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Decision and Policy Analysis Research Area – DAPA

Enhancing Development through Cooperatives

By Gian Nicola Francesconi & Elizabeth Minchew

The Enhancing Development through Cooperatives workshop was held from September 1 to 3 in Addis Ababa, Ethiopia.

The event was hosted and sponsored by the US Overseas Cooperative Development Council (OCDC), International Center for Tropical Agriculture (CIAT), International Food Policy Research Institute (IFPRI) and the Missouri University College of Agriculture, Food and Natural Resources (MU). The event was organized by CIAT’s Gian Nicola Francesconi, a Kampala, Uganda based recent addition to CIAT’s Decision and Policy Analysis Area (DAPA)  Linking Farmer’s to Markets team.

Workshop participants discussed cooperatives, the benefits of ICT and improving governance structures, among other topics.

Workshop participants discussed cooperatives, the benefits of ICT and improving governance structures, among other topics.

The power of cooperatives

The United Nations declared 2012 the International Year of Cooperatives to highlight the important role cooperatives play in promoting global socio-economic development and their impact on both poverty reduction and social welfare. Cooperatives play a central role in rural finance and contribute to the marketing of about 50 percent of global agricultural output. Despite a troubled past, farmer organizations based on cooperative principles remain widespread and are growing throughout the African continent.

Africa is currently witnessing a decline in foreign aid but an increase in foreign investment. A growing number of private and multinational companies are entering African agri-food markets to promote agribusiness. Rural cooperatives are increasingly asked to play the critical role of organizing African farmers and ensuring that investments in agribusiness yield expected returns while alleviating rural poverty and preserving natural resources.

However, numerous studies (see related articles at end of post) by Wageningen University, IFPRI and CIAT suggest that agribusiness development initiatives involving African farmer organizations tend to produce heterogeneous and contradictory impacts in terms of social, economic and environmental outcomes. This is because African cooperatives are not always (nor often) successful in coordinating farmers and linking them to emerging value chains.

CIAT's Nicola Francesconi at a dairy cooperative observation activity.

Workshop organizer Nicola Francesconi (CIAT-Uganda) at a dairy cooperative observation activity.

This workshop took place in Ethiopia due to a particularly long tradition of rural cooperation. Today, Ethiopia counts more than 11,000 primary farmer organizations based on cooperative principles, providing services to more than a million member-households and employing approximately 36,000 individuals. The Ethiopian Federal Cooperative Agency indicates that these numbers continue to grow at a rapid rate. However, the sustainability, quality and safety of farming practices adopted by cooperative farmers remain uncertain, and their contribution to the commercialization of agricultural production is estimated at only ten percent, well below the global average of 50 percent.

Workshop objectives

The workshop’s main objective was to bridge development and agribusiness knowledge by connecting internationally renowned experts from these two fields and allowing them to interact with the leaders of East and South African rural cooperatives, as well as with interested donors and investors. In particular, the workshop was designed to address the following questions:

  • How can rural cooperatives optimize the dissemination and adoption of improved agricultural practices?
  • How can we provide business intermediation and credibility to rural cooperatives?
  • How can Information and Communication Technology (ICT) be used to support the development of rural cooperatives?
  • How can we improve the organizational design/governance structure of rural cooperatives?

Agenda

A significant part of the presentations and discussions that took place during the workshop focused on a series of initiatives sponsored by USAID, the Ford Foundation, the European Union and the Netherlands Ministry of Foreign Affairs (MoFA) that aimed to improve the vertical integration of farmer organizations into multiple value chains (dairy, grains, pulses, horticulture, fruits, etc.).

These included initiatives carried out by private companies and civil society organizations such as: SNV (Netherlands Development Organization), the International Food Policy Research Institute (IFPRI), ACDI-VOCA, Wageningen University, FIT Ugandan Ltd., the Pan African Agribusiness and Agro Industry Consortium (PANAAC), Catholic Relief Services (CRS), the International Institute of Rural Reconstruction (IIRR), K-rep Micro-Finance Development Agency (KDA), Veterinarians without Borders USA, and the Technical Centre for Agricultural and Rural Cooperation (CTA). Particular emphasis was placed on the role increasingly played by the private sector and civil society in promoting and facilitating linkages between rural cooperatives and other value chain operators, both downstream and upstream, with or without the help of customized solutions based on mobile Information and Communication Technology (ICT).

The workshop also allowed the leaders of 15 cooperatives and farmer organizations from Ethiopia, Uganda, Kenya and South Africa to present in plenary sessions and express the concerns and interests of their members vis-a-vis international experts and donors.

Finally, the workshop raised awareness about the importance of horizontal coordination among member-farmers, which depends on the governance structure, or organizational design, adopted by a cooperative. University of Missouri’s (MU) Professor Michael Cook and his team addressed the importance of internal management and leadership of cooperatives using the “cooperative life cycle framework.” This framework was developed in order to train cooperative leaders and perform organizational diagnostics.

MU has applied and developed this framework for more than 20 years in order to support the leadership and governance of US-based cooperatives. Nowadays, many of the most important cooperatives in the US consider MU’s training program compulsory for all their leaders and managers. MU is in the process of globalizing this training program, already having introduced it in the EU, Brazil, China, Kenya and Malawi, among others. In particular, the presentation and discussion of the cooperative life cycle framework highlighted the importance of well-defined and forward-looking organizational design and governance structure for the success of cooperative agribusiness in Africa.

