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  • 1. Cooperative Movement in Ethiopia Workshop on perspectives for Cooperatives in Eastern Africa October 2-3, 2012, Uganda By Bezabih Emana HEDBEZ Business & Consultancy PLC Emana_b@yahoo.com
  • 2. OUTLINE         Historical overview Legislative/regulatory framework Current status of cooperatives Contribution of cooperatives to social and economic development Role of the government in cooperative development Advocacy role? Challenges and prospects for cooperatives Best practices in cooperative movement
  • 3. HISTORICAL OVERVIEW OF COOPERATIVES  Cooperative is:  association of persons who have voluntarily joined together to a common end through the formation of a democratically controlled organization, making equitable contribution to the capital required and accepting a fair share of the risks and benefits of the undertaking, in which the members actively participate  Cooperation among people of Ethiopia has existed since time immemorial
  • 4. HISTORICAL OVERVIEW OF COOPERATIVES  Traditional forms of cooperation involved: "iqub" - voluntarily pooling financial resources;  "Jigie” “Wonfel” - labour resource mobilization to overcome seasonal labour peaks;  “insurance” - reciprocal insurance mechanism whereby members contribute membership fees in kind or in cash to meet social needs including wedding and funeral ceremonies.   Operated independent of the formal markets and less influenced by the political system
  • 5. HISTORICAL OVERVIEW OF COOPERATIVES Cooperative as a legal institution first came into being in Ethiopia in 1960s.  Ethiopian Air Line Workers’ Saving and Credit Cooperative was established in 1956.  During the socialist government i.e. the Derg regime (1974-1991), cooperatives were formed to assist implementation of the government policy of collective ownership of properties.  It was then triggered by reforms to the sociopolitical system. 
  • 6. HISTORICAL OVERVIEW OF COOPERATIVES Violation of cooperative principles proved to destabilize cooperative movements in Ethiopia as most of the cooperatives were dismantled following the downfall of the socialist system  In 1974, app. 149 cooperatives  1974-1991, app. 10,524 cooperatives  In 1991, figure dropped to7,366 cooperatives  In 2011, app 37,247 primary coops;  245 unions 
  • 7. HISTORICAL OVERVIEW OF COOPERATIVES During this time, cooperatives were forced to operate in line with socialist principles, which meant that production and marketing of produce were done collectively.  Membership to cooperatives was also compulsory, which goes against the basic cooperative principle of voluntarily participation.  Were instruments for implementing government policies; leaders loyal to government.  Were also especially supported by the government (privileged loan by development bank of Ethiopia) 
  • 8.  The first legislative Decree No.44/1960 called “Farm Workers Cooperatives Decree” issued in 1960  Proclamation No. 71/1975 legalized Peasant Associations including the right of administrative power  Proclamation No. 138/1978 issued to legalize establishment of Cooperative Societies incluing Housing, Credit and Handicrafts, etc. cooperatives  Policy geared towards direct control of the cooperatives and turning them into government and political instruments
  • 9.  Current government also issued different proclamations, policies and strategies that also include cooperatives:   Proclamation 85/1994-to revitalize coops; Proclamations 147/1998 and 402/2004 to reinforce these principles and strengthen membership incentives by improving members’ rights in the areas of ownership, voting, share transfers, and risk management
  • 10. Lack of legislative frame for establishing cooperative bank,  legal aspects of if members of below 18 years of age are elected to leadership positions and made accountable for their wrong doings,  how the saved money is distributed among cooperative members upon liquidation of cooperatives,  how donated fund or property should be utilized in the case of cooperative liquidation,  laws governing employment of cooperative employees, etc. 
