Guest blog: Daniel Fireside, posted on October 17, 2017, on Equal Exchange - http://equalexchange.coop/blog/avoiding-the-exit-strategy-trap
One of the first questions investors ask of a company is, “What’s your Exit Strategy?”
In other words, when are you going to go public or sell your company to a larger company so I can cash out with 10 times my original investment?
With a conventional profit-driven company, this might not be a big deal for consumers, workers, or suppliers. For companies primarily with a social mission, however, it means the end of the mission. But you can’t get that investment money without having a plan to sell out – call it the Exit Strategy Trap.
We’ve seen it over and over among companies that were once our peers in driving change in food and consumer products. (Dr. Phil Howard has put together an excellent graphic of the consolidation of the organics industry.) Despite the rosy statements when big piles of cash are being exchanged, once the mission-driven company becomes a cog in the machine, it ceases to be an agent of change.
How did Equal Exchange avoid this Exit Strategy trap? It’s not because we don’t get offers. We get them all the time. It’s not because we’re more noble or purer of heart. A lot of folks at our company would welcome a windfall payout in exchange for our ownership stock.
The answer is in three parts.
First, our democratic worker co-operative model means that a decision like this would have to be approved by 2/3 of the worker-owner members of the co-op, and we each get an equal vote. Unlike faceless corporate investors, we’d be voting to end the social part of our company for ourselves and our co-workers. We’d have to look them in the face, and look at our reflection in the mirror.
Second, we’ve figured out how to raise the investment capital from sources that mirror our social mission, from over 600 investors, dozens of mission-driven lenders, and over $2 million from our own workers. You can find a deeper description here: http://equalexchange.coop/blog/cooperative-capital.
Third, recognizing the Exit Strategy Trap early on, the workers in the company adopted what you might call the “No Exit Strategy.” Essentially, this established a rule that in the event of a sale of the company, we couldn’t keep any of the money. All loans and investments would be returned at face value, but all the net proceeds of the sale must be donated to another Alternative Trading Organization. All we’d get is a new corporate boss.
By taking the money off the table, we took away the temptation to ever sell out. What stays on the table is a shared obligation to run the company for the benefit of all stakeholders: farmers, workers, consumers, and the environment. Why would we ever want to have an exit for that?
Written by: Enkhtuya Boldbaatar, Dairy Specialist, EMIRGE Mongolia
Just like any business group or SME seeking to grow and expand, cooperatives often have to come together and make important decisions regarding the type and size of investment necessary to increase their production and improve member livelihoods. But, it is not always the case for various producer groups in Mongolia who are constantly faced with external and internal challenges, leading to ineffective decision-making processes around investment.
In my experience, I have seen SME support programs or NGOs provide equipment or machinery at no cost to cooperatives and producer groups, along with very limited training on how to effectively operate and use them to grow and expand. This form of support ends up being counterproductive, as the equipment or tools end up being underutilized, sometimes rusting in a member’s back yard or even never used at all because the equipment requires further investment. Other types of ineffective investment I have witnessed are mainly due to: (1) lack of coordination among the members to assess their specific needs before acquiring inputs or equipment, and (2) lack of proper training on best operational practices. Here are some cases of failed investments I have personally encountered:
Example 1 - Fodder cutter:
In August of 2017, Members of a local cooperative in the Darkhan-Uul province borrowed a fodder cutter from another group, which obtained the equipment for free under the Disaster preparedness project and never used it. By the time the members of the cooperative tried to use the equipment, they realized that it was not actually a fodder cutter, but instead a grain mill. Furthermore, the equipment did not have any power input socket.
Example 2 -Sprinkler irrigation:
A sprinkler irrigation system was given to a local cooperative under the Markets and Pasture Management project in 2015 and was kept without use. After planting green fodder plants such as oat and peas in early July in the group’s fodder field, the members attempted to install the system to irrigate the land; but when they tried to connect the system to a well, it was discovered that many small parts such as fans and hoses were missing. The group members spent a great deal of time and effort to put together missing parts and get the system to operate. However, the system did not work properly and was not good for further use. They had to replace it in early August.
