperative Movement in Ethiopia
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Cooperative Movement in Ethiopia
Workshop on perspectives for Cooperatives in Eastern Africa
October 2-3, 2012, Uganda
By Bezabih Emana
HEDBEZ Business & Consultancy PLC
OUTLINE
Historical overview
Legislative/regulatory framework
Current status of cooperatives
Contribution of cooperatives to social and economic
development
Role of the government in cooperative development
Advocacy role?
Challenges and prospects for cooperatives
Best practices in cooperative movement
HISTORICAL OVERVIEW OF COOPERATIVES
Cooperative is:
association of persons who have voluntarily joined together to a common end through the formation of a democratically controlled organization, making equitable contribution to the capital required and accepting a fair share of the risks and benefits of the undertaking, in which the members actively participate
Cooperation among people of Ethiopia has existed since time immemorial
HISTORICAL OVERVIEW OF COOPERATIVES
Traditional forms of cooperation involved:
"iqub" - voluntarily pooling financial resources;
"Jigie” “Wonfel” - labour resource mobilization to overcome seasonal labour peaks;
“insurance” - reciprocal insurance mechanism whereby members contribute membership fees in kind or in cash to meet social needs including wedding and funeral ceremonies.
Operated independent of the formal markets and less influenced by the political system
HISTORICAL OVERVIEW OF COOPERATIVES
Cooperative as a legal institution first came into being in Ethiopia in 1960s.
Ethiopian Air Line Workers’ Saving and Credit Cooperative was established in 1956.
During the socialist government i.e. the Derg regime (1974-1991), cooperatives were formed to assist implementation of the government policy of collective ownership of properties.
It was then triggered by reforms to the socio-political system.
HISTORICAL OVERVIEW OF COOPERATIVES
Violation of cooperative principles proved to destabilize cooperative movements in Ethiopia as most of the cooperatives were dismantled following the downfall of the socialist system
In 1974, app. 149 cooperatives
1974-1991, app. 10,524 cooperatives
In 1991, figure dropped to7,366 cooperatives
In 2011, app 37,247 primary coops;
245 unions
HISTORICAL OVERVIEW OF COOPERATIVES
During this time, cooperatives were forced to operate in line with socialist principles, which meant that production and marketing of produce were done collectively.
Membership to cooperatives was also compulsory, which goes against the basic cooperative principle of voluntarily participation.
Were instruments for implementing government policies; leaders loyal to government.
Were also especially supported by the government (privileged loan by development bank of Ethiopia)
The first legislative Decree No.44/1960 called “Farm Workers Cooperatives Decree” issued in 1960
Proclamation No. 71/1975 legalized Peasant Associations including the right of administrative power
Proclamation No. 138/1978 issued to legalize establishment of Cooperative Societies incluing Housing, Credit and Handicrafts, etc. cooperatives Policy geared towards direct control of the
cooperatives and turning them into government and political instruments
Current government also issued different
proclamations, policies and strategies that
also include cooperatives:
Proclamation 85/1994-to revitalize coops;
Proclamations 147/1998 and 402/2004 to reinforce
these principles and strengthen membership
incentives by improving members’ rights in the
areas of ownership, voting, share transfers, and
risk management
Lack of legislative frame for establishing
cooperative bank,
legal aspects of if members of below 18 years of
age are elected to leadership positions and made
accountable for their wrong doings,
how the saved money is distributed among
cooperative members upon liquidation of
cooperatives,
how donated fund or property should be utilized
in the case of cooperative liquidation,
laws governing employment of cooperative
employees, etc.
