Why co-operatives should work as business entities

Why co-operatives should work as business entities

Proponents of co-operative societies have been asked to promote them as business entities to boost growth. They could supply farmers with inputs at subsidised costs, deliver real-time guidance (extension) to supplement public extension systems, said Godfrey Mayambala, who heads the Zirobwe Agali Awamu Agribusiness Training Association. (ZAABTA). They could also negotiate on behalf of farmers for reliable forward markets, provide quality assurance mechanisms to help farmers meet standards and provide produce handling/bulking facilities. “Currently, most co-operatives are still run like social enterprises, with low levels of commercialization. For example, there are co-operatives with well-established storage facilities whose utilization capacity is below 50%,” he said. He blamed it on weak governance and management structures, as well as laws. However, some flexibility is required to allow for innovations that enhance growth. He pointed out that ZAABTA has transformed from a small farmers in 2004 into a formidable company located in Zirobwe town. It is and is now a one stop centre for farmer services, reaching out to 4,321 farmers, on Tuesday. He was briefing a team of officials from the agriculture ministry, National Planning Authority, Alliance for a Green Revolution in Africa and Kilimo Trust.

The team was in Luwero to assess the impact of the financial support extended to the association, progress and lessons that can be replicated in different parts of the country, under the Regional East Africa Community Trade in Staples (REACTS) project. REACTS is a three-year flagship regional project, supporting small-holder farming households and other value chain actors across the three East African countries Uganda, Kenya and Rwanda, to exploit structured national, regional and opportunistic international markets for agricultural products, according to Dr Birungi Korutaro, the Kilimo Trust country team leader. REACTS-II commenced on April 1, last year and will end on March 3, 2021. The project is funded by the Alliance for a Green Revolution in Africa (AGRA) and is implemented by Kilimo Trust.

ZAABTA embraces business model

Four years ago, ZAABTA, with support from Sasakawa Global2000 set up one-stop centres and drafted an implementation manual for farmers. However, when the support from the project ended, the farmers did not have business approaches to sustain the initiative. ZAABTA then identified financial and technical partners for support to help establish a grain marketing project as an income generating activity for the association. Under this initiative, grain is collected with the help of village agents spread across the districts of Luwero, Nakaseke, Nakasongola, Kayunga and Mukono. The grain is dried to the required standards, cleaned and stored in the 500 metric tonne facility owned by the association, as they scout competitive prices. Currently, farmers have the option of selling their grain at the produce stores close to their locations or travel to the ZAABTA storage facility in Zirobwe town to sell their produce at a competitive price. A system of sales commissions has been designed to enable those participating in the transactions (mostly youth) to earn decently.

The REACTS II project is providing maize shellers and moisture metres to ensure all grain is kept at the store is properly handled. Other income-generating projects in the association have been started. They include maize milling, rice milling, extension services, loans for both inputs through the association’s SACCOS. They are now growing the export market according to Mayambala. At the moment, the association exports grain to Kenya, Rwanda and Tanzania, but the long-term plan is to export finished products, such as flour and graded rice, he said. “We have already started the process of getting the standard and necessary requirements from the Uganda National Bureau of Standards so that we can package our products in the recommended way for export,” Mayambala added.

What others say about the model

The AGRA country manager, Dr. John Jagwe, commended the model for creating decent employment for the youth through a commission reward system and ensuring strict observance of quality standards for the grain traded. He said this is positively contributing to the profile of grain sourced from Uganda. According to National Planning Authority (NPA), co-operatives can deliver social and economic growth like they did in the 1960s. He pointed out that they only got into problems when they were mismanaged by non-co-operators and political interference. “Co-operatives can, therefore, be run as businesses for profitability and, in return, the profits are equitability shared among members. As long as co-operatives are able to control the entire value chain, it makes more sense for them to operate as a business,” a statement from NPA said.

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