Cooperation started from the creation of human beings. People assured their survival by bringing pieces together to accumulate capitals that can solve their socio-economic issues.
This review was carried out to identify the trends of cooperative development of Ethiopia and its challenges. In doing so, the review tries to show the status of cooperatives in the Ethiopia, the gaps existing within the founders (members) and the government structures whose concern is on the sector, and ultimately briefs about the challenges encountering the sector as a result of the mentioned shortcomings and ultimately indicates the direction to escape cooperatives out of the challenges.
Table of contents
Abstract
1. Introduction
2. Methods
3. Emergence and Historical Development of Cooperatives
3.1 Emergence of Cooperatives at Global Level
3.2 Historical Development of Modern Cooperatives in Ethiopia
4. Tendencies and Status of Modern Cooperatives in Ethiopia
4.1 Analyzing the Trends and Status of Cooperatives by Geographical Distribution
4.2 Analysis in terms of the Trend and Status of Secondary Cooperatives (Cooperative Unions)
5. Challenges of Cooperatives
6. Conclusion and Recommendations
6.1 Conclusion
6.2 Recommendations
7. References
Cooperative Development Trends and Its Challenges in Ethiopia
Desalegn Fekadu Etefa
Ambo University: College of Business and Economics, Department of Cooperative,
Abstract
Cooperative is a useful instrument to alleviate the socio-economic problems of the people in many developing countries including Ethiopia. Cooperation among people has existed since time immemorial. However, formal cooperatives began in Ethiopia in 1960. The objective of this review article is to identify the overall cooperative development trends and the challenges encountering the sector. Intensive conceptual and empirical literature reviews were made in the areas of cooperative development, cooperative policy and regulatory framework documents, and cooperatives periodic activity reports from the Federal Cooperative Agency. The study indicated that the number of primary cooperatives has increased from 7,366 in 1991 to 82,089 at the beginning of 2019 showing 1,014% rate of growth. The number of members increased from 4.5million to 18 million during the same period demonstrating growth rate of 297%. Likewise, their capital was increased from half billion to 20.5 billion birr during the stated periods. The finding identified challenges of cooperative such as low participation and lack of awareness, low involvement of the stakeholders, lack of professionalism, weak linkage, inadequate support and lack of good governance. It necessitates provision of cooperatives education and training to promote members’ participation, involving stakeholders, attracting professionals, creating strong linkages, solving capital related problems, promoting cooperatives’ good governance and providing enabling legislation and regulation for the development of the cooperatives
Keywords: Challenges, Cooperatives, Cooperative Policy, Participation, Role of C ooperatives
1. Introduction
In the contemporary period, poverty is abolishing the lives of billions of the people around the world. As a result, many people sense incapable to change their lives. In this hardship situation, cooperatives emanated to be a strong, active, and feasible economic opportunity to alleviate poverty. The concept of human cooperation is not new; it existed even before the formation of modern cooperation. To overcome their immediate problems and to share their feelings, human beings traditionally work together in day to day life. As it is stated by Gary (1993), cooperative is an association of persons who have voluntarily joined together to achieve a common goal. They finance and operate the business for their mutual benefit. This implies they are created on the leading idea that by working together, a group of people can achieve an objective that would be unattainable if acting alone (Ruhul & Mahin, 2014; Desalegn, 2019).
Evidence from various sources reveals that cooperatives are contributing to the country’s economic and social development. For instance, report of International Cooperative Alliance (ICA) (2019) stated that about one billion people are involved in cooperatives, either as members or, as employees or both. The same source further indicated that nearly 280 million people get employment opportunities from cooperatives at global level. The livelihoods of almost half of the world‘s population are safeguarded by cooperative enterprises. This is particularly true in the rural areas where it provides an important potential for income generation and equity for the dwellers.
In order that cooperatives play their role, government’s aid is highly required. Government supports cooperatives in creating enabling environment. These include putting in place sound economic policy, technical, legal and administrative support to sector development, providing regulatory frameworks and transparent system; all of which together will create an environment conducive to sector development (United Nations Framework Convention on Climate Change (UNFCCC), 2014).
As modern business structure, cooperatives originated in Britain by Robert Owen in 1844 and it was introduced to Ethiopia by 1960 during imperial Hailesillasie regime. Successive governments, starting from the Imperial period to the Ethiopian People’s Revolutionary Democratic Front (EPRDF), gave due attention to the role of coops and made deliberate effort to promote the same. However, the principles and approaches followed were obviously different, reflecting the political thinking and ideology of the regimes.
