Emerging agricultural cooperatives enable people to improve their economic conditions by enabling them to work collectively to achieve results that individuals cannot attain (Gertler, 2001). In cooperatives, farmers can collectively bargain for better prices (Cakir
& Balagtas, 2012) and increase their profit margins (Uematsu & Mishra, 2011).
Cooperatives can transform farmers into industrial agricultural farmers by enabling them to access liberalised markets (Birchall, 2004). Mason, et al. (2004) offer a useful list of twelve elements to assess the effectiveness of agricultural organisations, namely Leadership; Vision and goals; Partnerships; Socio-economic objectives; Culture and values; Entrepreneurship and business development; Global economic context; Business
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management capacity; Human resource capacity; Financial capacity; Land and rights capacity and organisational capacity.
The successful performance of cooperatives is also measured in terms of financial performance, for example net margin, member commodity prices, return on equity, and sales growth. Banaszak (2008) identified four elements, namely leadership strength, group size, business relationship among members, and a member selection process during group formation. Cooperatives are crucial in the development of the agricultural sector (ICA, 2015 & United Nations (UN), 2015). The most important role is that of mitigating small holder farmers’ weaknesses such as lack of information, high transaction costs, small volumes, low capital and insufficient credit (Bernard, et al., 2010).
2.6.1 Roles of Cooperatives in Africa and Globally
The United Nations (UN), the International Labour Organization, the International Cooperative Alliance (ICA) and the European Union (EU) have total confidence in cooperatives as tools to address the economic and social development worldwide (World Bank, 2007). In Africa, cooperatives have been creating employment opportunities. An estimated 250 million farmers in developing nations belong to a cooperative. An ILO study estimated that the cooperative sector in 15 African countries was responsible for 158,640 direct jobs (Schewttmann,1997). Cooperatives were reportedly employing a staggering 77,400 staff in Kenya (Wanyama, 2007), in Ghana, 3,130 (Tsekpo, 2008), in Uganda, 2,823 (Mrema, 2008), in Rwanda, 800, in Egypt, 9,500 (Aal, 2008), in Ethiopia, 28,000 (Lemma, 2008). Wanyama and Lemma’s findings suggest that, for Kenya and Ethiopia respectively, employment might even be higher than the official figures.
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According to ILO (2012a), in Kenya, cooperatives employ 300,000 people and create indirect work for 2 million people through finance and opportunities they created in 2012.
Cooperatives in the 10 biggest world economies make up an average of almost 5% of the GDP, which amounts, approximately, to the GDP of Italy, the world’s 7th largest economy (Roelants, et al., 2012 & Bajo & Roelants, 2011). According to ICA (2012) the largest 300 cooperatives of the world had a combined annual turn-over of $2 trillion. In a study that they conducted in Sri Lanka and Tanzania Birchall and Simmons (2009) found out that cooperatives reduce poverty. It was also found that cooperatives make positive contributions in non-income areas such as skill development, education and gender equality. In China, cooperatives provide 91% of microcredit. Clearly, cooperatives have a huge potential of changing poverty situations for many. This is in line with the empirical evidence of studies on poverty from eleven African countries, which showed that cooperatives significantly contributed to poverty alleviation (Wanyama et al., 2008).
Government should facilitate the growth of cooperatives into a modern value chain system and show forth such benefits to small scale and emerging farmers (Birthal and Joshi, 2007).
2.6.2 Role of Cooperatives in South Africa
In 2009, the Minister of Rural Development and Land Reform approved the Comprehensive Rural Development Program (CRDP) as one of the key strategic priority areas of government as outlined in the Medium Term Strategic Framework (MTSF). The drive towards cooperative development occupies an important place in the CRDP within the context of the government’s rural development strategy. According to the CRDP, the drive to agrarian reform will focus on, among others, the establishment of rural business
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initiatives, agro-industries and cooperatives in villages and small, rural towns. The Department of Agriculture, Forestry and Fisheries has an Information Management System for cooperatives called CODAS (Cooperative Data Analysis System) and its objectives are: (i) To store, collate and analyze data in a more accessible format and ensure accuracy, reliability and currency of data; (Tuominen et al.) To establish the actual status, performance and extent of existing cooperatives in the agriculture, forestry and fisheries sector in South Africa; (iii) To establish the growth trends of the cooperatives in the sector; (Zambia Ministry of Agriculture and Cooperatives. et al.) To perform comparisons in terms of the cooperative activities by province, district and local municipality; (v) To facilitate planning and implementation of intervention strategies and programs for cooperatives in the sector; and (vi) To assist in the compilation of annual reports on the status of cooperatives in the sector (DAFF, 2011).
Cooperatives are regarded as having a potential to impact on development and poverty reduction. Cooperatives have a wide-reaching direct and indirect impact on socio- economic development. Agricultural cooperatives play an important role in food production and distribution, and in supporting long-term food security. Cooperatives can create productive employment, raise incomes, and help to reduce poverty. Some agricultural co-operatives improve farm productivity by obtaining inputs at low costs, encourage sustainable farming techniques, and develop member’s management and organisational skills. Small-scale agricultural cooperatives also promote the participation of women in economic production, which, in turn, helps in food production and rural development (DAFF, 2011).
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Through co-operatives, women mostly in African countries are able to unite in solidarity and provide a network of mutual support to overcome cultural restrictions to pursue economic or commercial activities. Smallholder and emerging farmers are able to increase their productivity and incomes by collectively negotiating through cooperatives for better prices for inputs like fertilizer, seeds, transport and storage. They can also help farmers expand market access and capture more of the value chain, for example, by getting involved in value adding or agro-processing activities (DAFF, 2011).
The 2010/11 report on cooperatives (DAFF, 2011) in the agriculture, forestry and fisheries reveals the status of cooperatives in South Africa. The analysis done on the cooperatives sector shows that there were 836 small-scale agricultural cooperatives in the Cooperative Data Analysis System (CODAS) in South Africa during the time of analysis in 2010/2011 period. Of the 836 cooperatives on CODAS, 306 were found in the province of KwaZulu- Natal, which made up 36% of the total cooperatives. In funding, Limpopo Province surpassed all the provinces with 42 cooperatives funded with R36m, followed by KwaZulu-Natal with R22m worth of support to 51 cooperatives. A total of 2 389 job opportunities were created by the cooperatives sector in the country, with 65% of this (1 858) being permanent jobs, while 33% (981), were temporary jobs. At the time of the report agricultural co-operatives in the Limpopo province were 127, which translated into 15% of the total cooperatives which were on CODAS in 2010/2011. Of the jobs that were created in Limpopo Province from the 127 cooperatives, it was reported that 377 jobs were full time jobs and 141 jobs were part-time.
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