This document has been made available in electronic format by the International Co-operative Alliance (ICA)
ICA Strategy Documents : A Development Update (1997)

June, 1997
(Source: ICA Review, Vol. 90 No. 3, 1997, pp.43-49)

A Development Update
by Bjorn Genberg and J-E Imbsen*

It is now some forty years since development issues first became identified as a priority for the ICA and its member organizations. Since that time, the promotion of co-operatives in the countries of the South has assumed, for the co-operative movement, an increasing sense of urgency and importance. This mood has coincided with the pre-eminence of development issues in the world - the debt crisis, the threat against the environment, globalization and liberalization - which have shown that the future of the developing countries is the future of the world as a whole. At the same time, the conviction has grown among co-operative leaders of the important role which co-operatives can play in finding a solution to many of the problems facing our global community.

Changing Environment - Constraints and Opportunities
The environment in which co-operatives exist is now undergoing fundamental changes which can be accounted for under two headings. First, the economic reforms which as part of the structural adjustment programmes have led to a dismantling of the monopoly positions many agricultural co-operatives have enjoyed. Market liberalization is the structural adjustment reform with the most far-reaching and decisive implications for the co-operative movements in Africa. Of particular importance is liberalization in the agricultural sector which has exposed co-operatives to competition, something they have not been used to and are not prepared to face.

The second fundamental change, the political transformation with increased pluralism and democratization, is now bringing political independence from the state. This enables the co-operatives to function without the same degree of interference and control from the government which had, in effect, prevented the co-operatives from developing into true member-owned and controlled organizations.

We welcome these changes which will make it possible for the co-operatives to operate in an open market, in accordance with their guiding principles, with full responsibility for success or failure resting with the members. However, we also recognize that this process may be painful, indeed that for many co-operatives it is a question of adjust or perish.

Situation Report from the Regions
When ICA’s Regional Directors were recently asked to provide a status report from their regions to the ICA Board, they reported on a number of problems which are characteristic for co-operatives in their regions. However, when comparing the reports, it is interesting to note that while the problems and constraints have their own regional characteristics, there is one basic external force which causes a common and very serious problem to many co-ops: the ongoing liberalization of the economy. This is neither new nor surprising. What is worrisome is that they report that many co-operatives seemingly continue to find it difficult to adjust to and withstand the competition from the new entrants in the market, and that the situation, at least in Africa, seems to get worse. There are of course wide differences between, as well as within, the regions.

The two Regional Directors in Africa both reported that some co-operators find it hard to accept that the de-linking from the state and their entering an open market mean that they now have to stand on their own feet. There is still a hope that the government will come to their rescue. This dependency syndrome could easily be a major obstacle in the co-operative adjustment process in Africa since it may lead to inactivity.

This situation is aggravated by several factors. First, the open market in which the co-operatives suddenly find themselves is not a level playing field. In several countries, the co-operative legislation is lagging behind the liberalization; a grave situation, as pointed out by the Regional Directors in Africa and Asia. Government interference in the affairs of co-operatives makes fast decision making difficult, and puts co-operatives at a considerable disadvantage when competing with entrepreneurs who operate under a different set of rules.

Secondly, there is a lack of adequate management skills to meet the new requirements. Market liberalization leads to competition and demands on co-operative organizations to improve their business efficiency. Co-operatives which have resembled government bureaucracies more than businesses have tended to be manned by administrators rather than managers. This lack of entrepreneurial capability, which seriously hinders their ability to adjust to a market economy situation, is reported as a serious drawback in all regions. What makes the situation worse is that the co-operators have very little time to do anything about it. What is required is a co-operative entrepreneurship, which combines business acumen with member concern and mobilization. And it is needed now.

Thirdly, there is insufficient capital accumulation within the co-operatives. This is a general observation in all the regions. Lack of capital not only makes it more difficult for co-operatives to seize new business openings offered by the market, it also jeopardizes their very survival.

This is the general picture. There are of course many co-operatives that are not adversely affected by the liberalization, or that are already operating in an open market. Many co-operatives have also been able to turn the deregulated market to their advantage and have been able to increase their market shares. What is clear is that the liberalized market has brought about a drastic change for a number of co-operatives; a transformation of their business environment so fundamental that many co-operatives are now looking for a new identity and a new place in the market. For many it is a question of sink or swim, and for many swimming lessons are long overdue.

