This study examined the elements that make up an effective and functional primary agricultural cooperative among three small-scale agricultural cooperatives. The marketing, transport and financial management capacity of the three cooperatives was hampered by poor networking skills, poor infrastructure and low literacy rates.
The problem and its setting
These constraints result in limited instances of successful agricultural cooperatives in the Republic of South Africa (Ortman & King, 2007). However, there are limited case studies that provide sufficient documented information to understand the elements that influence the effectiveness of agricultural cooperatives among resource-poor rural smallholder agricultural cooperatives in South Africa.
Statement of the problem
Sub-problems
Sub-problem 1: What activities do the three agricultural cooperatives undertake to achieve their objectives? Subproblem 2: What are the advantages and disadvantages of collective action in the three agricultural cooperatives.
Study limits
Study assumptions
Organization of the mini-dissertation
The determinants of collective action in smallholder agriculture, particularly the reasons why agricultural cooperatives emerge, are discussed. Success factors for cooperatives in the context of smallholder agriculture are discussed, drawing evidence from empirical studies of the success and failure of agricultural cooperatives.
Understanding co-operatives
Origin of co-operatives
Agricultural cooperatives existed in South African history long before the right to association rights (Philip, 2003). First establishment of cooperatives in Natal - the first province to introduce cooperative practices in South Africa.
Objectives and activities of agricultural co-operatives
Previously, the primary function of cooperatives was the marketing of agricultural production (Kim & Mahoney, 2005). Many agricultural cooperatives in developed countries have made remarkable progress in value addition.
Determinants of collective action
Marketing advantage
Large retailers such as supermarkets are looking for manufacturers who have the potential to supply large quantities of products of the same quality all year round. It is highly unlikely that a single small, resource-poor manufacturer can meet the demand needs of large retailers.
Pooling of resources
Therefore, advantages such as the market advantage of collective action in smallholder agriculture need to be explored. It is also important that cooperatives work together to ensure high year-round supply.
Social benefits
Empirical studies on successes of co-operatives in smallholder agriculture
Empirical studies on failures of co-operatives in South Africa
A study by Machete (1990) interviewed members of six agricultural cooperatives in the former homeland of South Africa. The research was carried out with the aim of determining the causes of poor business performance and failures of cooperatives.
New Institutional Economics and co-operatives
Results from Kirsten & Roets' (2005) study on the potential to commercialize goat production suggested that cooperative formation and contract farming are the preferred tools to commercialize the goat industry. Kirsten & Roets (2005) argue that transaction cost barriers can be overcome through collective action by goat farmer cooperatives.
Constraints facing smallholder agricultural co-operatives
Market constraints
Therefore, communication between smallholder farmers and potential buyers is usually poor, as farmers cannot negotiate deals and prices without going directly to the markets (Ferris et al. 2006). Due to historical factors, there is a lack of sufficient information to support smallholder farmers (Aliber et al. 2006). Research indicates that the current extension system in South Africa is not capable of disseminating information to farmers (Farrington et al., 2002; Duvel, 2004).
Skills constraints
Extension exists as a system for disseminating agricultural information to farmers, but the services are not effective (Duvel, 2004). Documentation of information on smallholder related issues is carried out continuously, but the problem for farmers is the utilization of the information. As a result, resource-poor farmers experience a challenge in the form of a lack of information and communication flow from the agricultural extension and research service (Hawkins & van der Ban, 1996).
Financial constraints
The challenges facing small agricultural cooperatives include a number of global changes (Aina, 2007). Therefore, small agricultural cooperatives face a challenge in meeting industry standards (Roy, 1994). Donors (government and private sector) in the current South African system are demanding the formation and development of smallholder agricultural cooperatives.
Overview of success factors for smallholder agricultural co-operatives
Among the objectives of cooperative development is the promotion of solidarity in the communities (DTI, 2005). The first focus area in the development of cooperatives is financing of the cooperative. The agricultural cooperative is considered a social organization (Mohamed, 2004), as it is a support system of the society established to achieve social goals.
