Memorandum submitted by the Co-operative
Party
INTRODUCTION
The Co-operative Party is the political arm
of the Co-operative Movement. As such, we promote co-operatives
as the economic model that allows its stakeholders to take responsibility
for their action, and benefit from them, both at home and abroad.
The role played by co-operatives in developing
countries is far from being limited to fair trade products. As
a matter of fact, the co-operative model is currently being used
as an alternative to privatisation for delivering utilities across
the globe. Two notable examples of such practice are the NRECA
electricity co-operative in Bangladesh and the SAGUAPAC water
co-operative of Santa Cruz, Bolivia.
The reason why we have decided to present this
short submission into this Committee's inquiry is that whilst
the link between co-operatives and fair trade is rather obvious
[a large majority of fair trade products are produced by co-operatives],
we would like to see the current passive acknowledgement turn
into an active encouragement and support for this economic model.
Within the scope of this enquiry, we have limited
our short submission to answering one specific question:
| Is there a role for donors in helping to develop the interests of producer communities in developing countries?
|
A—DEFINING THE
INTERESTS OF
PRODUCER COMMUNITIES
1. