Planteamiento del problema

Most agricultural cooperatives on the African continent are formed by smallholder farmers. Some researchers have observed that although farmer cooperatives are highly recommended mechanisms to reduce poverty and hunger in Africa to enable the poor to participate in productive and income generating activities (Getnet, 2010), they have not been successful. Ortmann & King (2007b) also support this view having observed that agricultural cooperatives serving smallholders in less developed rural areas of South Africa have generally not been successful in promoting agricultural development and members’ welfare. Ortmann and King (2007b) also cite Machethe (1990) as having observed poor performance and failures among agricultural cooperatives in a former homeland of South Africa. Zarafshani et al. (2010) reported that a study by Amini and Ramezani (2008) in Iran among poultry farmers in that country showed that these cooperatives had failed to keep their member-producers satisfied.

There are many reasons why smallholder agricultural cooperatives have generally registered poor performance. Many smallholder agricultural cooperatives use the traditional cooperative model. According to the ICA, a traditional cooperative is an organisation formed by a group of people who meet voluntarily to fulfill mutual economic and social needs through running a democratically controlled enterprise such that the benefits achieved through cooperation are greater than the benefits achieved

individually (ICA, 2015). Researchers have observed a number of institutional and governance problems in traditional smallholder cooperatives.

a. Smallholder Agricultural Cooperatives Have Difficulty Raising Capital

Membership of traditional cooperatives is open hence any producer can join by purchasing shares at their par rather than their appreciated price. There is generally no up-front investment other than a nominal membership fee. Cooperatives therefore have difficulty to raise capital necessary to finance long term strategies (Cook & Iliopoulos, 2000). Traditional cooperatives have constrained access to debt and equity capital. They can raise it only from owner-patrons who have little incentive to invest because capital is not rewarded at market-related rates. Financial institutions have also been hesitant to provide credit to cooperatives due to the high risks associated with lending to them (Ortmann & King, 2007b). According to Ortmann & King, 2007b) citing (Coetzee & Vink (1991), high risks are due to insufficient equity capital, the influence problem which prevents the majority investors from influencing investment decisions, poor financial recordkeeping, and high transaction costs involved in granting small loans.

According to Chibanda et al. (2009), when equity and debt capital are constrained, the cooperative is unable to finance investments in growth assets. In order to ensure its long-term sustainability, a cooperative needs adequate capital for both its initial development and its ongoing operations. Chibanda et al. (2009:298) citing Magingxa & Kamara (2003) argue that the “difficulty in raising capital implies that smallholder farmers in developing regions are usually dependent on government donations and/or soft loans for initial capital”. This situation is what is obtaining in most agricultural cooperatives in Malawi.

b. Smallholder Agricultural Cooperatives are Established with Motives other than Cooperative Development

Sometimes, smallholder cooperatives are established with motives other than cooperative development in mind. Chibanda et al (2009:298) citing Ngubane (2008) expressed the view that “only a minority of smallholder cooperative members had a

genuine interest in developing their cooperative”. Zulu (2007) as cited by Chibanda et al. (2009) supported this observation stating that some smallholders establish cooperatives to access government grants rather than to develop a business. In Malawi, accessing government and donor grants is also used often as an incentive for establishing an agricultural cooperative.

c. Lack of Business Management Capacity

The performance of cooperatives also depends on educating and training cooperative members, and enhancing their knowledge of cooperative principles and members’ rights (Ortmann & King, 2007b). Birchall (2004) argues that cooperatives that lack capital and business management capacity have had a rather disappointing history in developing countries. In Malawi, lack of business management capacity is a common characteristic of the country’s agricultural cooperatives.

d. Other reasons for Poor Performance of Smallholder Agricultural Cooperatives

Other researchers have also shown that several other factors have hindered the performance of smallholder cooperatives in developing countries. For example, research by Machethe (1990) on poor-performing and failed cooperatives in the former homelands of South Africa suggests that:

 Members did not clearly understand the purpose of a cooperative, their obligations and rights, or how to manage their business.

 Cooperatives failed to provide transport for delivery of members’ purchases

 Members did not identify with their cooperatives

 Members did not understand their roles.

This could have resulted from members’ ignorance, a lack of education and skills training and/or poor extension advice (Machethe, 1990).

Ortmann & King (2007b) citing Van der Walt’s (2005) study on cooperative failures in Limpopo province indicated that poor management, lack of training, conflict among

members due mainly to poor service delivery, and lack of funds were important contributory factors. Other researchers also cited by Ortmann & King (2007b) blamed poor management, lack of access to start-up capital, lack of experience and training in business management, lack of marketing and accounting skills, low levels of literacy, poor attitudes towards work, the degree of cooperative community ethos, weak institutions, inadequate capital, deficient support systems such as external monitoring and evaluation, and lack of a supportive policy environment as factors contributing to poor cooperative performance (Barratt, 1989:2; Kherallah & Kirsten, 2002; Anderson & Henehan, 2003, Lyne & Collins, 2008; Zulu, 2007; Kyriakopoulos, 2000, and Van Niekerk, 1988).

Mude (2006) reports that while a general consensus exists that empowering the poor to take a pro-active role in their development should be a central pillar of development efforts, it is not as clear that membership based organizations are always the most effective means to improving the welfare of its members. He illustrates this point by arguing that the marked deterioration of coffee cooperatives in Kenya can be partly explained by institutional changes in cooperative organization that gave full ownership and administration control to members.