Partnering with Ease-Agr to Extend and Expand Cooperative Agribusiness in Africa:

organizational diagnostics, international networking and big data

Nicola Francesconi, CIAT-CGIAR

g.n.francesconi@cigar.org

IFPRI/IITA office, Naguru Hill

CIAT office, Kawanda

Tel. 0794756336

EDC

Enhancing

Development

through Cooperatives

Did you know?

• the UN declared 2012 as the International Year of Cooperatives

• cooperatives play a major role in rural financial and extension services worldwide

• 50% of global agricultural output is marketed through cooperatives

• cooperatives were instrumental for the success of family farms in the US and EU

Coops prevalencein Africa

% of rural villages with at least one coop

Senegal 47

Burkina Faso 56

Ethiopia 35

Uganda 31

Recent data from CIAT shows that 80% of Ugandan bean producers are members of at least one coop

What is a cooperative?

Not an NGO or a parastatal because it is a for profit organization

Not an Investor-Owned Firm (IOF) because it is:

an organization owned/controlled by individuals benefiting from its services

or

a user-owned, user-controlled and user-benefitted organization

The History of Rural Cooperation in Africa (from defensive to offensive)

Time

Market-driven

State-driven

Community-driven Mutuals

Coops

New-Coops (FOs/POs)

Pre-colonial Colonial & Post Independence

Post StructuralAdjustment

Governance

Hundreds of thousand of new coopsare arising…but they are still

small and uncompetitive

Our previous research shows that:

• Cooperatives are widespread and resilient organizations in Africa

• Participation in cooperatives improves farmers’ technical efficiency(i.e. adoption of improved technology, to produce with less..)

• Cooperatives tend to be affected by allocative inefficiency: elite-capture and side-selling (no inclusive business)

How to help cooperatives optimize their sustainability?

The Cooperative Life Cycle Framework

How Do you Measure Coop Health?

• Is it just financial performance (i.e. investments and profit)?

• What about membership size, social inclusion and members’ patronage (i.e. participation)?

Minimizing governance problems that hinders participation

is as important as maximizing profit and investments…

P1

Phase 1 = Economic Justification

Health of Cooperative

Time

Phase 1

Phase 1: Economic Justification

• Better Access to Markets?

• Economies of scale?

• Social capital?

• Bargaining/Countervailing power?

• Multiple rent extraction?

Phase 2

P2

Phase 2 = Organizational Design

Health of Cooperative

Time

Phase 2: Organizational Design (the rules of the game)

• Who can be a member?

• Who/how is risk capital acquired?

• Who has residual claim rights?

• Who has residual control rights?

• Sanctions - Enforcement

Phase 3

P3

Phase 3 = Growth–Glory–Heterogeneity

Health of Cooperative

Time

Glory = external incentives, i.e. better price, tax exemptions, subsidized inputs/credit

This competitive advantage triggers:

Growth = expansion in membership and increasing members’ patronage

However, growth tends to add managerial and leadership complexity, due to the rise of:

1. the free-rider problem = when many new members enter a group and claim the same benefits of existing members

2. horizon or portfolio problems = when members’ patronage is used to pursue investment strategies that are either too risky (i.e. one big and long term investment) or too cautious (i.e. multiple small and short term investments)

3. agency cost problems = when growth is associated with high internal monitoring, influence and decision making costs

Phase 3: Glory and Growth

• These governance problems create increasing disincentives for members’ participation (side-selling and membership expansion) affecting coop health

• To minimize these problems coop leaders and managers need to “tinker”, or adjust the rules of the game, in such a way to design and enforce solutions

• When coop leaders and managers are able to “tinker” they extend the length of the life cycle

• “Tinkering” occurs only when there is consensus among coop managers and leaders, i.e. when their preferences are homogenous enough to quickly craft and enforce solutions

• Yet, the preferences of coop leaders and managers tend to diverge over time (Heterogeneity)

• “Tinkering” is a temporary strategy, which can extend a life cycle, but not indefinitely…

Phase 3: Heterogeneity

Phase 4

P4

Phase 4 = Recognition and Introspection

Health of Cooperative

Time

Phase 4: Recognition and Introspection

• Factions?

• Apathy?

• Crisis?

• Members’ drift?

• Side-selling?

• Elite Capture? (the coop becomes a separate firm)

Sooner or later a cooperative will no longer be able to “tinker”, due to increasing heterogeneity in the

preferences of its leaders/managers…

…and will have to do introspection and recognize its governance problems

Reinvent

Exit

P5

Phase 5 = Choice

Health of Cooperative

Time

Spawn

Phase 5

Phase 5: Choices

• Reinvent?

• Spawn?

• Exit?

a cooperative that can no longer “tinker” can decide to either dismantle itself or re-invent its governance structure and enter a new life cycle…

In which phase are you in?

What exactly am I proposing?1- to help you extend and optimize your business cycle

• To use this framework to perform organizational diagnostics of your coops, to build leadership and management consensus (or reduce heterogeneity) on how to “tinker”

• We are not offering solutions…but we can help you find your own, through training and coaching sessions like this one

Donors:

USAID, Ford Foundation

CIAT/EURICSE

EASE-AGR/KDA

African

Coops

GICL/ISPRI

US, NZ, EU, Brazil, China, etc. Coops

Projects:

(OCDC, CGIAR, OXFAM, FAO, SNV, GIF, etc.)

An International Network for Cooperative Research & DevelopmentP

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Promoting and facilitating networking between your coops and other ones at the local, national, regional and global level

to nurture (inter)national strategic alliances, joint ventures and mergers…

Large

mature and

offensive coops

Small, young and defensive coops

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What exactly am I proposing?2- to help you expand and globalize your business

What do I need from you?

Time, Engagement, Trust and…Data, Data and more Data!

With your help we can build an ICT platform

that will not only help you sell your coffee, maize, etc.,

but also your data…

No more time-consuming surveys

but an automated ICT system for data collection