Archive for category: Cooperative Governance

Managers of Savings and Credit Cooperative Societies (SACCOs) in Sembabule district are calling for strict enforcement of governing regulations to combat multiple memberships in the districts’ SACCOs, saying it is stifling the SACCOs’ growth.

The district is home to at least 33 registered cooperative societies according to its framework paper, but many of them have barely been able to grow to their potential, says Daniel Kintu, the manager of Sembabule SACCO, one of the leading SACCOs in Sembabule Town Council.

Kintu attributes the minimal growth to people holding multiple memberships in several SACCOs – some with competing objectives, with a view of obtaining multiple loans which they later fail to pay back.

“Our observation is that these people registering with us do not do so necessarily to save. The majority are perennial borrowers with a poor repayment culture,” Kintu says.

He argues that as a result, the SACCOs are facing a problem of a high default rate on loans advanced out to their clients.

Now, Kintu says, through their umbrella body, SACCO managers are moving to stop the practice. He told theCooperator that they’re mooting for the full operationalization of the governing laws at the district and regional level to make it impossible for people to hold multiple memberships and take multiple loans in SACCOs.

Already, section 17 of the Cooperative Societies Act 1991, forbids any person to be a member of more than one registered society having the same or similar objects for avoidance of contradiction

But SACCOs have for long been reluctant to implement that particular clause of the law as they seek to maximize the benefits that come with many members.

Kintu says they now have no option. “Our SACCOs are not growing because of this practice,” he says, adding “It is high time we organized and undertook to verify our members and implement the law to the latter to stop the vice of multiple defaulters.”

Kintu’s concerns are shared by other SACCOs in the district. Hussein Tamuzadde, a board member of Mateete Saving society also told theCooperator that their SACCO faced a similar problem, noting that the high number of loan defaulters has forced their SACCO to raise interest rates on loans to make up for the bad loans.

SACCOs according to the Cooperative Societies’ Regulations of 1992, are member-founded microfinance institutions that run on member savings and tend to their financial needs through providing affordable credit.

Simon Peter Ddungu, the Sembabule District Commercial Officer told theCooperator that of late, his office had embarked on vigorous sensitization of cooperators to adhere to cooperative best practices as a way of supporting the growth of their SACCOs.

“These institutions are member-formed and member-owned, the members themselves are responsible of their sustainability. This is what we’re trying to remind cooperators,” he said.

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The National Coordinator of Operation Wealth Creation (OWC), Gen. Caleb Akandwanaho aka Salim Saleh has on several occasions asked a poignant question – Where is the farmer in in the value chain power relations?

Having had many adaptive hours and years of work and engagement with farmers and those who do business with them in Rwenzori region, West Nile, Luwero etc, Gen. Saleh evokes a historic question that has dominated discourse over human progress and advancement from pre-stone age, stone age – and from first to the forth industrial revolution that many elites and laggards are equally talking about these days.

This question of mediating producers power, the state and the market is at heart of 1944 Karl Polanyi’s work “The Great Transformation”, Peter Evans “Embedded Autonomy”, Adam Smith’s “The Wealth of Nations” and Maynard Keynes’ “The General Theory of Employment, Interest, and Money”.

My answer to this question is that farmers’ power in the value chain is equal to their level of organization. The non-organised and weakly organized farmers have no power at all in the value chain. The organized farmers have power to take a fair chunk of their sweat in the value chain.

But what is this animal called value chain and how can farmers govern it? A value chain is a set of linked activities that work to add value to a product; it consists of actors and actions that improve a product while linking commodity producers to processors and markets.

Let’s take an example of the coffee value chain. I pick coffee, because, it is the second largest valued commodity in international trade, and the most widely traded tropical commodity after petroleum. According to Mordor Intelligence world market report, global coffee market is growing at a compound annual growth rate of 5.5% during the forecast period (2019 – 2024). Coffee is one of the world’s favourite beverages and a major source of caffeine, coffee continues to be an essential factor in society’s daily routine.