Example 3 - Distillation equipment:
The senior management of a local cooperative made an incorrect assessment of the conditions and opportunities of the group, and invested resources in the acquisition of distillation equipment. However, due to improper planning, lack of communication with the coop members, and lack of training and experience in using the equipment, the cooperative has not been able to use it for over two years now.
Under the EMIRGE program, partner cooperatives have received capacity building in their specialization, business advisory services and market linkages that are tailored for their daily activities, and have enabled them to make smart decisions for their own investments. Cooperatives have learned how to make investment decisions around important products and inputs such as irrigation systems for greenhouses or small farm fields, small tractors, milk cans, curd dryers, and lactoscans. Our partner cooperatives are now able to vocalize their needs to supporting organizations for additional equipment, parts, or tools that are needed for their daily operations. This approach lowers the risk of aid reliance for the farmers, which is always in short supply and not always matching their actual needs. Our results on the EMIRGE program have demonstrated that choosing agribusiness training over donations are well-paired with the objectives of our partner cooperatives and groups.
For instance, Devjikhuguuj group, one of the program partner cooperatives, approved and implemented a decision to invest in an irrigation system to protect crops from drought, and increase harvest. This turned out to be a solid investment as the group was able to double their harvest compared to the planned quantity. Many other partner cooperatives are also working with great enthusiasm to expand their businesses in the coming years by: (a) applying investment best practices, (b) learning and developing their ability to acquire and utilize new equipment and technology, and (c) generating new business ideas and initiatives.
Smart investments are key to development.
The Journey Of Establishing A Service Co-Operative: Lesson From Brand Ambassadors And Marketing Co-Operative Society In Nairobi
Written by: Mark Matabi, Co-operatives Specialist / Country Lead, EMIRGE Kenya
The idea of developing and strengthening service oriented co-operatives in Kenya was a key initiative under the USAID/EMIRGE program. Three service sectors were identified for pilot purposes to include branding and marketing, building and construction, and beauty and wellness service groups. After 12 months of formation, capacity building activities, and processes, only the group of free-lance sales agents had successfully established the Brand Ambassadors and Marketing (BAM) Co-operative Society. Implicitly, starting a new co-operative takes energy and resources!
Based on the advisory experience in co-operative development work, guidance, training and coaching of the service group in co-operative membership, legal, tax, finance and business process/service issues were paramount. Such answered questions and concerns in the process included:
The essential learning in the efficient and timely establishment of BAM co-operative, was coherent adherence of the following step-by step procedures. First, was the sensitization, identification and assembling of the group members who were were interested and willing to work together.
A group of over 200 young sales agents were sensitised and mobilised on the need of using co-operative business model to offer sales and marketing services. Afterward, the relevant information was collected and feasibility undertaken, and unanimously acknowledged by the majority of the potential members that there was mutual need for a co-operative business.
The second step by the EMIRGE team was to hold several meetings of potential members to discuss needs and vision. Numerous pre-co-operative education and training activities were conducted to understand the co-operative business model, structure and system, roles and responsibilities of members and leaders. Then, a co-operative steering committee was selected to coordinate business research on whether there is enough interest in a co-operative to justify further co-operative planning.
With the potential members having sufficient interest in the co-operative business model, the EMIRGE co-operative development team supported the steering committee to conduct an economic feasibility study on whether the proposed co-operative is likely to be successful and beneficial to its members by determining important factors including markets and volume of business, potential membership, facilities needed, operating costs, capitalization and funding options. It was confirmed in this stage that the young potential members had sufficient skills and capacity to start a branding and marketing co-operative.
When the members positively affirmed that the co-operative would make practical and financial sense, more meetings were held to affirm their commitment. It is at this juncture that the EMIRGE team supported the group to develop their three-year businesss plan. The plan was to define how the co-operative would be structured and financed. The group’s 2018-2020 business plan was to substantiate member benefits and the co-operative’s short and long term viability. Subsequently, short workshops were convened to review the business plan in which more adjustments were made by the potential members. By this time, the number of potential members had reduced to only 20 percent of the original number.