Approaches for measuring organisational effectiveness
According to Mohamed (2004), the choice of a certain measurement or indicator for measuring organizational effectiveness is based on the organization's nature and the goals of evaluation. In the goal approach, organizational effectiveness is measured by using the organization's ability to achieve its goals as an indicator. Constituency approach measures the organizational effectiveness by the organization's degree of compliance with the needs and expectations of the constituency.
Framework for analysing effectiveness of primary agricultural co-operatives
Agricultural co-operatives’ ability to mobilise and utilise the available resources
Such analysis will demonstrate the cooperatives' ability to either pool their own resources or to acquire resources. The ability of a cooperative to utilize available resources can be assessed from the production capacity, marketing capacity and through distribution of the cooperative's outputs. Reduced collective action problems (horizon problem, portfolio problem & free rider problem) in cooperatives.
Agricultural co-operatives’ ability to manage its challenges
Ability of a co-operative to meet its set objectives
Introduction
Geographical location and rural infrastructure of the district
Inyamvubu co-operative
The cooperative has its detailed bylaws that outline goals, vision and missions, the management structure and some rules under which the cooperative operates. The number of members of Inyamvubu co-operative has increased significantly in the two years since the co-operative was registered. The cooperative strictly employs members of the community to fulfill its goal of community upliftment.
Ingwe-Mndeni co-operative
The process of registering the cooperative as a formal registered structure was facilitated by their extension officer. Ingwe-Mndeni Cooperative had a population of eight members, including four committee members, two casual members and two ordinary permanent members.
Umphumela co-operative
Sample characteristics of the survey participants
This study investigated collective farming by assessing the elements that make up the effectiveness of the three agricultural cooperatives in Umgungundlovu district. The study was designed to specifically identify the activities carried out by the three cooperatives to achieve their goals, the advantages and disadvantages of farming as a cooperative and the constraints that the cooperative faces. Finally, the study analyzed the elements that make up an effective cooperative according to its stated objectives.
Sample selection
Non-members of cooperatives were purposively selected based on the knowledge that they are not involved in agriculture. Contact persons were therefore asked to invite community members who were not involved in cooperatives. The selection of non-cooperative members was based on their willingness to participate in the study and their availability on the scheduled dates.
Data collection methods
Focus groups
The researcher allowed the participants to brainstorm and define the advantages and disadvantages of agricultural cooperatives. The participants assigned scores relative to how they perceived each point as influencing their respective cooperatives. To elaborate on advantages and disadvantages of collective farming, focus group discussions were held with non-members of cooperatives from the three different communities in which the cooperatives were found.
Survey interviews
Data analysis
The main objective of this study was to assess collective farming by examining the key elements that make up an effective agricultural cooperative. What activities do the three agricultural cooperatives carry out to achieve their goals. What are the advantages and disadvantages of collective action in the three agricultural cooperatives.
Objectives of the co-operatives
The majority (73%) of farmers from the three cooperatives indicated that they were willing to remain long-term members of the cooperatives. Very few farmers (26%) were unwilling to remain long-term members of their cooperatives. Member involvement in the cooperative was cited as another reason farmers (21%) were willing to remain long-term members of their cooperative.
Activities of the agricultural co-operatives
Production
However, the shortage of tools creates a need to employ more workers, fulfilling one of the cooperatives' objectives: job creation. Morris (2001) stated that one of the benefits of cooperatives is diversification, value addition and specialization of labor. Diversification of Inyamvubu Cooperative's activities could be the result of its large membership, which allows for growth and expansion (Morris, 2001).
Marketing
The Ingwe-Mndeni and Umphumela cooperatives are exclusively engaged in agricultural activities and there is no specialization of labor or diversification of activities. The Ingwe-Mndeni cooperative conducts an annual informal assessment of turnover and members reported an increase in turnover. The Inyamvubu cooperative sells to the school food program and to supermarkets in Mooi-River and Pietermaritzburg.
