Saturday, September 23, 2023

Cooperative societies could help accelerate economic development

Cooperatives have been found to provide many benefits to communities and have a significant positive impact on the economy hence the need for their revival in most developing countries including Botswana. Globally, the cooperatives’ societies movement employed over 100 million people with a turnover of US$3 billion as at the end of 2013.

In a 2014 white paper, Jessica Gordon Nembhard explained that cooperatives are community-owned enterprises that combine consumers with owners, and buyers with sellers in a democratic governance structure. Cooperatives solve the general economic conundrum of under or over production, business uncertainty, and excessive costs.

Cooperatives address market failure and fill gaps that other private business ignore such as provision of rural electricity or other utilities in sparsely populated areas, provision of affordable healthy and organic foods; access to affordable credit and banking services, affordable housing, to quality affordable child or elder care and markets for culturally sensitive goods and arts.

The author notes that the economic activity of the 30 000 cooperatives in the United States of America contributes an estimated US$154 billion to the nation’s total income. Cooperative businesses have lower failure rates than traditional and small businesses, after the first year of startup, and after five years in business. About 10 percent of cooperatives fail after the first year while 60-80 percent of traditional businesses fail after the first year. After five years, 90 percent of cooperatives are still in business while only three to five percent of traditional businesses are still operating after five years.

This is often because of the many people involved in starting up a cooperative and the high level of community support for the cooperatives.

Cooperative businesses stabilise communities as they are community-based business anchors, and recycle and multiply local expertise and capital within a community. They pool limited resources to achieve a critical mass. They enable their owners to generate income, jobs and accumulate assets, provide affordable, quality goods and services and develop human and social capital, as well as economic independence.

In addition, cooperative enterprises and their members pay taxes, and are good citizens by giving donations to their communities, paying their employees fairly and using sustainable practices.

Since most cooperatives are owned and controlled by local residents, they have a vested interest in and more likely to promote community growth than an investor-oriented firms controlled by non-local investors.

Cooperatives are more likely to ensure their objectives within the community are met and are interested in promoting community economic development. Many non-agricultural cooperatives are created to serve a local need and so the objectives set by their members may not include profit maximisation at the firm level. The objectives are usually more needs oriented, therefore cooperatives may be more likely to grow as fast as possible, which may lead them to outgrow the community and relocate to a place where the supply of labour is larger and other inputs can be more easily and efficiently obtained.

Cooperatives are oriented to solving local problems by organising local people into stable organisations, and they have an explicit mission to keep funding, distribution of benefits and responsibility and accountability in local users’ hands. They also aggregate people, resources and capital into economic units that overcome the historic barriers to development.

In addition evidence shows that cooperatives address the effects of crises and survive crises better than other types of enterprises. Cooperatives are collective problem solvers. Their start-up costs are often low because cooperatives are eligible to apply for loans and grants from a number of state agencies designed to promote cooperatives development. There are also other non-governmental financial institutions like cooperative banks that provide relatively low cost loans to cooperatives either because they have been established to assist cooperatives and non-profit firms.

To revive the once mighty cooperative societies, Botswana government in 2013 reviewed the Cooperatives Societies Act of 1989. The review gave the societies the latitude to diversify their operations to ensure long term viability.

The amended Act provides that the relevant minister, being the Minister of Trade and Industry shall in consultation with the director take measures as may be necessary for the encouragement and development of self-reliant co-operative movement which provides for the economic interests and welfare of its members within the framework of the national development policy. 

Botswana Cooperative Association (BOCA) chairperson Smarts Shabani concurs that cooperative societies are commercial enterprises owned collectively and run by members who periodically share profits if they are doing well especially in the consumer market.

Although he admits the negative impact chains store supermarkets have had on the consumer market that was once dominated by the cooperatives, he remains optimistic that cooperatives still have potential to be revived and play a meaningful role in Botswana’s economy.

Shabani is also happy that government is doing everything in its power to revive the cooperative societies whose contribution to the national economy has been on the decline in the past few years.

“During formative years, cooperative societies were viable, vibrant and profitable as the economy was relatively small and the societies enjoyed some form of monopoly of the consumer market. However, since Botswana’s economy has been growing as a result of an influx of foreign investors with stronger financial muscle who came in and encroached in the comfort zone that was enjoyed cooperatives, the significance of cooperatives has drastically declined. The net effect was loss of qualified personnel who left for greener pastures to wealthy chain store super markets which are professionally run and managed,” said Shabani.

He is optimistic that the cooperatives can be revived on the back of government initiatives to ensure their resuscitation. Although he agrees that consumer cooperatives have been overtaken by chain store supermarkets, this does not spell doom for the movement as evidenced by the growth of credit cooperatives which are doing fairly well in the Botswana economy providing easy loans for members than commercial banks that cater for the banked markets at the expense of ordinary citizens who do not have bank accounts.

Shabani acknowledges that the consumer market has been over taken by chain store super markers hence the government decision to amend the governing legislation.

“All we need to do is to take advantage of the amended legislation and venture into other areas like property development and others which have long term sustainability. There is no reason why the movement should not be propelled when government is supportive,” said the BOCA chairman.

He is upbeat that a division specifically mandated to revive the cooperative societies movement in Botswana has been established in the Ministry of Trade and Industry.

The ball according to Shabani is the court of the drivers’ of movement to take advantage of the new legislation to ensure long term viability of the movement in the changed economic landscape.

Shabani added that recently they attended a conference in Nairobi, Kenya where they bench-marked on how the cooperatives have survived and contributed immensely to the east African country’s economic development.

To ensure that the movement survives, Botswana Cooperative Societies movement has become a member of the European Union, African Union and United Nations. In addition, Botswana hosted the 11th Cooperative Ministerial Conference last year to bolster its efforts to revive the movement. The conference was graced by the vice-president Mokgweetsi Masisi and the Minister of Trade and Industry Vincent Seretse.

“All these initiatives are a clear testament that government is supportive and we need to meaningfully play our part to ensure that the movement contributes significantly to the country’s economic development as well creating sustainable jobs,” said the BOCA chairperson. 


Read this week's paper