As indicated in the work of Kifle (2015a), the present government provided Proclamation No. 147/1998 and 402/2004, which served as a legal framework. This declaration combined universally accepted principles of cooperatives. As a result of these; many cooperatives have been established in new forms in Ethiopia since 1998 following the initiatives taken by the government.
For cooperatives principles to be fully implemented; there should be efficient policies to guide it. However, the process of policymaking in the country lacks the fundamental elements of the activities. Furthermore, the policy making in Ethiopia is not following a systematic and consultative procedure rather it is top down approach while a genuine bottom-up policy process is possible and preferable making (Teshome, 2007, cited in Kemal et al., 2018). This shows it is against the guiding principles especially in case of cooperative sectors.
Consequently in line with these realities, this review was carried out to identify the trends of cooperative development of Ethiopia and its challenges. In doing so, the review tries to show the status of cooperatives in the Ethiopia, the gaps existing within the founders (members) and the government structures whose concern is on the sector, and ultimately briefs about the challenges encountering the sector as a result of the mentioned shortcomings and ultimately indicates the direction to escape cooperatives out of the challenges.
2. Methods
The methodological approach adopted in this review is “best evidence review” whose focus is targeted towards combining various systematic methods of study-selection and result exploration. The data were collected from various secondary sources such as, policy and regulatory framework documents, past study reports and cooperatives periodic activity reports, Federal Cooperative Proclamation No. 147/1998 and Cooperative Societies (Amendment) Proclamation No. 402/2004. The most prominent secondary data were obtained from the Federal Cooperative Agency of the country. Moreover, based on their relevance, over very recent 30 related published journal articles, some newspaper articles, magazine articles and books were referred and used as a background to analyze and synthesize the existing conditions regarding the title in the country. Depending on these, data were examined and interpretations were done to show the tendencies and status of cooperatives in Ethiopia. Basing the principles and values of cooperatives, the practical situation in the sector is examined and the problems encountering were identified. Eventually, the proposed interventions and strategies to be adopted are indicated.
3. Emergence and Historical Development of Cooperatives
3.1 Emergence of Cooperatives at Global Level
Cooperative has been the very basis of human civilization. The inter-dependent and the mutual help among human beings have been the basis of social life. It is the lesson of universal social history that man cannot live by himself and for himself alone. Since the beginning of human society, individuals have found advantage in working together and helping one another in all over the world. A cooperative operates for the benefit of its members. These member-owners share equally in the control of their cooperative. The members elect directors which, in turn, hire management to manage the day-to-day affairs of the cooperative in a way that serves the members' interests. It is based on the idea people working together for a common goal and common good (Dogarawa, 2005).
Many scholars argued that the origin of cooperative was in Europe (Holyoake, 1908; Shaffer, 1999). As modern business structure, it was started in Britain in 1844 by Rochdale Societies who were termed as the pioneers of modern cooperative movement (Evans, 2006). They had the goal of social development. They commenced it being twenty-eight community members. They have endeavored to pool their resources together and finally formed the first consumer cooperative (Gibson, 2005, cited in Dogarawa, 2005). The founders also established a unique combination of written policies that governed the affairs of the cooperative. Based on its success, the Rochdale set of policies soon became a model for other cooperative endeavors, and became known as the general principles that make a cooperative unique from other business structures.
Following the success of the Rochdale Society, other types of cooperatives as textile plant and shoe factory were emerged between 1850 and 1855 throughout England. As a result, more than 400 cooperative associations taking Rochdale Society as a role model emerged in 1863 in British. Subsequently, the English movement grew steadily, becoming the prototypical for similar movements globally. Some of the European countries in which cooperatives way of life disseminated were France, Germany, Belgium, Austria, Italy, Denmark, Finland, Norway, and Sweden (Abell, 2004).
As cooperatives became an alternative of business throughout Europe, the body that has to play leadership role was highly required. Therefore, to take this responsibility, ICA was established in 1895. ICA is a non-governmental organization who served as umbrella organization to promote friendly and economic relations between cooperative organizations of all types, at global level. This organization also has an intention to promote and strengthen autonomous cooperative organizations throughout the world. In order to achieve this objective, branches of offices are opened in different parts of the countries. Finally, to accommodate the newly emerged types of cooperatives, the Rochdale principles were found to be amended. Accordingly, ICA adopted the revised statement in 1995 in its third meeting in Sao Paulo and came up with seven principles and ten values. These cooperative principles are guidelines by which cooperatives put their values into practice until today. On the other hand, cooperative values are general norms that cooperators, cooperative leaders and cooperative staff should share and which should determine their way of thinking and acting.