  • 11. Current Status: Cooperative Sector Structure Ministry of Trade Federal Cooperative Agency Regional Cooperative Bureau/Agency/Office Zonal Cooperative Office District Cooperative Office Line of communication Facilitation /capacity building Confederation/ League; Not Yet Formed Cooperative Federation Cooperative Union Primary Cooperative society Cooperative members
  • 12. General Assembly Executive Committee Control Committee Purchase and Sales Committee
  • 13. Number of cooperatives 40,000 35,527 30,000 20,437 22,275 24,935 37,247 26,672 20,000 10,000 0 2006 2007 2008 2009 Year 2010 2011
  • 14. Khat 0% Proportion of primary cooperatives (Total =37,247) in 2011 Butchery 0% Turism 0% Coffee 0% Agri. product 1% Livestock production 1% Horticulture 0% Technique 22% Multi purpose 19% Incens and Gum 0% Irrigation 4% Saving and credit 19% Housing 20% Mineral 5% Milk 1% Fish 0% Electricity 1% Consumer 3% Hand craft 3%
  • 15. Primary Cooperatives by Region 14,000 12,545 12,000 10,406 10,000 8,000 6,390 5,982 6,000 4,000 3,181 1,924 1,863 886 2,000 632 633 - Amhara SNNP Oromia Multipurpose primary coops Tigray Other regions All primary coops • Other regions: BSG, Gambella, Harari, Somali, Afar, Dire Dawa • Oromia accounts for the largest No. of cooperatives, land mass and population of Ethiopia
  • 16. Membership (primary coops) • 5,882,260 members of primary cooperatives – 158 members per cooperative • 23% female • 74% of the members belong to multipurpose coops
  • 17. Capital: Primary Coops • Total of USD 125 million • About USD 3,400 per primary coop • 34% of the capital is owned by multipurpose primary coops.
  • 18. No. of coop. unions Cooperative Unions 212 250 200 150 112 145 162 174 2008 2009 245 100 50 0 2006 2007 2010 2011 Year Other regions Amhara 10% Tigray 17% 17% SNNPR 15% Oromia 41%
  • 19. Proportion of unions by type Fish 0% Fruit and vegetable 3% Sugar cane Livestock 0% market 1% Forest 1% Coffee 4% Mineral 3% Grain market 7% Consumer 5% Koble stone 0% Multi purpose 45% Saving and credit 26% Dry food prparation 1% Milk and milk product 3% Bee and bee product 1% • Total=245 unions; 6,792 member coops
  • 20. Cooperative Unions • 245 cooperative unions with • 6,792 member primary cooperatives – About 28 member primary coops per union • 52.3% of the union members belong to multipurpose primary coops • 18% of primary cooperatives organized into unions
  • 21. Capital: Unions • Total of USD 45 million • About USD 625,000 per union • 71.6% of the capital belongs to multipurpose cooperative unions
  • 22. Which Coops are most active? • Agribusiness activities – Coffee marketing – Grain marketing (now also processing) – Dairy – Irrigation • Saving and Credit • Mining
  • 23. Source of Finance for the Coops • Membership fees (small) • Savings (for SUSACCOs) • Loan (cooperative banks, sometimes commercial banks) • Donations (NGOs and other agencies) • Business undertakings (marketing coops, unions) • Government (through capacity building and programs also linked to agencies0
  • 24. Role of Cooperatives  Economic role:  Enhance production by providing inputs  Fertilizer: Cooperatives marketed 357,000 metric tons of fertilizer, or 67 percent of all fertilizer imports and 85 percent of domestic fertilizer distribution (Meherka, 2008)  Improved seeds  Pesticides  Machinery (tractor renting)  Marketing of outputs (collect, assemble and sell or export agricultural commodities):  In 2007/08, four unions exported a total of 36,593.36MT (USD 104,154,838)
  • 25. Economic Roles of Cooperatives  Increased income (through price stabilization or dividend);  Poverty reduction (through impacts on income and access to credit from RuSACCOs to engage in income generation activities);  Economic growth (value chain): value additionunions engagement in processing of agricultural commodities.  Provision of consumer goods  Provision of storage services
  • 26. Role of Cooperatives  Creates employment  Self employment  Permanent employees  Casual workers    Cooperative sector generated 207,587 employment (18% was by cooperative unions and 82% by primary cooperatives). And the total value of the employment was estimated at USD 72 million in 2009/10 fiscal year. Capacity building-for members
  • 27. Role of Cooperatives  Social protection/services  Price stabilization (also influenced by the policy advocacy)  Protect the members from exploitative pricing  Some unions invest profits to social works  Voicing:  Serve as an institution through which the voice of the poor is herd  But cooperatives do not involve in political issues to advocate for members
  • 28. Factors of Success     Strong leadership and governance Members participation Access to financial resources Capacity: material and human  Often  NGOs are behind the successful coops Nature of commodity handled: coffee, cereals, seed production typical
  • 29. Coops have been always considered as instrument to mobilize the society to implement policies  The socialist government practiced communal ownership principle using coops  The current government also included cooperatives as a means to organize and develop the societies:       Agricultural Development-led Industrialization (ADLI) strategy (1995); Sustainable Development and Poverty Reduction Program (2002-2004)); Food Security Strategy (2004-2006), Plan for Accelerated and Sustained Development to End Poverty (PASDEP) (2006 -2010) and “Growth and Transformation Plan” (2011-2015) all acknowledge that cooperatives play key roles in the implementation of these strategies.
