During the week-long stay, we got to visit cooperative-based organizations - like Royal Flora Holland, Rabobank and Royal FrieslandCampina -and institutions set up to advance the interest of the cooperatives and farmers like National Cooperative Council(NCR) and the Netherlands Farmers association (LTO). These particular organizations were selected as they are a great example of the historical growth of cooperatives in The Netherlands that started in the villages and grew their capacities to gaining international relevance. We also visited companies that are interested in venturing into Ethiopia.
The experience in the Netherlands has provided us with key lessons that I believe will certainly impact the way in which 2SCALE provides support to the cooperatives and unions in Ethiopia.
Having professional advisors in cooperative board memberships
Since the inception of farmers’ cooperative movement in Ethiopia, all cooperatives were governed by boards consisting of farmers only. This, for a long period of time, has restricted the growth perspectives of the cooperatives, but is a situation that would have been remedied if most of the board members had business development insights. Consequently, and in most board meetings that I have observed, the agendas are more focused on quick wins as opposed to long-term business development. These cooperatives need board members who can better understand business trends, predict future growth and have all the information at the industry level in order to be able to pinpoint future strategic directions.
In our visit to the Netherlands, the delegates were surprised when they learnt that all the cooperatives have a non-member/ non-farmer/ sitting in their board with a voting power as equal as the member. These non-member farmers are elected in order to provide strategic advice in the different aspects (financial management, business development, logistics, human resource development of the cooperative) and they get paid for providing the services to the coops.
It is increasingly becoming more critical to start this movement in Ethiopia as the level of efficiency in cooperative unions engaged in large scale processing can easily be improved by more business-oriented directions and experience in managing complex business activities by both the board members as well as the union staff. Getting strategic experts within the board members would improve the competitiveness of the cooperatives.
Creating economies of scale through mergers
According to the latest report by the Ethiopian Federal Cooperative Agency, there are 85,000 primary cooperatives and 388 cooperative unions in the country. However, the scale of operation and levels of efficiency remains low. Looking at the few cooperatives (only 2,500 cooperatives) in the Netherlands and their share in the economy, it is important to note that it is not the number of cooperatives that matter but their efficiency and market share.
One of the critical lessons from the visit in this regard, for a country like Ethiopia, is the gradual merger of several small cooperatives in the villages into a larger and more efficient cooperative. We have learnt big cooperatives like Rabobank and FrieslandCampina were the result of a series of mergers of smaller cooperatives. One of the insightful factors for promoting cooperative mergers is ensuring that membership to cooperatives is not tied to geographic location/presence. Understanding this is of high importance for Ethiopia as the government clearly indicated that the focus will no longer be on setting up of new cooperatives but building the capacity and also creating conditions for merging cooperatives and unions to be able to generate good economies of scale.
Separating direct economic transaction from advocacy work
Cooperatives in the Netherlands only focus on direct marketing activities that can increase their farmer members’ share from the final price of the commodity. There is a very high level of specialization in this regard. As the cooperatives have decided to focus solely on the marketing, they are also prepared at the same time to pay for an association and council that can advance theirs and the farmers at each level, including the policy makers level. This has given a strong negotiation power for the cooperatives and the farmers to push their interest especially at higher policy makers’ level.
Looking back at the experience in Ethiopia, Cooperative unions are trying to play both economic activities and advocacy roles, but their influence remains minimal as they are too disintegrated and are not specialized in advocacy work. The focus was more on economic activities based on the assumption that the government-established cooperative agency will handle advocacy. I, however, believe that it is now time to think about farmer- owned entities that promote and lobby their interests and their cooperatives with policy makers at all levels.
Conclusion and adaptation to the 2SCALE Program
It is easy to get inspired by what we have learned from the visit, but the main objective is to find a way to transfer the knowledge to 2SCALE partners. We had a series of discussions after the visit to select the most critical learning that can have a transformational effect on the cooperative landscape in Ethiopia. Accordingly, we have shared the lessons (among others) with Tsehay Union board members in relation to having a professional business advisor as a board member. The board quickly agreed with the idea with a slight adjustment as the current proclamation on cooperative doesn’t allow non-farmers to be board members of farmers cooperatives. Thus, 2SCALE is providing technical assistance to the union on how this advisor council to the board will be set up in a financially sustainable manner. All respective federal and regional agencies are paying a closer attention to this as they are interested to scale up the practices if this pilot with the Tsehay union succeeds.