Part 3 of The Situation of Co-operatives in Africa (1994) 1.8.7 Member affiliation: In all co-operative movements in Africa there is a core of highly committed cooperators. Impressive efforts have been made by scores of cooperators to further the co-operative ideals often under highly adverse circumstances created by the historical relationship to governments. They are and will remain cooperators for ever no matter what. In order to assess the degree of affiliation one can expect from ordinary members and the appeal of the co-operative movement to non-members: it is imperative to recall the recent history of our movements. In far too many instances the co-operatives were not a creation through initiatives from below where people joined to solve common problems within the framework of a co-operative. Whereas it is true that genuine grass-roots level initiatives were taken to form co-operatives many decades ago, these are the exceptional cases rather than the rule. If we look at the history of the rapid expansion of the co-operative movements in Post-Ind}pendent Africa, we find a different pattern. Co-operatives were seen by governments as important rural institutions which could be used to implement government policies and programmes. Therefore, governments took a keen interest and an active role in promoting the establishment of co-operative organizations. As we have noted, co-operatives were generally a key institution for implementing government monopoly policies in the agricultural sector. Promotion of the formation of co-operatives was then important as a means to implement these policies. Farmers interested in commercial production of a scheduled (monopoly) crop generally had no alternative than joining a co- operative. One interpretation is then that farmers wanted to join co-operatives and certainly did so voluntarily. According to this interpretation the interest in joining a co-operative is emphasized. Another interpretation is that farmers wanted to grow a profitable cash crop and had no choice other than joining a co- operative to market the crop. The interest in the crop rather than the co-operative was their prime concern. Our interpretation is that the majority of present co-operatives were formed through initiatives from above and not as a result of spontaneous initiatives among farmers. It is also our interpretation that most farmers joined co-operatives not primarily because they were interested in being cooperators but because they were interested in producing and marketing a monopoly crop or because co-operative membership gave access to (subsidized) credit and/or inputs. This does not mean that all these farmers, once they had become members, continued to view the co-operatives as purely means to other ends and were indifferent to co-operative ideals and concepts. To the extent that their co-operatives provided them with valuable services and proved themselves in terms of their principles, a true affiliation could develop and did so in many instances. It is indeed impossible to assess the degree of affiliation felt by the members in present day co-operatives in Africa, let alone that it is next to impossible to generalize on such an issue. Yet, let us review what might have influenced member affiliation. Member services are likely to be paramount in determining member affiliation. All co-operative movements have performed valuable services to their members. When implementing government monopoly policies, the existence of the co-operative services was indeed a prerequisite for farmers' access to certain inputs, credit and markets for scheduled commodities. The question is if this is appreciated by members or not. Perhaps even more important than the existence of a particular service (e.g. marketing of a scheduled crop) is the quality of the service. With respect to agricultural marketing this would include the price paid, whether payment is made promptly or with a delay, provision of inputs (in time and in adequate quantities), provision of dependable transport and collection service, fairness in weighing and measurement, transparency in calculations, etc. Unfortunately, there are reasons to argue that in far too many instances services provided through co-operatives have been poor. The fact that this has been so for reasons beyond the control of the co-operatives in numerous ways is no consolation. Members in general can not necessarily be expected to have seen the difference. To them it is the co-operatives, in the end, which get the blame. Farmers have seen that prices paid to them for their produce have been low. Payments have been notoriously late. Transport has faltered and farmers have seen their produce destroyed at household or primary society level for want of adequate storage facilities and timely collection. Input supply has been irregular, inadequate and often poorly synchronized with the agricultural season. The blame for this has been given to the co-operatives. Co-operatives in Africa are hardly member-owned. Members' share capital is generally a fraction of the total capital. At apex and intermediary levels the capital has tended to come from the government either as grants or loans altering the direction in which co-operatives at these levels have felt to be accountable. Rather than being accountable to their general membership the co-operatives have tended to feel accountable upwards in the structure and eventually out of the structure (to governments). It is a fact that many ordinary members have failed to distinguish between the co-operative movements and the government. The staff from the co-operative unions and the (government) co-operative departments have all been seen as "they" and often this has been synonymous to "the government". Too often ordinary members have not perceived unions and apex organizations as their organizations. This perception has been reinforced by the limited influence most ordinary members have had on their organizations. Influence has obviously been greater at primary level, but even at this level there have been frequent flaws in terms of transparency and accountability. Needless to say not all these shortcomings have appeared to the same extent in all situations. However, there are reasons to believe that they have been experienced to such an extent by sufficiently many co-operative members to be a matter of concern. As a result, it cannot be taken for granted that those who are now registered as members of co-operatives are committed cooperators with a strong affiliations to their organizations. Neither can it be taken for granted