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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 [email protected]

Cooperatives in ethiopia

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Cooperative Movement in Ethiopia

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Page 1: Cooperatives in ethiopia

Cooperative Movement in Ethiopia

Workshop on perspectives for Cooperatives in Eastern Africa

October 2-3, 2012, Uganda

By Bezabih Emana

HEDBEZ Business & Consultancy PLC

[email protected]

Page 2: Cooperatives in ethiopia

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

Page 3: Cooperatives in ethiopia

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

Page 4: Cooperatives in ethiopia

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

Page 5: Cooperatives in ethiopia

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.

Page 6: Cooperatives in ethiopia

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

Page 7: Cooperatives in ethiopia

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)

Page 8: Cooperatives in 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

Page 9: Cooperatives in ethiopia

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

Page 10: Cooperatives in ethiopia

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.

Page 11: Cooperatives in ethiopia

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

Page 12: Cooperatives in ethiopia

General

Assembly

Executive

Committee

Control

Committee

Purchase and

Sales Committee

Page 13: Cooperatives in ethiopia

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

Page 14: Cooperatives in ethiopia

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

Page 15: Cooperatives in ethiopia

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

Page 16: Cooperatives in ethiopia

Membership (primary coops)

• 5,882,260 members of primary cooperatives

– 158 members per cooperative

• 23% female

• 74% of the members belong to multipurpose coops

Page 17: Cooperatives in ethiopia

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.

Page 18: Cooperatives in ethiopia

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%

Page 19: Cooperatives in ethiopia

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%

Page 20: Cooperatives in ethiopia

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

Page 21: Cooperatives in ethiopia

Capital: Unions

• Total of USD 45 million

• About USD 625,000 per union

• 71.6% of the capital belongs to multipurpose cooperative unions

Page 22: Cooperatives in ethiopia

Which Coops are most active?

• Agribusiness activities

– Coffee marketing

– Grain marketing (now also processing)

– Dairy

– Irrigation

• Saving and Credit

• Mining

Page 23: Cooperatives in ethiopia

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

Page 24: Cooperatives in ethiopia

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)

Page 25: Cooperatives in ethiopia

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

Page 26: Cooperatives in ethiopia

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

Page 27: Cooperatives in ethiopia

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

Page 28: Cooperatives in ethiopia

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

Page 29: Cooperatives in ethiopia

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.

Page 30: Cooperatives in ethiopia

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

Page 31: Cooperatives in ethiopia

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)

Page 32: Cooperatives in ethiopia

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)

Page 33: Cooperatives in ethiopia

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.

Page 34: Cooperatives in ethiopia

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

Page 35: Cooperatives in ethiopia

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

Page 36: Cooperatives in ethiopia

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

Page 37: Cooperatives in ethiopia

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;

Page 38: Cooperatives in ethiopia

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

Page 39: Cooperatives in ethiopia

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

Page 40: Cooperatives in ethiopia

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.

Page 41: Cooperatives in ethiopia

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,

Page 42: Cooperatives in ethiopia

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

Page 43: Cooperatives in ethiopia

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.

Page 44: Cooperatives in ethiopia

Thank you!