sustainable cooperative development in africa

PKF Consulting

SUSTAINABLE COOPERATIVE DEVELOPMENT IN AFRICA

By: Patrick Kuria

www.pkfea.com Global Expertise, Local Knowledge

Role of Cooperatives in Africa

Cooperatives play an important role in economic development of many countries across the continent.

In Kenya, cooperatives are controlling about 43% of GDP and 31% of national savings and deposits. They have 70% of the coffee market, 76% dairy, 90% pyrethrum, and 95% of cotton.

In Benin, FECECAM (Faitiere des caisses deparge et de credit agricole mutuel), a savings and credit cooperative federation, provided USD 16 million in rural loans in 2002.

In Côte d'Ivoire cooperatives invested USD 26 million for setting up schools, building rural roads and establishing maternal clinics.

In Kenya, over 300,000 people are directly employed by co-operatives

Globally, cooperatives provide over 100 million jobs around the world, 20% more than multinational enterprises.


Cooperatives in Africa vs Cooperatives in Western World

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Challenges facing coop movement in Africa

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Government interventions through supporting legislation that foster growth of cooperative movement across the continent

Consolidation of small cooperatives and formation of federations

Continuous education and capacity building of officials and members

Addressing the challenges


Value additions

Adoption of farmers producer company business model

Adoption of professional management services

Embracing modern technology



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Challenge Solution

Seasonal productivity Embracing modern technology

Low productivity Embracing modern technology

Access for financial servicesSetting up of farmers friendly financial institutions

High cost of production Embracing modern technology

Embracing professional management and business automation

Restrictive laws and regulations Farmers producer Company Persistent misconceptions on the cooperative business model


Case study - PKF Kenya

We provide professional management services to coops which include:

Business registrations and business systems development

Improvement in governance

Professionalism in recruitment of staff and formulation of reward system


Establishment of strong internal control and internal check system

Establishing value chain partnership that ensure a win-win situations for all participants

Management training and capacity building

Case study - PKF Kenya


Support in formulation of growth strategies and an establishment of an elaborate evaluation criteria to monitor achievement

Support in development of strong Business Plan, Business Case and Strategic Plans

Improving operational efficiency though implementation of cost cutting measure and business automations

Case study - PKF Kenya cont’

Objective Lever

Maximize payout to farmers

Increase milk price per kg

Increase payout ratio / reduce operating costs

Increase productivity per farm

x

x

Impact Feasibility

$

PKF case study - Increasing pay - out to farmers


Low

Moderate

High

Very high

Very low


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Increase payout ratio / reduce operating costs

Reduce collection costs

Reduce staff costs

Reduce input & material costs

Increase number of farmers

Lever Impact FeasibilityAction needed

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Low

Moderate

High

Very high

Very low

Farmer Producer company (FPC) concept - A case study of India

In 2002 India passed legislation that allowed farmers to form Farmers Producer Company in place of the cooperatives.

It takes care of the flaws in the cooperative societies but keeps its strengths, borrows its strength from corporate companies

According to this law only farmer producers can be members of the FPC and the farmer members themselves manages this company

These FPCs are promoted by the farmers, run by the farmers and for the benefits of the farmers. The surplus is shared among the farmers only.

They are financially facilitated by the Government or donor agencies and managed by professionals


Why FPCs were established

To encourage groups of small-scale primary producers to connect with corporate buyers

To establish basic business principles within farming communities, to bring industry and agriculture closer and to boost rural development

To combine efficiency of a company with the spirit of traditional cooperatives

To integrate small-holder farmers into modern supply network-minimizing transaction and coordination costs while benefiting from economies of scale


Disclaimer


The items contained in this document have been prepared as a general guide. They are not substitute for professional advice, which would necessarily have to take account of the particular circumstances. The information and opinions given are liable to change without notice. Neither PKF nor its partners or employees make any representation regarding the completeness or accuracy thereof nor do they accept responsibility for any loss or damage incurred as a result of any user acting or refraining from acting upon anything contained in this document or upon its omission therefrom.PKF firms in Eastern Africa are member firms of PKF International Association Limited Network of legally independent firms and does not accept any responsibility or liability for actions or inactions on the part of any other individual member firm or firms. PKF Eastern Africa Firms in Africa operate in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan, Somalia and Zambia and associated office in the UK.PKF operates a code of conduct to ensure that all types of data are managed in a way which complies with regulatory authorities. If you wish to be informed about the services we offer and forthcoming events, please contact your local office.

sustainable cooperative development in africa

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