3.2 Historical Development of Modern Cooperatives in Ethiopia
Modern cooperatives movement introduced to Ethiopia in 1960. Of the ruling body existed in the country, main emphasis in this article review is given to the three regimes that have contributed to the cooperatives’ development in Ethiopia, viz., Hailesillasie (1916-1974) Derge/military (1974-1991) and EPRDF regime (1991 onwards).
During the imperial Hailesillasie regime, cooperatives have got recognition by Decree No. 44 of 1960 (FCA, 2005 cited in Bezabih, 2009). This decree had its own limitations then another new Cooperative Society Proclamation No. 241/1966 was to come to operative with concern of previous Decree’s short comings. This enabled the cooperative society to realize their objectives. In its Five Year Development Plan, the Imperial regime envisioned an important role for coops in transforming smallholding agriculture. Thus, the Farmer Workers Cooperative Decree No. 44 was provided the first legal framework, which was later replaced by the Cooperative Societies Proclamation No. 241/1966. This was relatively comprehensive and contained most of the essential contents of the legal framework. However, success was limited during the period due to several limitations with it (Mojo et al., 2015). It was also failed to be in line with the international cooperative principles and they were exclusive to farmers with larger farm sizes (Abate et al., 2014). Hence, they failed to survive in the succeeding regime.
In the reign of military regime, proclamation 1975 was ratified. This proclamation set condition for the nationalization of rural land and extra houses in urban areas on its article 10. Simultaneously, this decree provided for the creation of marketing and credit cooperatives by peasant association. After the overthrow of Emperor, Cooperative Societies proclamation No. 138 issued in 1978. The intention of the military regime was to use coops as a key instrument to build a socialist economy. Thus, it pursued the cooperatives agenda more aggressively. The cooperatives were not autonomous organizations, but had purely political character. The approach followed combined force with extensive support including priority access to resources, goods and services. The number of coops and membership sizes were relatively large; but it was not viewed as a particular success for a number of reasons. Due to this reason, following the downfall of Derge regime, most of them disappeared rapidly. The number of primary cooperatives reached 10, 524 having 4,529,259 members started to decline following the decease of the Derge regime. The reason for their immediate disappearance is, by then, their property particularly cash was in the hands of the government structures. As a result, with the collapse of this structure, the properties of the coop societies were lost. Consequently, there was no distribution of assets between members. This created a lasting suspicion and distrust of cooperatives even until today. According to McCarthy (2001), it served as a vehicle to eliminate internal conflicts and also characterized by corruption and mismanagement.
Economic liberalization policies were first implemented in 1991 when the EPRDF, the new government came to power. These policies have been effective in releasing the economy from rigid state control, but also mean that Ethiopian people have become exposed to the hazards of both domestic and international free market competition (Kodama, 2007). That means; they were facing challenges emanating from globalization, where the issue of competition and market pressure emerges (Cemal, 2019). Such issues are still affecting cooperatives of developing countries in general and Ethiopia in particular.
The EPRDF government provided a new legal framework, which is entitled Proclamation No. 147/1998 and 402/2004 to promote cooperatives from 1991. The past experience, particularly the bad habit inherited in cooperatives during the Derg regime was highly hindering the development of cooperatives. In this regard, evidence shows that the numbers of primary cooperatives existing in Derge regime declined to 7,366 in 1991. Thus, EPRDF had taken some years to build new mind-set up and to change the attitude of the community towards cooperatives (Holmberg, 2011). In connection to this, some “cooperative activists” and organizers assisted the government to reconsider the cooperatives positively. As Holmberg stated, ILO also played crucial roles in the renaissance of the cooperatives in Ethiopia, by organizing study tours for cooperative activists and leaders to strengthen their empathetic and leadership skills through sharing the experiences of the neighboring countries. Due to this, the government’s opinion of cooperatives had rehabilitated and policymakers generally accepted the meanings and principles of cooperatives given by the ICA in 1995 (FCA, 2014). Consequently, these determinations led to the establishment of cooperative legislations that opened up a room for the flourishing of modern cooperatives in Ethiopia.
[...]