But given the legal provision in Kenya of the formation of a co-operative is 10 members, the EMIRGE team, together with the co-operative officers, supported the group with drafting legal papers to secure the membership commitment. The by-laws would clarifed co-perative organisational details, prepared necessary legal papers for registration, and secured the written and financial commitment of members.
Through the State Department of Co-operatives Development, BAM co-operative was officially registered. The inaugural co-operative general membership meeting was held and official board of directors elected. In essence, the members formally began the co-operative and accepted the articles and by-laws.
Today, the BAM co-operative leaders are working with the members to implment the three-year business plan. The official start up operations are on with the co-operative securing finances and permits and licences required, and seeking sales and marketing businesses from various partners. The co-operative is already getting recognition from County Government of Nairobi City and Corporate organsiations while establishing and maintaining communications with members.
From this process of BAM co-operative compared to other two service groups, it is clear that each (pre)co-operative has unique aspects and faces different start-up challenges even if there are common areas critical to the future success. The main reasons that new co-operative businesses fail are insufficient financing and lack of business expertise.
Starting an co-operative can be a challenging and yet, rewarding activity. It requires research, careful planning, patience, and uncounted hours of time. The co-operative may not turn out exactly it was originally conceptualized. Some will inevitably take longer than you wish it would to get started.
Written by: Enkhtuya Boldbaatar, Dairy Specialist, EMIRGE Mongolia
As a dairy sector specialist, I see that current chaotic competition for fresh milk at the sourcing stage is not helping anyone, including milk producers and dairy processors. Therefore I want to discuss this issue with you. I have been working as the EMIRGE program dairy specialist for 5 years now. Our program works with rural dairy cooperatives and groups as well as relevant organizations in the sector to build mutually beneficial relationships between dairy value chain actors. We are working towards improving opportunity for dairy cooperatives and farmers, to produce and supply the market with quality milk at favorable prices.
Experts and researchers point out that milk production in the dairy producing region of Mongolia is limited, it produces 45 million liter tons of milk annually. On the other hand, 5 large dairy processors in UB, with combined processing capacity of 450 tons per day, compete in this region to source milk, each of them following different competitive strategies. This competition has been increasing since 2014 and has intensified even further in 2017. The reason is declining milk production at the farm level.
Milk production in the main milk producing region declined by half in 2017 due to extremely dry summer and poor vegetation growth. Consequently, dairy processors pursuing high price strategy in their competition for scarce resources. Scarcity and fierce competition for milk resulted in the following: 1) price of fresh milk increased by 45%; 2) quality of milk declined; 3) dairy processors’ profit declined.
Furthermore, milk producers’ income did not increase and in fact it saw a decline. For example, a farmer used to make income of MNT20,000 per day in the summer of 2016 by producing 40 liters and selling at MNT500 per liter. Whereas, in 2017 the farmer is making MNT18,000 per day by being able to produce only 20 liters a day and selling at MNT900 per liter, making MNT2000 per day less than previous year.
Moreover, there seems to be a declining trend in fresh milk quality. For instance, in 2016 Suu JSC used to collect and test milk samples from its’ suppliers on a weekly basis, whereas, in 2017 the company is performing milk sample testing only once a month. APU JSC used to procure milk through its’ milk collection centers upon testing quality using lactoscans, rejecting low quality milk and performing somatic cell testing with milk samples at their processing plant.
Whereas in 2017, the company started to send its’ laboratory workers from milk cooling centers directly to dairy farm collection centers to procure milk. Additionally, the company is using 75% alcohol (previously 82% alcohol was used) to perform quick testing of milk quality. This shows that competition for fresh milk is forcing processors to apply lower quality standards in the procurement of milk and therefore creating conditions for a decline in milk quality.
