Using the literature on objectives of agricultural co-operatives and success factors of smallholder agriculture as outlined in Chapter Two of this study, and using the theory of organisational effectiveness, particularly the systems approach as outlined in Section 3.2 above, a framework that explains critical issues to be covered in analysing the effectiveness of the agricultural co-operatives can be developed. The framework, as shown in Figure 3.1, implies a combination of approaches towards analysing organisational effectiveness; the goal and the process approach. The framework suggests that the objectives or goals of agricultural co-operatives can be used as standards or measures for assessing co-operative effectiveness. The processes include the ability of a co-operative to mobilise and utilise the available resources and the ability of an agricultural co-operative to manage its institutional arrangements to ultimately meet its objectives. The overall measure of co-operative effectiveness is the ability of the co- operative to meet its set objectives.
The framework suggests that collective farming through agricultural co-operatives is established to meet the specific objectives, as listed in the framework. The list of key broader requirements or factors from which the level of success for co-operatives can be judged is presented in the framework. The framework also shows the indicators for effectiveness of agricultural co-operatives. The co-operative effectiveness measures and the specific indicators of each measure are outlined below.
3.2.1 Agricultural co-operatives’ ability to mobilise and utilise the available resources
The key area of focus in success of co-operatives is financing. Co-operatives need access to capital, to develop as effective enterprises. According to Phillip (2003), growth of co- operatives is not likely to be significant if access to finance is limited. Therefore, the framework of co-operatives effectiveness needs to focus firstly on the ability of the co- operative to obtain the necessary resources and materials for achieving its activities from the surrounding environment. The number and ease of accessibility of financial sources available to the co-operative should be assessed. Such analysis will demonstrate the co- operatives’ ability to either accumulate their own resources or to obtain resources.
FAO (2007) has argued that if mobilisation of resources was the only problem in organisation’s effectiveness, the problem would be easily solved. To be successful, a co- operative must ensure well-organised use of existing resources such as facilities, equipment, assets finance, procedures and people (FAO, 2001). It is through efficient use of resources or inputs that the desired outputs in an organisation will be achieved. Ability of a co-operative to utilise available resources can be judged from the production capability, marketing capability and through distribution of the co-operatives’ outputs.
Figure 3.1 Framework for analysing the effectiveness of primary agricultural co-operatives.
Collective farming:
Agricultural Co- operatives
Objectives of agricultural co-operatives
• Creation of income generating activities
• Creation of decent employment opportunities
• Development of human resources capacities;
managerial, business and entrepreneurial
• Strengthening market access
• Increasing savings and investments
• Contribution to sustainable human capacity development
Key success factors
• Improved financing of co-operatives
• Efficient use of resources in co- operatives for improved production
• Well organised institutional arrangements in co-operatives
Established legal framework
Reduced collective action problems (horizon problem, portfolio problem & free-rider problem) in co-operatives
• Improved market access for agricultural co-operatives
Measures for effectiveness of agricultural co-operatives
• Ability of agricultural co-operative to mobilise resource
Number of financial sources
Available sources from requested funding
• Ability of agricultural co-operative to utilise available resources
Production capability
Marketing capability
Transportation capability
Financial management capability
• Ability of co-operative to manage its institutional arrangements
Leadership and management capabilities
Administration capabilities
3.2.2 Agricultural co-operatives’ ability to manage its challenges
The effectiveness of an agricultural co-operative can be assessed through its ability to manage structural constraints. Structural constraints can be due to weak institutional arrangements and weak management and/or leadership. Kirsten et al. (2002) defined institutional arrangements not only as a set of formal laws, contracts, political systems, organisations and markets, but also as informal rules of conduct such as norms, traditions, customs, value systems, religions and sociological trends. These sets of formal laws and informal rules facilitate organisation or govern relationships between individuals or groups. Therefore, the ability of a co-operative to manage institutional arrangements can be judged by the extent to which a co-operative follows set administration. Moloi (2007) argued that the measurable indicators for organisations’ functioning include contributions by members, violations of rules, major conflict and decision making procedures.
3.2.3 Ability of a co-operative to meet its set objectives
The goal approach to measuring organisational effectiveness considers the outputs of an organisation as the standards to assess goal attainment. The framework in Figure 3.1 shows that the measures of co-operative effectiveness are linked to the objectives of co- operatives. The linkage suggests that measurement of the effectiveness of the co- operative using the listed measures, leads to an answer as to whether the co-operative is able to meet its objectives.
The framework will be used to assess the effectiveness of the three agricultural co- operatives selected for this study. Each co-operative will be assessed to check whether it meets the key success factors of co-operatives and the key measures of agricultural co- operative effectiveness listed in the framework. Chapter Five describes in detail how the framework was used to analyse and compare the three agricultural co-operatives.
CHAPTER FOUR
DESCRIPTION OF THE STUDY AREA