Current Status: Cooperative Sector Structure
Line of communication
Federal Cooperative Agency
Regional Cooperative
Bureau/Agency/Office
Confederation/ League; Not
Yet Formed
Zonal Cooperative Office
Primary Cooperative
society
Cooperative members
Cooperative Union
District Cooperative Office
Facilitation /capacity building
Cooperative
Federation
Ministry of Trade
General
Assembly
Executive
Committee
Control
Committee
Purchase and
Sales Committee
0
10,000
20,000
30,000
40,000
2006 2007
2008 2009
2010 2011
20,437 22,275 24,935 26,672
35,527 37,247
Nu
mb
er o
f c
oo
pe
rative
s
Year
Multi purpose 19%
Turism 0%
Horticulture 0%
Incens and Gum 0%
Irrigation 4%
Milk 1%
Fish 0%
Saving and credit 19%
Consumer 3%
Hand craft 3%
Mineral 5%
Electricity 1%
Housing 20%
Livestock production
1%
Agri. product 1%
Khat 0% Butchery
0% Coffee
0%
Technique 22%
Proportion of primary cooperatives (Total =37,247) in 2011
Primary Cooperatives by Region
• Other regions: BSG, Gambella, Harari, Somali, Afar, Dire Dawa • Oromia accounts for the largest No. of cooperatives, land mass and
population of Ethiopia
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Amhara SNNP Oromia Tigray Other regions
1,863 886
3,181
632 633
6,390 5,982
10,406
1,924
12,545
Multipurpose primary coops All primary coops
Membership (primary coops)
• 5,882,260 members of primary cooperatives
– 158 members per cooperative
• 23% female
• 74% of the members belong to multipurpose coops
Capital: Primary Coops
• Total of USD 125 million
• About USD 3,400 per primary coop
• 34% of the capital is owned by multipurpose primary coops.
Cooperative Unions
0
50
100
150
200
250
2006 2007 2008 2009 2010 2011
112 145 162 174
212 245
No
. o
f co
op
. u
nio
ns
Year
Amhara
17%
Oromia
41%
SNNPR
15%
Tigray
17%
Other regions
10%
Proportion of unions by type
• Total=245 unions; 6,792 member coops
Multi purpose
45%
Milk and milk product
3%
Bee and bee product
1%
Saving and credit
26%
Dry food prparation
1%
Grain market
7%
Coffee
4%
Forest
1%
Livestock
market
1%
Sugar cane
0% Mineral
3%
Fruit and vegetable
3% Consumer
5%
Fish
0%
Koble stone
0%
Cooperative Unions
• 245 cooperative unions with
• 6,792 member primary cooperatives – About 28 member primary coops per union
• 52.3% of the union members belong to multipurpose primary coops
• 18% of primary cooperatives organized into unions
Capital: Unions
• Total of USD 45 million
• About USD 625,000 per union
• 71.6% of the capital belongs to multipurpose cooperative unions
Which Coops are most active?
• Agribusiness activities
– Coffee marketing
– Grain marketing (now also processing)
– Dairy
– Irrigation
• Saving and Credit
• Mining
Source of Finance for the Coops
• Membership fees (small)
• Savings (for SUSACCOs)
• Loan (cooperative banks, sometimes commercial banks)
• Donations (NGOs and other agencies)
• Business undertakings (marketing coops, unions)
• Government (through capacity building and programs also linked to agencies0
Role of Cooperatives
Economic role: Enhance production by providing inputs
Fertilizer: Cooperatives marketed 357,000 metric tons of fertilizer, or 67 percent of all fertilizer imports and 85 percent of domestic fertilizer distribution (Meherka, 2008)
Improved seeds
Pesticides
Machinery (tractor renting)
Marketing of outputs (collect, assemble and sell or export agricultural commodities): In 2007/08, four unions exported a total of 36,593.36MT
(USD 104,154,838)
Economic Roles of Cooperatives
Increased income (through price stabilization or dividend);
Poverty reduction (through impacts on income and access to credit from RuSACCOs to engage in income generation activities);
Economic growth (value chain): value addition-unions engagement in processing of agricultural commodities.
Provision of consumer goods
Provision of storage services
Role of Cooperatives
Creates employment
Self employment
Permanent employees
Casual workers Cooperative sector generated 207,587 employment (18% was
by cooperative unions and 82% by primary cooperatives).
And the total value of the employment was estimated at USD
72 million in 2009/10 fiscal year.
Capacity building-for members
Role of Cooperatives
Social protection/services Price stabilization (also influenced by the
policy advocacy)
Protect the members from exploitative pricing
Some unions invest profits to social works
Voicing:
Serve as an institution through which the voice of the poor is herd
But cooperatives do not involve in political issues to advocate for members
Factors of Success
Strong leadership and governance
Members participation
Access to financial resources
Capacity: material and human
Often NGOs are behind the successful coops
Nature of commodity handled: coffee, cereals,
seed production typical
Coops have been always considered as instrument to mobilize the society to implement policies
The socialist government practiced communal ownership principle using coops
The current government also included cooperatives as a means to organize and develop the societies: Agricultural Development-led Industrialization (ADLI)
strategy (1995);
Sustainable Development and Poverty Reduction Program (2002-2004));
Food Security Strategy (2004-2006),
Plan for Accelerated and Sustained Development to End Poverty (PASDEP) (2006 -2010) and
“Growth and Transformation Plan” (2011-2015) all acknowledge that cooperatives play key roles in the implementation of these strategies.
