 Why
cooperatives have failed in Africa
by Vincent Obiro Orute
In practice co-operatives the world over have faced certain common problems.
First, cooperatives have an inherent weakness in management. There can be no one
person who as a result of investing large sums of money in the concern has a
compelling interest to pursue its financial success.
Inevitably, since produce marketing cooperatives bring together farmers, and not
businessmen, there will be a lack of business management experience and a lack
of accounting expertise since full-time farmers, will find it difficult to spare
time for the acquisition of these vital skills.
At the same time, there is often unwillingness to pay a sufficiently high salary
to attract a really competent manager who might be able to overcome these
deficiencies.
Secondly, the reluctance of members to pay very high subscriptions, and their
reluctance to pay well in advance, means that cooperatives are in fact often at
a disadvantaged with the traders they are competing with through 'lack of
capital'. It is important to remember that the main aim of developing marketing
cooperatives at all is not the pursuit of the 'cooperative spirit' but the
belief that cooperatives may be turned into viable business enterprises capable
of carrying out necessary marketing functions more effectively than alternative
forms of enterprise. If they are inherently weak, therefore, in two major
ingredients of business activity, namely, enterprise and capital, this must be a
some one's obstacle.
The other problem of cooperative enterprises to maintain loyalty among its
members. Once the cooperative is well established and flourishing, of course,
this is unlikely to be a source of difficulty, since producers will benefit from
'keeping in line'. But in fact it may require some considerable time, due in
part to the problems already mentioned, to build up an effective organization, a
sufficient membership, and a large volume of business in order to achieve this
comfortable state.
This is connected in part with our second point since, particularly in the
initial stages, cooperatives are likely to be short of capital and may not be
able to pay cash in full to growers until after they have in turn resold the
product. In the contrast, traders are likely to be in a position to pay cash
immediately on receipt of produce, or even before producers have the commodity
available.
It is in this period that there must be sufficient enthusiasm for cooperation
and sufficient patience to wait for benefits which will be obtained only at a
later stage, so that members do not prefer immediate opportunities for profit by
selling outside the cooperative to traders.
But how have these general difficulties of cooperative enterprises affected the
development of cooperatives in Africa in general?
The management problem in Africa is aggravated by the widespread illiteracy
among producers and often the difficulty of funding.
For a variety of social reasons, particularly in certain regions, there has been
a general lack of the businesses and commercial sense which might have
compensated for this. Today, most cooperative societies in Africa are run as
social clubs and not as business entities.
Management problems have been a major cause of the high rate of failure,
particularly among societies handling perishable products. The educational gap
between the secretary/treasurer and other members of the society result in the
former being tempted to mishandle finances, and societies have sometimes been
subject to frauds or embezzlement, this has had an adverse effect on morale and
on loyalty.
Cooperatives in Africa have also been handicapped vis-à-vis the trader by the
inability to pay growers fully in cash on receipt of produce. This is a more
severe handicap where producers at low levels of income are particularly
impatient to obtain payment. This has been a major cause of disloyalty,
particularly in some areas outside the main cash crop areas, and has
significantly retarded the growth of cooperatives in Africa.
On the other hand, the strong tribal loyalties and traditional African community
sense have operated in the opposite direction and have provided cohesiveness.
Despite all the problems faced by cooperatives the world over, I must confess
that one of the countries that seems to have succeeded in this front against all
odds is Kenya. For example, Kenya is ranked number one in Africa and number
seven in the world. It is estimated that members deposits stand at KSh.97
billion and that more than 10 million Kenyans derive their livelihoods from
cooperative enterprises. Kenya is also one of the countries in Africa peopled by
people who have strong business inclination and they can succeed in any
business.
Vincent Obiro Orute is a Seasoned banker and micro finance
expert.
email: orutev@yahoo.com
|