Deterioration of milk quality, despite higher prices, is creating higher risk of quality decline in final dairy products; increased return of dairy products by sellers; lower sale; and consequently lower profits. These conditions have negative consequences such as increased use of milk powder by processors, reduced consumption of dairy products by consumers, and lower income generation by farmers.
The EMIRGE team believes that, during this age of increasingly frequent droughts and extremely harsh winters (dzud) due to global warming, Mongolian dairy sector participants need to work towards ensuring and increasing stable milk production. This can be achieved by jointly developing and implementing risk management programs, and starting irrigated pasture and hay farming, with the collaborative participation of local milk producers, processors and local government; as well as towards the introduction of good practices among milk producers to protect milk quality and development of quality based pricing system.
Currently approximately 80% transition to high school, and only 40% transition to universities. Last year, approximately 800,000 did KCPE, and those that sat for KCSE were approximately 500,000. This leaves about 150,000 primary graduates and about 300,000 secondary school graduates without a way of progressing their learning. This is the gap TVET must fill.
TVET training has not be correctly placed both in the minds of learners, tutors, parents, and even the public. Often, my teacher would tell us that if you fail the final exams, you will only be able to earn a place in the village polytechnic school - where tailoring, masonry, carpentry, welding and other skill-based courses were taught – solidifying the perception that artisans are a ‘last resort’ occupation. We must seriously and urgently counter these perceptions for the artisans and graduates of TVET to be able to earn a decent pay, and enhance policies that protect the remuneration of their craft.
Unlike other trades such as law, teaching, engineering, accounting, and medicine amongst others which are well organised into associations to foster the welfare of the members, artisans operate with no organized representation, a poor public image and little to no enforced national legislation for minimum labour standards or occupational safety regulations, the artisan and construction workers are vulnerable to exploitation. This has further been complicated by the fact there are many people who practice in this same space without any certificate. A way must be found to weed out the quacks from the industry. The genuine practitioners should be availed opportunity to get certification while on the job, and slowly progress to a situation where in order to practice, you must show certification. Furthermore, organized foreign artisans have been able to take advantage of this situation, win contracts and displace Kenyan workers. This is a losing situation for Kenya. Our artisans could literally be building our country and contributing to the Kenyan economy, but instead those jobs are going to foreign nationals who spend a small percentage of their wages inside the Kenyan economy. Knowing the numbers we are talking about, it should concern all policy makers to think of innovative ways to keep these TVET graduates in employment. This will significantly lower the unemployment pressure exerted by un-employed youths.
Some efforts to mobilize the artisans to achieve the above goals have been made, and we know there are many such efforts out there that could be consolidated to address this problem. Global Communities, an International Non-Governmental Organization, operating in over 20 countries in the world, is pioneering the concept of worker-owned cooperatives as one of the means to unite the artisans, and create a pool of talent which the public could run to for guaranteed quality service.
FundiTech, a pre-cooperative of artisans and craftsmen in Nairobi County, supported by the USAID/EMIRGE program, is endeavouring to change this status quo narrative. As an association of skilled artisans or “Fundis” they are coming together using the worker-owner cooperative business model, to build their own business of professionals that they know can change the face of fundis (artisans) in the country. FundiTech wants to become a “one stop shop” where clients can get any quality service in the building and construction industry, from project design to interior finishing.
As worker-owners, FundiTech members can set the terms of their own employment, ensure members know their rights and remove avenues for exploitation, while ensuring wages earned are commensurate to the skill provided. As a social enterprise the cooperative is envisioned to improve the standards of living of artisans and also providing soft skills on professionalism, customer service, workforce standards, and others that will improve the client interactions and the perception of the Kenyan Fundi. By providing ownership in the form of shares to the members (artisans) the worker-owner element incentivizes them to work to the best of their ability in order to enhance the reputation and profitability of FundiTech.
We hope the many efforts out there to this end could be shared and that a more robust TVET promotion and investment would be made to give the millions of our young people a chance in life, now and in the years to come.