We don’t have sufficient data to be able to quantify the problem, nor are we in a position to make any reasonable comparison between the regions. However, as indicated earlier, it may seem as if the African co-operatives  are those which find it the most difficult to cope with the new situation.

In his report, the Regional Director of East, Central and Southern Africa succinctly summarizes the situation in his region as follows:

The main impact of the new environment has been to weaken co-operatives considerably. The primary level organizations have seen their members desert them in large numbers to take the services offered by the private traders. The second level co-operative organizations have been even more badly affected and many have closed down. All over the region co-operative leaders and members are reluctant to accept that governments will no longer be the source of their survival and development. In the final analysis, they are paying heavily for this illusion.

Problems and constraints connected to, and caused by, the liberalization of the economy constitute the main issue for the co-operatives at least in Africa, and it is thus also the main concern for ICA’s Development Programme.

There are also other types of constraints, not necessarily directly related to the liberalization of the economy, which could be mentioned. The lack of member participation is a major concern. Other problems that make co-operatives vulnerable are inadequate access to credit, deficient accounting systems and weak national federations. The Regional Directors also mention an image problem stemming from the way co-operatives were established and operated and their being identified with government.

Agricultural Co-operatives -  A Sectoral View
It may be useful to recall that more than 90% of the co-operatives in Africa are related to the agricultural sector. The implications of structural adjustment for the agricultural sector are therefore of particular importance. Many agricultural marketing co-operatives play a decisive role in the national economy by collecting and sometimes processing major crops. By providing market channels for food as well as cash crops, the co-operatives are an important contributor to food security.

However big their contribution to the economy at large, the importance of the agricultural co-operatives to the small scale producer is what matters when we consider the rural poor. The importance of the co-operative structure can in this context hardly be overemphasised. The primary co-operative society is often the only outlet for the farmer’s produce, and the society provides the agricultural inputs and implements required for the production. Well developed societies are also able to supply basic consumer goods. For the individual farmer these services provide the very link to the monetary economy, without which the poorest of the peasants would go back to a subsistence livelihood. Indeed, many co-operative farmers have access to alternative marketing channels, and also prefer them, but the widow who has only the surplus milk from one cow does not attract buyers other than the primary society.

The provision of savings and credit facilities is a vital service  provided by the co-operative network. This is of particular importance for the poor peasants, since the ordinary commercial bank networks normally do not reach the poorest strata of the rural population, and the commercial banks have so far shown scant interest in the small scale farmers. Unless they are given the opportunity to accumulate capital on their own and have access to credit, the poor peasants will not be able to increase their productivity and production, and subsequently not improve their standard of living.

Co-operative organisations require capital for investments in additional services, such as local processing, as well as to be able to seize the new business opportunities offered by the new market. Co-operative savings and credit services address these issues, and have the distinct advantage, as compared to other financial organizations (if they at all exist close enough to the farmers), that the owners/members retain the capital within the community rather than invest it somewhere else. Some well established agricultural marketing co-operative societies have been able to develop  these types of services, but they are in all likelihood a small minority. There are also examples of co-operative farmers who have  set up separate savings and credit societies to serve their needs, some with considerable success.

Co-operatives not only provide the technical services concerned with marketing and credit required by the poor peasants; there are also several other aspects of the co-operatives which in a broader perspective are of equal importance. The primary co-operative societies are fundamental schools of democracy. No other organisational structure in the rural areas provides a democratic and participatory approach for solving some of the basic day to day problems of the rural poor. This democratic schooling also makes a contribution to pluralism and democratization of the society at large. And the essence of the co-operative model, that the users/members govern and control their own affairs, generates confidence and self-reliance instead of over dependence on Government machineries and other external agents.

The co-operatives constitute a structure which enables the small scale farmers to maintain a dialogue with the government. This representative function of the co-operatives is particularly important in the present liberalization of the markets when entire regulatory frameworks are being replaced.