Uganda is the 2nd largest exporter of coffee in Africa, coffee supports over 3.5 million families at all levels of the value chain especially for income security and contributes to between 20 – 30% of foreign exchange earnings. Coffee is essentially central to Uganda’s pathway to total prosperity.

The current state of coffee value chain (money for every value added on coffee) begins with researchers in Kintunzi and other National Agricultural Research Organisation (NARO) stations that develop coffee plant varieties; then to nursery operators who raise and supply seedlings to farmers.

The next value add is by farmers (smallholders and plantation farmers) who grow and harvest the coffee; and then inputs dealers, transporters, aggregators and primary processors of coffee (farmer associations, cooperatives, traders/middlemen and coffee processing entrepreneurs).

Further value add is by exporters and importers – and then the greatest – coffee roasters! Globally, roasters take 50% of the entire value of a coffee bean. With respect to coffee farmers, there has consistently been very little opportunity for value addition and farm incomes are highly dependent on yield and prices – not set by farmers themselves.

Powerful farmers and their associations can capture value from production to roasting. Organised farmers in cooperatives or some other form can source best inputs, deploy the best extension workers, grow and harvest the best coffee, have inbuilt capability to process, roast and export the coffee to niche’ markets.

The coffee roaster dynamic in the world is tough. For example, coffee roaster cartel in the Europe is powerful and getting around it to establish a competitive roaster business at heart of Europe has been frustrating and impossible for many pan-Africanists. They control the roaster business through big brands, banks, traceability rules, complex legal regime etc. However, there could be ways to go around them; One way is to set up in places like Turkey and China – targeting boutique coffee shops, small coffee outlets and deepen Uganda roasted brands. The reason is that these outlets don’t have capacity to off-take big volumes from historic roasters in Europe which makes them a niche market for Uganda to penetrate and generate brand royalty.

The foregoing approach can be further enhanced by third-party endorsement of Uganda coffee brand from global celebrities and brand ambassadors – preferably with global moral standing.

The other aspect would be for organized farmers backed by the government to leverage state institutions, export strategies, networks marinated by embassies to for example open speciality coffee outlets in all major cities of the world (from Beijing to New York etc), pull off joint venture agreements with established coffee brands like Starbucks, Nestle and student popular coffee places like Peets in Cambridge Massachusetts to roast coffee at home and abroad.

So, what is limiting this farmers power? First, we have mostly looked at farmers role in the value chain as that of only production. The strategy has been to replace old coffee trees (30 years old coffee trees indeed cannot give us 27 tons per hectare like in Brazil) – and to export 2o million bags. This is contextual forward thinking – but not optimal. We should be strategizing on how farmers can roast at home and export directly exclusively or in alliance with global brands. Then we can think of other opportunities we need to create, leverage to make this happen. As long as our mentality remains to produce – and others export – others roast; we are in circles for a long time. Let’s crush and disrupt this circle and begin again.

The business of government and leaders at all levels is not to form farmer groups but rather through awareness and targeted education programs stimulate farmer agency with resulting groups that mushroom organically. The most efficient way is to stimulate formation of coffee enterprise specific groups – and not generic farmers groups. Whereas bees are good for pollinating coffee – having bee keepers and coffee farmers in a room may not yield fruitful discussions and strategies to yield common objectives and actions.

For zoned coffee areas, at a village level (where things happen) lets’ have coffee farmer specific cooperatives that can graduate into coffee unions at sub county and district levels. With proliferated technology and electricity extensions I see all over the place, we indeed can roast our coffee in Nyeibingo, in Kebisoni and Ikuniro in Rujumbura etc. It’s time for farmers not to just be integrated in coffee value chain – but to organise and govern the value chain. That is where the power is located and we can find it.

Morrison Rwakakamba – Coffee farmer, Nyeibingo Rukungiri. ( Source/ Daily Bread News)

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