Written by: Gandulam Chuluu, MEL Specialist, EMIRGE Mongolia
I became a member of EMIRGE Mongolia team quite recently, in March 2017. Straight away, I got immersed into the activities, which our team conducts for the program-supported co-operatives as well as dairy and vegetable sector stakeholders. My role in the project is as a Monitoring, Evaluation & Learning Specialist. In this role, I would like to share my knowledge of an activity that is facilitating how different co-operatives are learning and collaborating with each other. This activity is playing an important role not only within the EMIRGE co-operatives in Mongolia, but also in global co-operative development.
The activity is the “Co-operators’ World Club,” initiated by the EMIRGE Mongolia team in August 2016. At the time, there were no any other similar set-ups in Mongolia, and there was a need for such a club in order to provide continuous flow of information and knowledge, and thus, to support the smooth development of the EMIRGE-supported co-operatives. The Club provides a lasting opportunity for the co-operatives to share their experiences, exchange ideas and best practices. On the other hand, through the Club, the EMIRGE team is organizing discussions on the co-operatives’ challenges, on improving the governance and leadership, increasing the efficiency of cooperative businesses, and other capacity building activities.
The Club members meet on the monthly basis in Ulaanbaatar in a venue provided by EMIRGE. Any member of the EMIRGE co-operatives can attend it, but from the experience so far, mostly the co-operative leaders or the most active co-operative members regularly join the Club meetings. Sometimes, members of a certain co-operative takes turns, so that the coverage is even and they can substitute the members busy at the co-operative’s site.
Each monthly meeting is being held under a specific agenda related to the co-operative development, which is covered by using interactive facilitation tools, such as active knowledge exchange, case presentations and group discussions. Many crucial co-operative development subjects, such as expanding membership, motivating existing members, conducting efficient all members’ and Board of Directors’ meetings, financial regulations and reporting, creating transparency and resolving internal disputes have been discussed at the Club. In addition, each Club meeting has a sub-topic discussed, which is not necessarily directly linked to the cooperative development, but, nevertheless, the Club members are interested in. As an example, as a person with the public health background, I had an opportunity to present about the nutrition basics and organize a small interactive trivia game on it, which the Club members clearly enjoyed.
I believe that the Club is a valuable platform that is presented as an informal and friendly environment where the members can freely exchange not only their knowledge and experience, but also are giving each other much needed advice. In many occasions, the Club members discussed together the challenges faced by a certain co-operative and would come jointly to a good solution. I observed that the Club members also are attracted by the welcoming atmosphere. What is more, the Club helps to create a really effective network among all the program co-operatives, and they continue to interact outside the meeting room to visit each others’ sites to exchange and sell products.
The Club is a successful activity and the members have further plans to develop the Club. For example, they created their own logo and EMIRGE is supporting the Club in its branding and promotion among local communities and outside co-operatives. Also, Club members are considering establishing the Co-op World Club’s branches at local sites.
Written by: Mark Matabi, Co-operatives Specialist / Country Lead, EMIRGE Kenya
The 2017 general elections have had twists. After the nullification of the August 8th 2017 presidential elections, repeat presidential elections will be held on 17th October 2017. The Supreme Court annulled the presidential poll results on the basis of ‘illegalities’ and ‘irregularities’. Before, during, and after the elections, Kenya is characterized by cases of political tensions and chaos in parts of the country. A key lesson from these occurrences, is the unpassed test of the spirit of democracy, social justice and peace building. The immensity of ‘steam’ thereof, seriously threatens to ‘choke’ the nationhood and socio-economic activities. This connotes a citizenry whose aspirations are dampened by the current nation’s value systems.
One thing that seriously needs redress in Kenya, to end periodic electoral malpractices and political tensions and violence, are community structures to nurture democratic and societal values that re-define citizens’ principles. Just as the ‘Nyumba Kumi’ initiative has helped to curb community-level insecurity, co-operative societies are such community structures – to promote authentic democracy, social justice and peace.
