Co-operative societies have huge potential to grow our economy

Members of Mutheka Farmers Co-operative Society in Nyeri County follow proceeding during the 11th AGM at Ruringu recently. The Co-operatives have huge potential to help the Government meet Vision 2030 targets. [PHOTO KIBATA KIHU/STANDARD]

The Government should be commended for waking up to the reality that the co-operative movement has the potential to fund huge projects.

Hopefully, this recognition—borne out of the realisation that the sector has mobilised Sh460 billion in member deposits and is expected to reach Sh800 billion over the next eight years—will lead the government to do a better job of safeguarding the members’ interests.

This may mean the Government sitting down with all stakeholders and crafting new guidelines to be followed in future investments as this is one of the main areas where members have lost huge amounts of money in the past. These guidelines should borrow best practices from cooperatives in the Scandinavian countries especially Sweden.

The guidelines would, for example, detail the road-map to be followed when cooperatives want to upgrade their front office services and set up financial institutions and even moving up the ladder to setting up banks. This way, members’ interests would be safeguarded by ensuring their management does not get lured into buying an interest in questionable finance houses and banks.

The new guidelines would also spell-out the kind of investments in which the sector would partner with the Government— private sector investors--and clarify the terms of engagement.

Analysts are unanimous that the Government and the co-operative movement would be doing themselves and the country a great favour were they to prioritise agriculture as the area where they can partner. This is, partly, because both the Government and the country’s banking system are not yet ready to finance agriculture in amounts that would transform the sector and the country.

There is plenty of money to be made, for example, in primary production of food stuffs that are currently imported. The cooking oil sub-sector was a few years ago estimated to import about Sh50 billion of raw materials. This means that producing these materials locally would not only save the country the money used in imports but would also develop the areas they are grown.

Feasibility studies

This argument is bolstered by the realisation that areas that currently receive marginal rains are suitable for growing of these crops which include cotton and sunflower.

Value addition is the other area that the Government has spoken about but has done little to match action with its rhetoric. The co-operatives that are based on crops production are the best placed to invest in this area.

A good example is tea. Market trends reveal that the only way farmers will get better prices is by finding new markets as the old ones get glutted as soon as the country—and other tea growing countries—harvest a bumper crop. The challenge, however, is that these new markets are only interested in processed tea.

Instead of wringing their hands and bemoaning the low prices tea, stakeholders, led by the Ministry of Agriculture, need to dust the feasibility studies that show how the sub-sector can move quickly to meet the demand in these new markets.

Coffee is the other traditional export crop that has been crying out for value addition for some time now. The strange thing is that Government officials routinely join the debate but little is done to implement the recommendations.

It is not surprising that private companies that have moved into value addition are reaping huge dividends from their investments. Yet, small-scale co-operative societies produce the bulk of the country’s coffee and end up receiving peanuts because they lose control over their produce as soon as it leaves the factory.

Obviously, the cartels that are now controlling these and other export crops will not let go of their lucrative businesses without putting up major fights. They can be expected to intensify their lobbying of government and even going to court to defend their lop-sided contracts which they may have entered with individual co-operative societies and unions.

But this is where the Government should come in and demonstrate whose interests it is protecting. This is also where the caliber and development credentials of county governments are going to be revealed. It will no longer be enough to blame others and lack of money for failure to create wealth and well-paying jobs.

—[email protected]