Cooperative departments: Organize cooperatives, register them
Provide technical support
Provide audit service (but 20% of primary and 76% of unions were audited in 2010)
Provide legal services
Facilitate linkage with external sources
In principle, ensure that the cooperative bylaws are enforced. In practice, it also violates the laws e.g. in
timely election of management members
Pay other roles such as facilitation of market linkage
Several organizations work with cooperatives
to enhance their causes
NGOs/International Organizations:
ACDI/VOCA, IFPRI / ILRI, Oxfam, USAID, BMGF,
Self Help International, ILO, IFAD, African
Development Bank
Capacity building (material, facilities, training,
access to financial resources, etc)
Developing value chain (e.g. SOS Sahel,
USAID( avail guarantee fund),
International Development Enterprise (Seed
money and capacity building for cooperatives)
ILO ( Capacity building to improve work
environment),
FAO (technical support for improved
technology utilization and seed
multiplication and many others)
SNV (value addition approach and
contribution removal of EU import
restrictions especially honey)
Three broad challenges/constrains
cooperatives in Ethiopia encounter:
Lack of comprehensive
Cooperative Policy and Strategy;
Low Capacity of Cooperative
Leadership and Management;
Lack of Finance by Cooperatives.
Structural changes and institutional setting of
cooperative promotion agencies
Missing elements in the proclamations
Employment regulations, accountability, liquidation
Incompatible cooperative bylaws: e.g. Saving
rules not compatible with earning patterns
Low Capacity of Cooperative Leadership
and Management
Inadequate capacity building support by
agencies
Literacy gap from the coop leaders
Low interest of the management committee
due to low incentives
A strong degree of reliance on government
support has implications for the
independence of the organizations
Lending policies of commercial banks
not suitable for cooperatives
One cooperative bank which is limited
by region and capacity
Low saving by the members
Poverty
Awareness of benefits and confidence
Weak private sector or its exploitative nature
urges farmers to act in an organized manner
Provide means of creating competitiveness for
small holder farmers;
Government support-directly as well as
through projects like RUFIP, HABP
Need for participation in value chain and
agribusiness is growing.
Increase in price margin for the producers
Expanding rural agro-processing industries;
Increased need for accessing financial resources;
stabilize consumer prices;
accessing agricultural inputs at reasonable prices;
provides means of voicing for the poor (depends on the policy)
NGOs such as Oxfam, Self Help Africa, etc.
Infrastructure development in the rural areas creating market incentives
Capacity building programs: Universities, TVET
Good leaders for farmer’s cooperatives ◦ Managers make a difference
Transparent and rule-based operation of markets
Understanding of supply chains and a realistic assessment of the capabilities of farmer organizations
Capacity building through training ◦ Improved access to current technology level
◦ Financial capacity
◦ Managerial capacity
◦ Leadership
Value chain and Niche Market approach ◦ Organic product supply (coffee, beef, oilseeds, etc)
◦ Innovative models capitalized on market opportunities and local capacities
◦ Role of external forces in overcoming challenges is apparent.
Honey cooperatives: ◦ Investment in human resources of the cooperatives
◦ Initial management support;
◦ Investment in honey production and processing technologies;
◦ Engagement in value addition (processing, packing and quality improvement);
◦ Advocacy to overcome export bottlenecks,
Human and facility bottlenecks removed through technical and financial support of external sources and the coops.
Investment in technology e.g. wheat processing plants
Diversified portfolio ◦ Input marketing
◦ Grain marketing
◦ Loan distribution to members
◦ Processing, packing
Acknowledgements of Materials Used
• Bezabih Emana (2009). Cooperatives: A Path to Economic and Social Empowerment in Ethiopia, CoopAfrica, Working Paper No.9, ILO, Rome
• Bezabih Emana (2010). Impact of CoopAFRICA
Program in Ethiopia. A Study Report submitted to CoopAFRICA , Tanzania.
• Bezabih Emana and Mengistu Nigussie (2011). Strategizing Cooperative Development in Ethiopia. Agricultural Transformation Agency and IFPRI, Addis Ababa, Ethiopia.
Thank you!