that co-operatives have a strong appeal to those who never were members. Herein lies a serious danger in times of change. When alternatives present themselves to farmers as a result of market liberalization, there is no reason to believe that farmers will remain cooperators unless the co-operatives can provide as good services as other actors on the market. Failing to do so can result in mass exodus from the co-operatives and a more or less serious collapse of the base. The argument that it would be better for the present members to sustain their co-operatives in the long run, even when offered inferior services is a desk argument. To a poor farmer here and now is what matters. The "long-run" will have to be dealt with when it becomes here and now. 1.8.8 External dependence: We have already repeatedly made reference to the dependence on governments which was forced upon the co-operative movements in Africa. This dependence took many forms including policy formulation, selection of what activities to undertake, appointment of office bearers and executive staff, general monitoring and control, funding for trading and processing operations, etc. The implications of dependence in these respects will not be elaborated here. Attention will rather be drawn to some additional dimensions of a dependence syndrome. There is circumstantial evidence which suggests that the dependence upon the government had psychological effects influencing management behaviour in co-operative movements. Far-reaching, often erratic and unpredictable, government interference with the co-operatives promoted an attitude of cautiousness. Bold decisions were hardly expected. Toes should not be stepped on. "We-have-to-find-out-what-the-Department-(of co-operatives)-thinks" or "better-wait-and-see" attitudes tended to develop. Among co-operators, particularly at higher levels in the structures, a common notion was also, and perhaps still is, that eventually the government would rescue them by providing additional finance, by deferring loan repayments, etc. This attitude was reasonable as many had experienced these shortcomings. Another dimension of dependence that should not be forgotten is the dependence of many movements of donor funding. Donor dependence is an issue particularly at apex and intermediary levels. There are reasons to draw attention to this dependence as it seems as if many donors now may tend to reconsider their support. The argument is that donors should not assist co- operatives in their business operations on a liberalized market (with grant funds) as this would distort competition and disguise inefficiency. This position is most clear among non-co-operative donors but an increasing number of co-operative donors seem to argue along the same lines. It is inescapable that the result will be a reduction of donor support to some of the activities that were supported in the past. An important source of finance is reduced. 1.9 The need for change ************************ We concluded the preceding section by pointing out the potential costly implications of non- adjustment for the co-operative movements in Africa. Implicitly we have therefore already established the need for change. However, let us be even more explicit here. Market liberalization, disengagement from the state and partial withdrawal of traditional donor support implies profound changes in the external environment of most co-operative movements. At the same time we have to acknowledge that far too many co-operative organizations expose characteristics which make them alarmingly ill prepared to meet the challenges on a liberalized market. Therefore our conclusion is the following: A significant portion of the co-operative movements in Africa is presently under the threat of failing as business organizations and being competed out of the market. Unless the co-operative organizations which are threatened can make changes, and often far-reaching changes to improve their ability to provide their members with useful and competitive services, they will perish. Changes in the environment are often quick and dramatic which calls for urgent adjustment efforts. In the short-run the need for change in any co-operative movement in Africa is conditioned by the threats that market liberalization poses. This is a necessary defensive step; adjust in order to survive. However, seen in a longer time perspective changes are also needed in order to exploit the opportunities created by a disengagement from the State and from market liberalization. In this sense the changes called for in the short-term and medium-term perspective will lay the foundation for an exploitation of long-term opportunities. 1.10 The capacity and the constraints to change *********************************************** A range of context specific factors determine the capacity of co-operative organizations to make changes necessary to avert the threats and exploit the opportunities laying ahead. Again it should be emphasized that whereas the threats often are large and real, particularly in the short run, the opportunities are even greater. However, generally these opportunities cannot be exploited before the immediate problems are overcome. This justifies a preoccupation with the problems. In the following sections we will review a number of factors which are likely to determine the capacity of co-operative organizations to undertake changes. 1.10.1 The size of the problem: All organizations do have a capacity to change. The question is rather if this capacity is sufficient to ensure that changes that make a difference are initiated. The size of the problem to be addressed obviously is of decisive importance in determining whether the capacity is adequate or not. For instance, it may be concluded that very substantial cost reductions are necessary. The organization in question can certainly make cost reductions but the question is if it has the capacity to make the very large reductions that may be required. The preceding analysis suggests that the problems which many co-operative organizations in Africa face are very considerable. This places heavy demands on the organizations in terms of their capacity to change, and it is doubtful if this capacity is always sufficient. 