“It is the powerful farmers who really enjoy the group”: Inequality and Change in Uganda’s Coffee Cooperatives

This is part of a series of think pieces by scholars and practitioners working on a broad range of issues within the field of Social and Solidarity Economy. The series is being published in conjunction with the UNRISD conference “Potential and Limits of Social and Solidarity Economy”. The conference took place on 6-8 May 2013 in collaboration with the International Labour Organization and the UN Non-Governmental Liaison Service.

Despite the recovery of agricultural cooperatives in sub-Saharan-Africa since the 2000s, knowledge about their social and economic effects in liberalized agricultural markets remains inadequate. Evidence from Uganda’s coffee sector indicates that today’s cooperatives create net benefits for small producers by contributing to an improved capacity of disadvantaged groups to defend their interests. However, high risks and inadequate financial services in weakly regulated agricultural markets create barriers to economic organization for small producers, and some become too poor to organize. Furthermore, intraorganizational inequalities limit access to cooperative benefits for some members. New evidence from Uganda (Wedig, forthcoming) indicates close linkages between existing inequalities and the lack of a larger institutional framework which would allow disadvantaged members to defend their interests vis-à-vis stronger economic actors at the local level. Thus, community-based organizations seem to be particularly vulnerable to alliances between better-off producers and primary-level cooperative managers, which contribute to the reproduction of elite bargains.

Karin Wedig is a development economist who specializes in the sub-fields of labour markets and vocational education and training. She currently consults for the Indonesian Ministry of Economic Affairs and teaches at Magdeburg University in Germany.

Introduction

In East Africa, the liberalization of the coffee sector in the early 1990s led to intense competition from foreign buyers and a radical cut-back of public sector support. As a result, many of the formerly monopolistic cooperatives, which were largely characterized by weak economic performance, had to drastically reduce or cease production. However, cooperatives remained present in African agriculture. During the 2000s, new organizations were founded and some of the old cooperatives resumed production, both within the East African coffee sector and in other agricultural sub-sectors throughout the continent (see for example Pollet 2009, Develtere et al. 2008, and for Uganda, Kyazze 2010).

Overall, the agricultural cooperatives that operate in Africa today seem to create net benefits for small producers by contributing to increased productivity, improved access to markets, and a greater capacity of disadvantaged groups to defend their interests. Thus, cooperatives deliver relevant rural training and provide much-needed marketing services to small producers who operate in highly competitive markets. Women, who continue to be underrepresented in cooperatives operating in export agriculture, have started to establish women’s primary cooperatives to gain access to the marketing of export crops. However, the effects of cooperatives on the patterns of distribution among heterogeneous rural communities remain uneven, and inequalities in access to resources persist among members (see for example, Majurin, 2012).

In order to promote greater equality in the distribution of cooperative benefits, but also to increase access, the development of functional support institutions to protect the rights of disadvantaged groups and members is essential. Historical institutional analysis has shown that economic development works best in open-access societies with developed institutions which are largely independent of patronage networks and can protect the rights of large sections of the population (North, Wallis, and Weingast, 2009). However, features of open-access societies may exist in combination with patronage networks that contribute to the reproduction of inequalities.

This is relevant to cooperatives, which are often seen as a particularly suitable organizational and institutional approach to inclusive economic development. One reason is their potential ability to establish organizational structures and institutional arrangements which allow disadvantaged groups to defend their interests. Another reason relates to the combination of business and social concerns in cooperatives, which often allows an appropriate response to existing socioeconomic structures at the community level. However, a recent study of cooperatives in Uganda’s coffee sector (Wedig, forthcoming) shows that the close interlinkages between local power structures and the organization of economic activities may also encourage the reproduction of ‘durable inequalities’ (Tilly, 1998) that are based on divisions of gender, class, religion, or ethnicity.

Organizational diversity in agricultural cooperatives

The new cooperative landscape in sub-Saharan Africa is diverse and includes large, country-wide organizations, medium-sized enterprises with all members in a single region, and small, community-based organizations (CBO). The study of Uganda’s coffee sector (Wedig, forthcoming) has examined three organizations, which are representative of these organizational types: the CBO United Organic Coffee Growers (UOCG), the medium-sized Gumutindo Cooperative Enterprise (hereafter referred to as Gumutindo) and the country-wide National Union of Coffee Agro-Businesses and Farm Enterprises (NUCAFE).