How? It is in the annals of Kenya’s history how the co-operative and labor movements played a critical role in the country’s independence. The independence brought tears of joy and not anguish. Peace, Love, Unity and ‘Harambee’ (self-help) became the country’s slogan. Subsequently, the country’s history has shown that the slightest interference with co-operative and labor movements deteriorates the slogan and the spirit thereof. The results have been growing tribalism (and even nepotism and clannism), corruption, intolerance, tension, violence, and many more social ills; not only at the national, but also at the regional and community levels.
Co-operative structures, principles, and values can remedy these ills. How?
Firstly, co-operatives are democratic business organizations equally owned and controlled by a group of community members by common-bond admission – all are co-operators, period. Membership is none discriminatory – no tribe or region is greater than the other. One member one vote – and no dead voter or voting by proxy during the election of leaders or policy. Because co-operatives are democratically owned by community members, co-operatives keep much of their money and jobs in their communities. Much of co-operative’s money is not stuffed in foreign banks; jobs are created for people living in the co-operative community – youth, women and people living with disability.
Secondly, co-operatives offer achievable and practical solutions, to many economic, environmental and social problems that can be implemented right now. ‘Manifestos’ shouldn’t just impress the electorates, but should also be achievable and practical, based on the strategic plan or vision of the co-operative, and economic factors.
Thirdly, co-operatives are an empowerment means for self-help and solidarity of members. Co-operative leadership builds infrastructure, such as the industrial parks. They promote community empowerment rather than giving hand-outs among its populace, to attract votes. Everyone has a gift and should therefore engage in co-operative community and business building. This should be the path of Kenya’s politics.
Fourth, co-operative members equally share the burden in hard times and equally share benefits in good times. The co-operative’s populace is not ‘forced’ to share grief in hard times – to pray or even sympathize with ‘our leader’. Co-operatives emphasizes the need to genuinely embrace the shared leadership and ‘citizenry’.
Fifth, co-operatives strive to make members’ lives, communities and economies more just, equitable and democratic. The leaders are transparent about what they borrowed or generated and how they used it for the co-operative’s sake, they do not lie or engage in cheap public relations, and they do not disfranchise members nor offer skewed development on perceived voting patterns. It cannot happen, because members are well educated and informed on their rights and responsibilities as shareholders.
Sixth, co-operatives are more resilient in economic downturns and in impoverished communities. Being viable and just alternatives for meeting social and economic needs, co-operatives do not shut down, or lay off, or fail to pay workers. Instead co-operative members pull together to work out solutions – without castigating fears or intimidating others. Furthermore, leaders do not ‘loot’ the co-operative through shady ‘solution’ deals such as importation of raw materials, and privatization of co-operative businesses, without following the by-laws.
Finally, co-operatives are an international movement. There are thousands of co-operatives around the world making significant impact locally and globally. Co-operatives are implementing sustainable development goals, and undertaking actions that positively impact neighbors, and the whole globe.
A true co-operator is made to use the ‘head’ and not the ‘belly’ to think, talk and act. Social and political injustices and tensions thereof are fueled by the ‘belly’ values. Community structures like co-operatives instills ‘head’ values of, ‘I am because WE are, and since WE are, therefore I am’, as postulated by Kenya’s own Theologian, John Mbiti.
If this rings a bell on ways and means of promoting democracy and/or ending tribalism, corruption, tensions and violence in Kenya, then the roots of co-operatives in the country must be retraced and embraced. Promotion and strengthening of the co-operative societies in the country need serious re-examination and consideration under the new government(s). The USAID/EMIRGE program in Kenya is such a co-operative development initiative, empowering youth, women and people living with disabilities in Kenya’s rural and informal settlements, to address community love, peace, unity and prosperity. Let us create an environment for co-operative development and promote co-operatives for nurturing democracy, social justice and peace building in the countries and communities!
Written by: Mark Matabi, Co-operatives Specialist / Country Lead, EMIRGE Kenya
The Greek philosopher, Heraclitus, in wisdom is remembered by his startling quotes about change – ‘change is the only constant thing in life’; and “no man ever steps in the same river twice, for it is not the same river and he is not the same man”, because be it the man or the river, they are constantly changing.