  • 30.  Cooperative     departments: Organize cooperatives, register them Provide technical support Provide audit service (but 20% of primary and 76% of unions were audited in 2010) Provide legal services  Facilitate linkage with external sources  In principle, ensure that the cooperative bylaws are enforced.  In practice, it also violates the laws e.g. in timely election of management members  Pay other roles such as facilitation of market linkage
  • 31.  Several organizations work with cooperatives to enhance their causes  NGOs/International Organizations:      ACDI/VOCA, IFPRI / ILRI, Oxfam, USAID, BMGF, Self Help International, ILO, IFAD, African Development Bank Capacity building (material, facilities, training, access to financial resources, etc) Developing value chain (e.g. SOS Sahel, USAID( avail guarantee fund), International Development Enterprise (Seed money and capacity building for cooperatives)
  • 32.  ILO ( Capacity building to improve work environment),  FAO (technical support for improved technology utilization and seed multiplication and many others)  SNV (value addition approach and contribution removal of EU import restrictions especially honey)
  • 33.  Three broad challenges/constrains cooperatives in Ethiopia encounter:  Lack of comprehensive Cooperative Policy and Strategy;  Low Capacity of Cooperative Leadership and Management;  Lack of Finance by Cooperatives.
  • 34.  Structural changes and institutional setting of cooperative promotion agencies  Missing elements in the proclamations  Employment regulations, accountability, liquidation  Incompatible cooperative bylaws: e.g. Saving rules not compatible with earning patterns
  • 35.  Low Capacity of Cooperative Leadership and Management  Inadequate capacity building support by agencies  Literacy gap from the coop leaders  Low interest of the management committee due to low incentives  A strong degree of reliance on government support has implications for the independence of the organizations
  • 36.  Lending policies of commercial banks not suitable for cooperatives  One cooperative bank which is limited by region and capacity  Low saving by the members  Poverty  Awareness of benefits and confidence
  • 37.  Weak private sector or its exploitative nature urges farmers to act in an organized manner  Provide means of creating competitiveness for small holder farmers;  Government support-directly as well as through projects like RUFIP, HABP  Need for participation in value chain and agribusiness is growing.   Increase in price margin for the producers Expanding rural agro-processing industries;
  • 38.  Increased need for accessing financial resources;  stabilize consumer prices;  accessing agricultural inputs at reasonable prices;  provides means of voicing for the poor (depends on the policy)  NGOs such as Oxfam, Self Help Africa, etc.  Infrastructure development in the rural areas creating market incentives  Capacity building programs: Universities, TVET
  • 39.  Good leaders for farmer’s cooperatives ◦ Managers make a difference Transparent and rule-based operation of markets  Understanding of supply chains and a realistic assessment of the capabilities of farmer organizations 
  • 40.  Capacity building through training ◦ ◦ ◦ ◦  Improved access to current technology level Financial capacity Managerial capacity Leadership Value chain and Niche Market approach ◦ Organic product supply (coffee, beef, oilseeds, etc) ◦ Innovative models capitalized on market opportunities and local capacities ◦ Role of external forces in overcoming challenges is apparent.
  • 41.  Honey cooperatives: ◦ Investment in human resources of the cooperatives ◦ Initial management support; ◦ Investment in honey production and processing technologies; ◦ Engagement in value addition (processing, packing and quality improvement); ◦ Advocacy to overcome export bottlenecks,
  • 42.    Human and facility bottlenecks removed through technical and financial support of external sources and the coops. Investment in technology e.g. wheat processing plants Diversified portfolio ◦ ◦ ◦ ◦ Input marketing Grain marketing Loan distribution to members Processing, packing
  • 43. Acknowledgements of Materials Used • Bezabih Emana (2009). Cooperatives: A Path to Economic and Social Empowerment in Ethiopia, CoopAfrica, Working Paper No.9, ILO, Rome • Bezabih Emana (2010). Impact of CoopAFRICA Program in Ethiopia. A Study Report submitted to CoopAFRICA , Tanzania. • Bezabih Emana and Mengistu Nigussie (2011). Strategizing Cooperative Development in Ethiopia. Agricultural Transformation Agency and IFPRI, Addis Ababa, Ethiopia.
  • 44. Thank you!