Cooperative Movement in Ethiopia

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

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

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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!