In the today’s rapidly changing world, exhibited by emerging socio-economic challenges, the role of a development change agent cannot be underestimated. Global Communities, through the USAID funded Enabling Market Integration through Rural Group Empowerment (EMIRGE) Program in Kenya, is playing the role of a change agent in the co-operative movement. It is on the verge of re-writing the history of co-operative movement in the country.
The co-operative movement in Kenya has a long history from the colonial to post-colonial to post multi-party democracy era, to today’s new constitutional dispensation. From the production to housing and financial focus, these activity sectors have, doubtlessly, over the years put the country on the global co-operatives map – being number one in Africa and number seven in the world. But today, the emerging youth and employment trend challenges, are definitely about to define the status of the country’s co-operative movement. This is because, the previous sectors of focus in Kenya, are either stagnating or slowly collapsing or metamorphosing to other business models. Such cases include, the delay in return on investment for housing co-operatives, increasing loan defaults in savings and credit co-operatives or transformation to microfinance institutions, and lowly performing agricultural sector for agricultural producer co-operatives.
What next? It is being appreciated that as Kenya moves to the league of ‘middle income’ countries, based on Country’s Vision 2030 blueprint, the economic sector is slowly and firmly settling on the bedrock of growing service industries – for employment creation and income generation. But such service industries, with greater composition of workers, are still characterized by the concentration of wealth in hands of few (who are not accountable to the communities), low job qualities, and wide wage disparities.
By their nature, principles and values, the co-operatives can address these gaps in service industries. How? In a Kenya under new constitutional dispensation, the co-operative movement is now a devolved function of the county level of government. This is the gap that Global Communities’ EMIRGE Program is filling. First, by spearheading the development of County Model Legal, Regulatory and Policy Framework; and lobbying for the adoption of the same by the respective County Governments. Secondly, by conducting research on the structural, relational and cognitive dimensions of co-operatives as significant social capital organizations in the country. Thirdly, by piloting workers co-operatives in building and construction, beauty and wellness, and corporate branding and marketing service industries. To greater extend, these industries are dominated by women and youth, from the informal settlements of urban areas, starting with Nairobi, the Capital City.
The worker co-operatives’ momentum is on, in Kenya. The push by Global Communities’ EMIRGE Program is in the right direction, to make the greatest difference, to bring about the inevitable co-operatives change, and to re-write the history of co-operatives movement in the country.
Global Communities Country Director, Kimberly Tilock, presenting draft Model County Co-operative Law to Chair Council of Governors, Hon. Peter Munya, September 5,2016
Written by: Mark Matabi, Co-operatives Specialist / Country Lead, EMIRGE Kenya
USAID funded Enabling Market Integration through Rural Groups Empowerment (EMIRGE) program in Kenya, has highlighted key lessons on co-operatives development. With the objective of market linkages to ensure co-operatives’ engagements, capitalization, and sustainability; the facilitation of the horizontal or vertical linkages is stifled by co-operatives management practices. This is a clear indication that Kenya’s co-operatives movement is in crisis of co-operative management due to inadequate knowledge sharing and weak regulatory framework.
The democratic participation and engagement of the respective members in their co-operative economic activities is still minimal, besides the nominal share contributions. Co-operative members have limited knowledge of their rights, roles and responsibilities. This leaves the management leaders to make unchecked decisions, and undertake only self-aggrandizement activities. With Kenya’s corruption index surging high, at 154 out of 178 globally, co-operatives are not an exception to the expression of this menace that is eroding the co-operative principles and value. If you check the co-operatives’ financial statuses, the book values are not the real values. Additionally, the issues of unprogressive founder syndrome and negative tribalism, clannism and nepotism compromises co-operatives’ management. Some leaders ‘turning’ co-operatives into private or family businesses. This has been exhibited by chaos during some co-operatives’ annual general meetings.
