PROPIEDADES DEL CONJUNTO DE JULIA

All four cooperatives have failed to successfully market their produce. The cooperatives’ management has stated that they find it extremely challenging to identify suitable markets for their produce and also to compete successfully with private traders. These challenges included a lack of market information; a lack of infrastructures needed to facilitate market coordination; and regulations and policies regarding commodity pricing.

The two cooperatives (Lifuwu and Mtunthama) that were farthest away from the main city had more problems in accessing markets, citing a lack of market information and the high transport costs incurred to take their produce to remunerative markets in the cities, as their main problems, unlike the two cooperative close to the city, which indicated that they did not have many problems marketing their produce. However, respondents in all the cooperatives indicated that the common source of market information is just hearsay from friends or physically having to visit companies in the cities, in order to gain market insights, as stated by one member of a board.

“We would just get the information from just asking people we know about the market. And one or two officials would go to find out if the market is available to some of the companies and large scale traders”

As a result the cooperatives closest to the city were able to gather market information and with less cost, compared to the two cooperatives located in a remote district. Ndaula cooperative, which is one of the cooperatives closest to the city, attributed their access to market information to their first manager who lived in town. The manager had some connections with people in town, which helped them to acquire market information and secure some tenders with large traders. Since this cooperative is only 15 kilometres away from the industrial area, transporting the produce was also not a problem. Hence it was able to buy at prices which were slightly higher than the vendors. The cooperatives in the far away district had more opportunities to buy produce from farmers. However, the marketing of that produce was a problem, because of high transaction costs.

The challenge in accessing market information was echoed by a trader who described the marketing system as not open, as captured in these sentiments:

We are not transparent if I put it that way; we don’t really share information as traders and some of the buyers do not even share the information, they have their own accustomed customers who they deal with. They don’t want to share information with any other trader” If and only if we become a transparent market, there could be a future for the cooperatives. But currently we are not a transparent market with no sharing of real time information.”

In all the cooperatives, their main competitors were small scale traders, who would sometimes not have a real designated buying place as tend to be very mobile. As observed from one local market it is not easy for one to know the real prices for commodities due to cheating coupled with unstandardized measures. The vendors who are more skilled have a competitive advantage over cooperative due to their linkages to large traders.

The interviews with key informants also indicate that the technological gap between the cooperatives and their competitors, who are private traders, puts them at a disadvantage, as commented upon by one trader:

“At the meantime these cooperatives are not competitors; because for them they still have a very huge information gap unlike us traders who are based in town we have access to several other facilities and we are able to talk to the major buyers”.

The trader also indicated that they are trying to partner with cooperatives as affiliate members to the traders association. The traders view them as an alternative way to save cost in bulking, but not really as partners. This attitude by traders would bring in the challenge of power imbalance due to asymmetric information which may still leave the cooperatives as price takers as observed from one of the traders:

“They offered it to me at MK40 per kg delivered to Lilongwe (straight to the buyers’ warehouse) and I sold it at NFRA at MK50 per kg. Then when you are talking at what level, it is just at that producer level they are organized as a cooperative and you will get it”.

This trader was able to make a 25 percent margin by just identifying the market, and where to find the produce, while the cooperative had to bare all the costs (including transport). If this cooperative had access to information would be able to deliver it direct and get these profits for its members. There are also a lot of barriers to markets for small- scale farmers, as one said:

“It is not easy for the farmers to sell their produce to ADMARC, even if you know that ADMARC is buying. What ADMARC official do is they would collude with the vendors to go buy from farmers at lower prices and sell to ADMARC at higher prices? So it is only those vendors that have that connection that are able to sell to ADMARC, while small scale farmers like us they will just tell you oh we don’t have money and this and that so that you give up and just sell to vendors”.

Although there are some organisations that try to share this market information, such as the ‘Initiative for Development and Equity in African Agriculture’ (IDEA) and ‘Malawi Commodity Exchange’ (MACE), this is mainly through the internet and SMS. All the cooperatives visited did not have access to internet services and they generally relied on

their individual phones. As a result, the cooperatives, especially those in remote districts, experienced more difficulties in marketing their produce.

Lack of contracts and contracts enforcement mechanisms

When asked why the members could not bring their produce and get paid later, respondent at three sites, namely, Malingunde, Mtunthama and Lifuwu, cited cheating practices as a problem associated with some private trading. Malingunde and Lifuwu cooperatives had lost their produce to an unscrupulous trader, who promised to pay them later and never paid them. One board member states:

“….and this man as agreed brought his trucks and collected the rice from the cooperative for a market in Lilongwe. After collecting rice we were waiting for payment which did not come, and when we tried to follow up, we were told that the man is a thief”.

Some of the cooperative’s management, who were interviewed, indicated that due to such losses the members now refuse to bring their produce to the cooperative, unless it is on a cash basis. The management of one cooperative indicated that, after such a loss, it was also difficult to trust some of the buyers and this situation complicates their search for markets. Furthermore, this type of occurrence impacts negatively on the general operations of the cooperative and it results in conflicts between the members and management. As a result the managers were forced to trade on spot.

One key informant indicated, that although there are regulations that everyone buying produce from farmers should register with the Ministry of Agriculture, there is no enforcement of such regulations: as one respondent states:

“….there is a government initiative that anyone buying produce from farmers should register with the Ministry of agriculture but there is no monitoring system, so a lot of people buy without licenses and nothing happens”.

In some cases, where the cooperatives have secured some contract, the agreements were prone to be abandoned: an example being a case where the management of the Mtunthama cooperative secured a contract to produce paprika for a certain trader, only to have that trader change the decision, when the crop had already been produced. The reason given had nothing to do with the cooperative and the farmers were left to look for other markets, which were not easy to find. This resulted in a great deal of frustration for the members and a lost of trust in management.

Government policies

Price regulations imposed by the government of Malawi are another problem. The government normally set a minimum buying price for some commodities, such as maize and cotton. The cooperative would normally wait for these prices to be announced before they can start buying from farmers. Whereas the private traders would start buying their produce around April to May, before the government announced prices for the season, and when prices are at their lowest. The traders know that most farmers are poor and tend to sell their crops early, due to pressing cash needs. On the other hand, the cooperatives’ dependency on government prices forces them to buy the produce at higher prices, which then lowers their margins, since they have to compete with the same traders when selling.

Discussions with cooperative management reveal that the policy of price regulations was intended to address the problem of low producer prices. However, there has not been any appropriate monitoring of the system, in order to ensure that all players adhere to the rules. As a result, the cooperatives, which are registered organisations, were obliged to follow government set prices, whilst their competitors, who are mostly unregistered private traders, continue to buy at lower prices. At times, the cooperatives felt that a price was too high for them, taking into consideration the fact that they would also incur transport costs, which would add to the selling price, especially for faraway cooperatives. One respondent stated:

“……The government set price was MK40 while we were buying at MK25 while vendors were still buying at MK20; we were forced to raise the prices to MK35. And we as a registered organization we are bound to follow the government laws

while the vendors because they are not known they would still buy at lower prices”.

On the part of the cooperatives, especially the faraway, they feel this puts them at unfair competition. The management of all the cooperatives agreed that their main challenge is selling the commodities to companies than buying from farmers as one of them said:

“We have higher chances of buying as much maize as we can; there are a lot of farmers selling. Though we have some vendors from town, but most of them their prices are low. But we face competition when selling as cooperative to companies”.

6.2.2 Incentives for starting a cooperative