If the rural areas are to be included in the mainstream of economic and social advancement, the rural poor will have to mobilize themselves and  participate fully in the development process. Recognizing that the civil society at large will play an increasingly important role in development, governments will have to adjust policies and plans. And within this broader perspective, the organisational model of co-operatives has an important role to play in the process of uplifting the standards of the rural poor. To refer to the 1996 UN report on the status and role of co-operatives:

“Only by  means of a people-centred, participatory approach will effective transformation of the rural sector occur; co-operative enterprise is one of the most efficient organizational vehicles for such a transformation in developing regions - as it has been in the past when similar conditions existed in the rural economies of currently developed countries.”

Sustainable Development and Impact on Grass Roots
It should be noted that ICA’s Development Programme is concerned with sustainable development and not relief aid. In 1995, at the ICA Centennial Congress in Manchester, ICA member organisations committed themselves to promoting sustainable development and adopted their guidelines for action. Co-operative Agenda 21 identifies on a sectoral basis objectives and methods for promoting sustainable development.

Nor is it a grass roots organisation in the sense that it is working at the primary level. However, the programme activities that the ICA carries out, at the regional as well as the national level, reach and have a definite impact on the grass roots. The following will serve to illustrate this:

Sustained co-operative growth requires an environment sensitised and conducive to co-operative development. Legislation constitutes an important part of this environment. A legal framework favourable to the development of co-operatives as autonomous self-help business organisations will have a beneficial impact on overall development, particularly at the primary level.

The ICA encourages and assists national and regional efforts aimed at providing legal frameworks that will permit the emergence and progress of true co-operatives and has for a long time been actively involved with partners like the ILO Coopreform Programme in changing co-operative legislation in countries in Africa and Asia.

Adjustment policies, economic liberalisation and political democratisation are creating a new environment for co-operative development. While these new conditions offer opportunities for growth, they also require adaptability, efficiency and effectiveness on the part of co-operatives if they are to survive in this highly competitive climate. Regional office plans and activities have focused on this issue.

Survival presupposes an awareness and understanding of the drastic changes that are taking place. The ICA has seen  as its role a contribution to raising such awareness among its members, and has to that effect (inter-alia) published a study on the effects of structural adjustment in Africa. It has also encouraged, facilitated, organised and participated in numerous discussions on this theme in national and regional forums.

Once awareness has been created, the adjustment process has to begin, and the ICA has consequently given priority to assisting co-operatives in this process by helping, for instance, in strategic planning in which methods developed and adapted to local conditions are used.

The purpose of strategic planning is to assist co-operative organisations specify their mission, their goals, future activities, what services to provide to whom and how; the idea being to define future options and to prepare for what will come. It addresses economic factors as well as member relations, democracy, equity, and a range of other issues. Such planning is particularly important in light of the new economic environment that places particular importance on competitiveness.

Although these activities take place at regional and national levels where the ICA functions as a catalyst for change, the resulting structural changes in the environment and within the movements impact directly on the grass roots level. This process of adaptation and change is by no means over, and the ICA will continue to need to collaborate with partners and members during this difficult process.

What, then, has been the result of some forty years of co-operative development?  The answer is basically the same for co-operatives as for international development as a whole: much, but not enough.

One lesson which is apparent is that the development of co-operative structures is a difficult and complex undertaking. Indeed, if co-operatives in the industrialised countries have had both successes and failures over more than one hundred years, why should this not be the case also in the South, where the problems to overcome are far greater.
It has also become apparent that the concept of co-operation, and the utility of co-operatives as a means to self-help and development, remain as valid as ever. Where co-operative structures have been properly established upon a strong membership base, they have demonstrated conclusively that there is no better means for promoting economic and social progress.

The challenge ahead is to learn from the successes and failures of the past, and to concentrate on a few key priority areas. There are encouraging signs that the international co-operative movement is prepared to take steps to meet this challenge. And in so doing we call upon governments to participate as partners within a redefined policy framework that will allow true co-operative development.

*Bjorn Genberg is Development Director for ICA, posted at the ICA Project Office in Nairobi. Jan-Eirik Imbsen is Deputy Development Director at ICA Headquarters in Geneva.