Furthermore, co-operative leaders have inadequate life skills, hence stifling the member engagements in co-operative activities. The results are mistrust among (old and new) co-operative members and leaders; and the negative perception of co-operative business models among potential members. In such case, youth and women still shy away from embracing the co-operative business model. Eventually, co-operatives seem to be facing capitalization challenges for meaningful and sustainable co-operative businesses. This in turn makes the co-operatives unable to have a competitive edge or comparative advantage over other forms of businesses among the smallholder, informal producers, and service providers in the current competitive and capitalistic environment. To survive, Kenya’s co-operatives are quickly becoming ‘company’ and ‘partnership’ model businesses, faster than anyone could imagine.
Exacerbating this crisis further, are the co-operative officers’ structure and inadequacies. The co-operative staff turnover is increasing, as many officers retire. At a point, the growth of the movement was not commensurate with government co-operative staffing. Today, the county governments are to manage county co-operative officers, who are now being appointed from respective counties and sub-counties, many of whom are inexperienced. In promotion of the co-operatives this could be good. However, in the regulation of co-operatives there are likely to be cases compromise, partialities and indecisiveness among the officers in handling co-operative leadership and management issues. Hence, compromising the internal co-operative leadership and management. In short, the co-operators, promoters and regulators have been unable to manage the exponential growth of the Kenya’s co-operative movement.
Therefore, there is need for a concerted effort to build the capacity of co-operative members and leaders on good management practices and corporate governance. This will position co-operatives as a critical business model for a collaborative economy. Models of internal co-operative by-laws, service charters and operational policies for human resource and financial management should be developed and reviewed on a regular basis by co-operative movement stakeholders. Every co-operative should be supported in developing, reviewing and operationalizing periodic strategic business plans. Additionally, in the wake of the technological advancement era, co-operatives should be supported in developing and operationalizing secured technology for enhanced integrated management and financial systems. Just as we need the law for co-operatives development, we need technology for active member participation. Integrated online operations by co-operatives will not only improve trust between members and their leaders, it will also encourage economic participation.
In relation to co-operative officers, there should be a rotating inter-county governments’ co-operative staffing system, to regularly rotate the officers with supervisory mandate of co-operatives. Furthermore, the co-operative should enlist credible co-operative private consultants and auditors to work with co-operatives in the respective counties, as service providers. Such service providers should work closely with development organizations that promote the co-operative business model in target communities.
The co-operative principles and values should be intensely re-inculcated into Kenya’s co-operative movement, to abate the co-operative mismanagement.
Written by: Mark Matabi, Co-operatives Specialist / Country Lead, EMIRGE Kenya
A product and its’ features reflect the maker’s spirit, to make it function in different locations. Japanese cars manufactured for Europe may not have the exact features as those made for the African market, even with the same intent of functionality. This is the same with co-operatives.
My journey into the co-operative movement, as a promoter and advocate, has been characterised by the passion and purpose of learning and information sharing. While growing in the co-operative profession, one of the issues I have been consistently fascinated by, is what really forms a co-operative business model, and how various types of co-operatives form in different societies. The question I always endeavour to answer is, “What is the co-operative image and identity in different geographical areas?” Initially, my thinking was like those of medieval cosmologists who held that the earth was flat. I remember some years back, on my very first international assignment as a co-operatives development advisor to one of the Southern Africa countries, I carried a box full of co-operative materials from Kenya, ‘as reference to teach them about real co-operatives’. Surprisingly, I never used it, but was able to support the development and strengthening of organisational and business structures and systems for 187 agriculture and marketing co-operatives in less than three years. I later learned what my unconscious secret was, effectively outlined in Ernesto Sirolli's TED talk, “Want to help someone? Shut up and listen!” (https://www.youtube.com/watch?v=chXsLtHqfdM)
This is key to being a co-operative specialist! Simply put, promoters of co-operatives should endeavour to internalise the environment in which they are promoting the co-operative business model, for rural socio-economic empowerment and development.