Conclusions and implications

Overall, this workshop emphasized that despite a troubled cooperative history, rural Africa is witnessing the return of farmer organizations based on cooperative principles, which appear to be significantly more autonomous and market-driven than twentieth century cooperatives. Some participants highlighted that this trend indicates that rural cooperatives are both resilient and adaptable organizations, which provide the conditions necessary for further innovating pre-existing agricultural practices.

Others reinforced this perception of cooperatives as agents of change by highlighting that innovation often comes from discredited movements involving large and spontaneously organized populations. Professor Ruben (Netherlands Ministry of Foreign Affairs) argued that countries with large and consolidated cooperative movements tend to be less affected by price volatility, which translates into less uncertainty and risk for agribusinesses.

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A representative of CTA discusses collaboration with stakeholder groups.

The workshop also emphasized that both the private sector and civil society are multiplying their efforts to improve the integration of African rural cooperatives into value adding chains, mostly through the provision of business intermediation and credibility with the help of modern ICT. Yet, these efforts appear to remain scattered and uncoordinated, calling for further efforts to reduce duplications and optimizing outreach.

In this regard, over the last few years, CRS has built an Agro-Enterprise Learning Alliance (AELA) for Eastern and Southern Africa, involving public, private, civil society and farmer organizations mostly operating at the regional or international level. AELA arguably represents the largest scale and most ambitious attempt to centralize and harmonize support to rural coops in Africa, both through the provision of physical and virtual brokerage and training services for agribusiness development. However, the coordination of this bottom-up, highly participatory and multi-country undertaking is turning out to be rather complex and time-consuming, as leadership remains unclear and fundraising and investments have yet to materialize.

IFPRI and CTA are pursuing a similar region-wide aggregating strategy in order to promote the usage of innovative ICT solutions among African farmer organizations. IFPRI’s AgriConneXions program and CTA’s ICT4Ag initiatives engage mostly with regional farmer organizations in order to develop ICT platforms to facilitate agribusiness development. As in the case of AELA, IFPRI and CTA’s programs appear to face significant challenges in combining scope with impact, as complex and large-scale interventions struggle to trickle down and generate tangible benefits for rural populations.

Although these regional and continent wide efforts have the potential for broader and longer term implications, smaller initiatives implemented through local organizations (national NGOs and social enterprises, and village-based farmer organizations), like those sponsored by the Ford Foundation in Kenya and Uganda or by the Netherlands MoFA and SNV in Ethiopia and Uganda, appear to be more functional and impactful. Attempts to harmonize and coordinate support for African farmer organizations may be more successful if connected with smaller and more localized initiatives rather than to international or regional mega-programs.

Furthermore, the majority of initiatives presented and discussed during the workshop seemed to consider rural coops and farmer organizations as black boxes, whose internal dynamics are too complex to be fully understood and thus governed by outsiders. Although all the above mentioned initiatives aim to strengthen the external market linkages of African rural cooperatives, internal problems and conflicts related to members’ side-selling (or free-riding) and shirking (avoiding investing in the cooperative), elite capture and corrupted management, misallocation of equity capital, etc., remain widely neglected.

The importance of continued discussion and collaboration was a focal point at the 2014 workshop.

The importance of continued discussion and collaboration was a focal point at the 2014 workshop.

However, rural cooperatives cannot possibly integrate into value chains and promote agribusiness unless their governance structure (or organizational design) is clearly designed to counteract the rise of internal frictions. It follows that development programs involving rural cooperatives and farmer organizations could significantly benefit from the incorporation of agribusiness management theory, like that embedded in the “cooperative life cycle framework,” in order to improve intra-organizational governance.

Therefore, the conclusions drawn for this workshop emphasize the need to develop an overarching or hub program to facilitate linkages and networking among localized initiatives in support of cooperative organizations that are directly owned and controlled by farmers, who must also be the primary beneficiaries. Such an overarching or hub program should also offer organizational training for improving current leadership and governance of cooperative agribusiness.

CIAT committed to further engage with the other workshop participants throughout the last quarter of 2014, in order to develop a five page concept note that will better define how to move forward and help to raise the necessary funds for implementation.

This concept note will be presented at the second EDC workshop to be held on January 12-13 in Washington DC.

Please enjoy a video from the event which includes images from a visit to the Ada’a Cooperative.



List of relevant publications

Francesconi, G.N. and F. Wouterse (2014). “Promoting the role of Farmer-Based Organizations for value chain integration: The tension between a program’s targeting and an organization’s investment strategy”. Forthcoming in Agricultural Economics.

Francesconi, G.N. and F. Wouterse (2014). “The Health of Farmer-based Organizations in Ghana: Organizational Diagnostics and Policy Implications”. Forthcoming in Journal of Development Studies.

Francesconi, G.N. and R. Ruben (2014). “FairTrade’s Theory of Change: an Evaluation based on the Cooperative Life Cycle Framework and Mixed Methods”. Journal of Development Effectiveness, 3ie, DOI: 10.1080/19439342.2014.918164

Abate, G.T., Francesconi G. N. and Getnet K. (2014), “Impact of Agricultural Cooperatives on Smallholders’ Technical Efficiency: Evidence from Ethiopia”. Annals of Public and Cooperative Economics, 5:22.

Francesconi, G.N. and R. Ruben (2012). “The Hidden Impact of Cooperative Membership on Quality Management: A Case Study from the Dairy Belt of Addis Ababa”. Journal of Entrepreneurial and Organizational Diversity (JEOD) Vol. 1, Issue 1: 85-103.

Francesconi, G.N. and N. Heerink (2010). “Ethiopian Agricultural Cooperatives in an Era of Global Commodity Exchange: Does Organizational Form Matter?”. Journal of African Economies, pp. 1–25.

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