1.10.2 The perception of a crisis: The perceived seriousness of a crisis influences the urgency with which it is addressed as well as the scope and the magnitude of the efforts. Therefore, it is of vital importance how the situation of the co-operatives is perceived. It is particularly important how influential actors in the co-operative movements in Africa perceive the situation of their organizations. Perceptions are notions in the minds of people. The methodological problems of this study are particularly great when it comes to assess subtle issues such as perceptions. In addition to "measurement problems", there are also cultural differences influencing perceptions. To Western observers living in contexts where most dimensions of their lives and most aspects of their societies are organized, predictable and stable, even modest deviations are perceived as crises. The present economic recession with high rates of unemployment in many industrialized countries is perceived as a very deep crisis in these countries, while observers from the third world have difficulties to detect the crisis. People living in a turmoil of uncertainty, insecurity, instability and unpredictability at a personal as well as at an organizational and a societal level get used to living with constant problems and constant crises. Under such circumstances it is hardly permissible to get overly excited over all problems. Believing in the worst outcome of all problems would simply become paralysing. One has to believe that somehow there is a solution even if that solution cannot immediately be seen. A different and perhaps simpler way to put the point across, is to say that the perception of a problem or a crisis is a relative matter. The question is then if there are no objective measures of a crisis. Can we objectively say that many of the co-operative movements in Africa are in crisis? The preceding analysis is hardly free from influence of a perceived crisis as seen by the study team. Yet, we would maintain that there is sufficient factual evidence to suggest that many co-operative organizations in Africa are in a serious crisis where the message is clear - adjust or perish. Taken the preceding reservations into account there is still fragmented and circumstantial evidence indicating that the perception of a crisis is insufficient in many co-operative organizations. In the in-depth participatory research process referred to in the section on methodology it became unambiguously clear that perception of a crisis hardly was commensurate with the threat the movement was exposed to in the country concerned. One illustration was the fact that the intermediary level of the movement had undertaken no major adjustment measures in spite of the fact that they had lost 50% of their market share in their main crop (from 70% to some 20%) in a few years . Another illustration was the failure of representatives from these organizations (or rather a selection of the better ones) to identify market liberalization and competition as a priority factor influencing their future. It should immediately be added that different individuals and different organizational units may have very different perceptions of the seriousness of the crisis. A general observation seems to be that apex bodies show a considerably higher degree of concern than do intermediary level organizations. 1.10.3 Entrepreneurial capability: Market liberalization will lead to competition and demands on co-operative organizations to improve their business efficiency. This will place heavy demands on their entrepreneurial capability. It is hardly controversial to argue that many co-operative organizations are characterized by a low level of entrepreneurial capability. Neither are the reasons for this state of affairs particularly hard to identify. As we have already discussed above, most co-operatives in Africa have suffered from the effects of a subordinate and dependent relationship with their governments and from having operated in a planned rather than market economy. The combination of these conditions has had far- reaching negative implications for the business efficiency of many co-operatives. Government policies governing the operations of co-operatives were seldom based on considerations of business efficiency. Trading margins were often depressed to a point where a management, no matter how efficient, could not break even. Produce marketing tended to be merely a matter of logistics, physical handling, administration of subsidy policies and, at best, a matter of cash flows. Huge debts often accumulated and operational losses escalated without any notable consequences. Economic and financial management was often reduced to a matter of negotiating additional capital injection (credit limits) in order to keep the activities going. Under such circumstances business talent was not in high demand. Co-operatives resembling government bureaucracies tended to be manned by administrators rather than entrepreneurs. The trouble is that a whole generation of managers and board members at different levels have lived through and been part of this area of a planned economy. They know nothing else and have never been exposed to the chills of competition. While we cannot provide hard facts to support the argument, we dare suggest that most co-operative organizations in Africa are still managed by board members and executive staff with this background. From this would follow that many co-operative organizations suffer from inadequate entrepreneurial capacity thereby constraining their ability to adjust to a market economy situation. The question is then if this constraint can be removed. At the heart of this question is the issue whether one can train someone to become a good businessman or not. The answer is probably that there needs to be a talent as a base and that training without that talent will not produce a good businessman. Many of those holding positions as managers and board members may not have this talent. Training them will not solve the problem. A sufficient number of them have to be replaced in order to raise the entrepreneurial capability. We will return to the question of how this can be achieved. It is a crucial question as people and their capacities and capabilities indeed make all the difference. If those presently in charge do not possess the capacities and capabilities demanded by a new situation and they cannot be replaced, it raises serious questions about the possibilities to adjust. 