The Situation of Co-operatives in Africa (1994) - Part 3

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.