Transportation of outputs
Reported advantages of co-operatives by the members
Therefore, it makes sense for cooperatives to report job creation as the most important benefit of cooperatives. Task sharing was reported from the Inyamvubu Cooperative as another benefit of working as a cooperative. Weak commitment to cooperative activities is a challenge that hinders faster execution of tasks in cooperatives.
Reported disadvantages of co-operatives
Clashing of opinions
Although the Inyamvubu Cooperative is a more established cooperative, disagreements between the members of the cooperative do occur. However, the cooperative has a disciplinary committee that takes disciplinary measures that all members agree on. In addition, all three cooperatives reported that it takes a long time to make decisions that are likely to satisfy everyone in the cooperative.
Lack of members' commitment
The results in Table 6.5 indicate the usefulness of the committee in the Inyamvubu cooperative as most members of Inyamvubu report their dissatisfaction to the committee. On the other hand, committee members and managers found it easier to express their dissatisfaction. These findings lead to the need for managers to carefully identify strategies to ensure members are not afraid to raise concerns.
Difficulty in managing groups
Apparently, members find it difficult to believe information provided to them by other members, especially those in higher positions within the cooperatives. The problem faced by the Upheka co-operative may be due to deviation from the co-operatives law as they do not hold regular meetings. The aim was to get an indication of the extent of information and opinions about cooperatives from people who are not members of the cooperatives.
Perspectives of non-members of co-operatives
Reasons for their reluctance to join cooperatives included the failure of existing cooperatives in the community, particularly in Richmond. Participants, including those who were not inclined to be involved in cooperatives, believed that cooperatives have their advantages and disadvantages. The advantages and disadvantages reported by non-members were similar to those reported by members of the three cooperatives.
Constraints faced by the three co-operatives
- Land
- Poor provision of extension services
- Lack of resources
- Poor infrastructure
More than 50% of the Ingwe-Mndeni and Upheka co-operative members do not have access to land. The Ingwe-Mndeni cooperative uses land that has been allocated to the manager of the cooperative. Members of the Ingwe-Mndeni cooperative were not clear about the procedure to apply for funding.
Effectiveness of the three agricultural co-operatives as per the set criteria
Analysis of the cooperatives shows that production capacity is hampered by a lack of land. Ingwe-Mndeni and Umphumela cooperatives had low effectiveness, especially in terms of management skills. Therefore, the three cooperatives had low effectiveness in improving access to markets.
Conclusions
Qualitative data were collected through focus group discussions with members and non-members of cooperatives from the three studied areas. Low ability of the three cooperatives to manage their institutional arrangements also affected the ineffectiveness of the cooperatives. While the cooperatives met certain criteria for effective cooperatives, they did not meet all the elements of the criteria.
Recommendations
Recommendations for consideration by institutions supporting cooperatives
Government institutions, through extension workers, need to engage further in disseminating sufficient information about what cooperatives really are to avoid speculation that members may have towards each other. Through close interaction with the farmers, extension workers could identify the target farmers and cooperatives likely to use the resources effectively. Identified technologies should be stimulated and disseminated to agricultural cooperatives to ensure that cooperatives take advantage of the opportunities for value addition.
Recommendations to be considered by members of co-operatives
While members of cooperatives faced difficulties in raising external funds, they could use strategies such as collective mobilization by raising funds from their own savings. Cooperatives must strive to become independent and to accumulate capital for themselves to remain independent or to rely only on external financial assistance. Cooperatives have a great marketing advantage and collective production is likely to be a success if the recommendations of this study can be considered for implementation by farmers and the government departments.
Implications for further research
Such distribution is likely to serve as a reward for members who commit themselves and their resources to cooperative activities and in turn encourage other members to invest in cooperatives. What activities do you carry out in this cooperative throughout the year? Think you'll be with this co-op for a long period of time.