1.10.4 Present economic conditions of co-operative organizations In the preceding analysis we have concluded that many co- operative organizations are more or less insolvent and yield very low if any profits. Their capital structure is often unfavourable with a very limited portion of share capital. The level of indebtedness is often high, debt service obligations exceed the net income generated, under-capitalization is frequent and credit-worthiness is notoriously low. Such conditions become serious constraints to change and managements often find that they are faced with a chicken and egg problem. Substantial capital injections would often be required as part of a plan for improving business efficiency while the current situation often effectively bars the organization from access to that capital. Members are reluctant to increase share capital in what may seem to be a defunct and non-promising business, and credit institutions for good reasons show similar reluctance. 1.10.5 Accountability, pressure for change: Significant for the capacity of co-operative organizations to adjust is also the degree of internal pressures for change that may or may not develop. We have certainly no clear opinion on the situation in different co-operative movements in this regard. However, we will venture to make some general observations. Strong internal pressure for change seems to presuppose a perceived need for change and the existence of mechanisms which can convey pressures. The market is supposed to be such a conveying mechanism for a private enterprise. If its customers are not satisfied with its products or its services, they will turn to an alternative service provider or a substitute product. The same mechanism is at work for co-operative organizations in a liberalized market. If members are not satisfied, they will turn to other market outlets, for instance. However, in addition the co-operative movement has decisive advantages over private enterprises since it is owned by its members and is based on democratic institutions through which members can influence their organizations. Through general member and board meetings at different levels they can exert pressure for change. This is the theory and at times the practical situation is a reasonable reflection of the theory. However, it would be self-deceptive to pretend that the theory is what is generally practised. The fact of the matter is rather that ordinary members generally have rather limited influence on their co-operative organizations. In particular, ordinary members seem to have limited influence over intermediary and apex organizations. This is particularly disturbing as drastic changes often will be needed above the primary society level if the co-operative structure is to become a competitive organization as a whole. Members with a limited commitment and a weak affiliation to the co-operative organizations are less likely to attempt to exert pressures for change. The reluctance will not be reduced by the difficulties to make one's voice heard as was discussed above. Such members are primarily interested in being well paid and promptly for their produce, and if the co-operative cannot do this they will simply turn their backs. For these reasons one should not be surprised if the pressure for change from the base is limited. Where then should the pressures for change within the movement come from? We have noted that the need for change at the intermediary level often is strong while at the same time the perception of the seriousness of the situations and the entrepreneurial capacity may not be as high as one would desire. Hence, it is not quite clear how strong pressure for change one can expect from within that (intermediary) level. Apex organizations may often have a clearer perception of the need for change, particularly among the staff. However, apex organizations generally see themselves as service organizations to intermediary and primary level organizations. Their possibilities to take initiatives to far reaching changes vis-a-vis other organizational units in the structure is often constrained. The executive may also find that the board of the apex unit, consisting of members drawn from the intermediary level, may see things differently. Apex level pressure is then reduced. A tentative conclusion would seem to be that pressure for change from within a co-operative movement may not be very high. 1.10.6 Freedom of action: In section 8.2 we discussed the present trend towards disengagement of the co-operative movements from the State. It was noted that this process proceeds at a different pace in different countries. Furthermore, it was observed that even in countries which have revised their legislation on co-operatives, only praxis will eventually show the degree to which co-operative movements are given independence. From this follows that almost all co-operative movements still are subject to different degrees of government intervention and control which may reduce their freedom of action and constrain their ability to change. It is hardly far-fetched to expect that "political considerations" at times may prevent co-operative organizations to dissolve defunct and unredeemable units. For instance, it may prove impossible to sustain co-operative organizations in remote areas with limited business potential as other organizations in the movement facing competition hardly can subsidize them and as government subsidies are cut off. Yet, the government and politicians may object to the dissolution of such units and interfere to prevent it happen. 1.10.7 Resistance to change: In any reform process there are interests which will resist change. Even if changes can be shown to mean long-term gain for all, they very often have short-term losers as well. Change may also be resisted because it introduces a measure of uncertainty or because it demands re-thinking, re-orientation of minds, modification of procedures and routines all of which can be felt as unpleasant or demanding. The more drastic changes that have to be considered, the more some are likely to loose and the more psychological resentment they are likely to create. This is the predicament of many co-operative organizations. Resistance to change will come from vested interests, from those who may loose their employment, their board positions, their fringe benefits from being associated with a co-operative organization, from those who feel that the demand for change questions their ability to manage the movement in the past, from politicians who still see the co-operatives as a springboard for political activity and from those at different levels who fail to see the need for change. This long list should not be interpreted to mean that there is always massive resistance to change. The list merely illustrates that resistance can come from many quarters. The strength of this resistance will obviously vary but it will always constrain the capacity of a co-operative movement to undertake changes.