Coffee farmer and cooperative leader in Sironko district, Mt. Elgon, Uganda (Photo: Karin Wedig).

NUCAFE, founded in 1995, is now the largest cooperative union in Uganda’s coffee sector, with registered members in nineteen districts from all major coffee growing areas of the country. NUCAFE has a national board that is granted authority by the Members’ General Assembly, a national secretariat and regional offices with fieldworkers who attend to primary cooperatives. NUCAFE’s system of operation is designed to help small producers in the coffee sector to adopt a business view of farming and to organize them to take on as many roles in the supply chain as possible. Activities include the provision of advisory and training services, the construction and maintenance of storage facilities, and investments in infrastructure projects to improve the conditions for production and marketing, such as the construction of feeder roads.

Gumutindo, which means ‘excellent quality’ in the local Lugisu language, is a cooperative specialized in fair-trade and organic coffee. It was founded in 1998 as a joint initiative of eastern Uganda’s formerly monopolistic coffee cooperative and Twin Trading UK, but became independent in 2003. Gumutindo has grown rapidly in recent years, with ten active societies in 2012, comprising more than 9,000 members who are organized in primary societies with approximately 25 members each. Similar to NUCAFE and other cooperatives, fieldworkers provide training and advisory services to primary cooperatives, and the organization invests in local infrastructure projects, most notably to improve transport facilities.

UOCG is a small, community-based organization with an estimated 100 members located in six neighbouring villages. It was founded in 2007 by a group of coffee growers who, because of their land ownership and access to non-land resources, are members of the local elites. The structure of UOCG is similar to that of larger cooperatives, with primary societies of approximately 25 members, primary cooperative leaders, secondary-level fieldworkers, and top-level management. However, in contrast to larger organizations, the positions of managers and fieldworkers are not strictly separated. Instead, fieldworkers are simultaneously part of the management. Furthermore, no regular votes are held to ensure a turnover of power at the management level, and the founders have remained within the management of the cooperative since its foundation.

Economic organization in a neoliberal environment

The cooperatives in Uganda’s coffee sector today face new challenges. Agricultural export markets are characterized by information asymmetries in favour of large buyers. While the poor quality of the rural infrastructure poses challenges for all economic actors, it makes operations particularly difficult for small producers’ organizations with limited capital investments. High poverty rates among small producers and a complete lack of social security aggravate the situation. Thus, the minor investments required from small producers to enter bulk-selling agreements present serious entry barriers to cooperative development at the local level.

Since the closure of Uganda’s Cooperative Bank in 1999, cooperatives have had to drastically reduce pre-payments. At the same time, access to rural financial services remains limited, although the Uganda Cooperative Alliance is slowly building up a network of saving circles, with modest support from the government. As a result, members without additional sources of income have to bridge the time between harvest and the receipt of cooperative payments by taking loans from commercial banks. Joining a cooperative therefore represents a serious financial challenge for many small producers, both because of their difficulty in accessing credit, and because of the risks associated with taking out a loan.

Against this background, cooperatives are experiencing heightened pressure to deliver visible benefits to their members in order to maintain a large member base. They compete against immediate payments offered by large buyers and local middlemen to producers who struggle to cope with payment delays. Small producers weigh the risks associated with a commitment to bulk-selling against the potential benefits, and households without sufficient additional income sources outside farming emphasize that sales to international buyers or middlemen are important fall-back options when they are unable to wait for the deferred, albeit higher, cooperative payments.

Representation of members’ interests

Cooperatives have responded in different ways to the new challenges posed by a competitive economic environment and reduced government support. Thus, within NUCAFE there is an apparent gap—well-known in large cooperatives in other African countries—between the terminology of empowerment and participation employed by the management and the nature of exchange relations at the local level. Although organizational goals emphasize the goal of helping small producers move up the value chain, activities at the primary cooperative level indicate that only limited efforts are made to transfer relevant political and economic knowledge in addition to agricultural skills.

However, the organization—similar to other large cooperatives in Uganda—has created formal organizational structures that connect members with the secondary and national administrative levels, thereby providing institutionalized control mechanisms to protect the representation of members’ interests. If the need arises for members to bypass primary cooperative leaders and local elites, who may act as gatekeepers of communication outside the community, they can address the cooperative management directly, either through fieldworkers who visit individual farms on a regular basis, or by visiting the nearest regional field office.

Overall, the organization has made visible efforts to minimize opportunities for strategic alliances between local elites and primary cooperative managers. The implementation of relevant mechanisms, however, depends on frequently overstretched organizational capacities. Thus, the union has grown faster than its operational capacities and there are insufficient numbers of fieldworkers to serve the primary level. This may constrain the ability to supervise the regular holding of votes for primary management positions. Furthermore, some fieldworkers are local to the area in which they attend to primary cooperatives, and due to their relatively high social status, they are likely to sustain close relations with members of the local elites, including primary cooperative leaders. This can impair the representation of members’ interests by reinforcing the social and cultural barriers to expressing criticism of cooperative leaders to fieldworkers.

In the case of Gumutindo, a closing of ranks between primary cooperative leaders and local elites might also occur, but it is less likely because the organization has a relatively well-developed secondary-level administrative structure. Furthermore, Gumutindo provides training and advisory services that extend well beyond agricultural skills to transfer basic knowledge of relevant political and economic issues. Like NUCAFE, Gumutindo explicitly addresses class- and gender-based inequalities within agricultural production and marketing as part of training programmes and encourages progressive changes in the division of labour at the household, farm and primary cooperative levels.

The small, community-based organization UOCG presents a rather different picture. Here, the interlinkages between the management and members of the local elites are strong and partially institutionalized. The cooperative management is therefore exclusively composed of better-off producers, which creates various opportunities for the reproduction of existing inequalities within heterogeneous rural communities. Against this background, it is not surprising that in comparison with Gumutindo and NUCAFE, members of UOCG unanimously report lower levels of satisfaction with the social and economic effects associated with their cooperative membership.

The need for supportive institutional frameworks

The study of coffee cooperatives in Uganda (Wedig, forthcoming) indicates that the highly competitive economic environment in which cooperatives operate contributes to the development of more democratic structures in some organizations. Cooperatives experience increasing pressure to effectively represent members’ interests, because dissatisfied small producers are likely to exit bulk-selling agreements. In addition, high risks for small producers in weakly regulated agricultural markets are aggravated by widespread poverty, inadequate financial services and a complete lack of social protection.

The ensuing risk adversity of small producers creates constraints on their ability to organize, because many are unable to afford medium-term economic planning. As a result, existing inequalities intensify and some producers see themselves as too poor to organize. Despite these adverse conditions, small producers continue to organize in large numbers. In order to support the development of cooperatives that effectively represent all members’ interests, supportive institutions are needed that are able to protect the interests of disadvantaged groups in heterogeneous rural communities. This demands a critical understanding of the role of institutions, including those internal to economic organizations of the social or solidarity economy type, in shaping distributional patterns at local and national levels.


REFERENCES
Develtere, P., I. Pollet, et al. 2008. Cooperating out of Poverty: the Renaissance of the African Cooperative Movement. ILO and The World Bank Institute, Geneva.

Kyazze, L. M. 2010. Cooperatives: The sleeping economic and social giants in Uganda. CoopAFRICA Working Paper No. 15. Series on the status of cooperative development in Africa. International Labour Office, Dar es Salaam.

Majurin, E. 2012. 
How women fare in East African cooperatives: the case of Kenya, Tanzania and Uganda. International Labour Office, Dar es Salaam.

North, D. C., John J. Wallis and Barry R. Weingast. 2009. Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. Cambridge University Press, New York.

Pollet, I. 2009. Cooperatives in Africa: The age of reconstruction - synthesis of a survey in nine African countries. CoopAFRICA Working Paper No. 7. Series on the status of cooperative development in Africa. International Labour Office, Dar es Salaam.

Tilly, C. 1998. Durable inequality. University of California Press, Berkeley and Los Angeles.

Wedig, K. Forthcoming in 2014. Institutions, Inequality, and Change: Agricultural Cooperatives and the Growth of Rural Labour Markets in Africa.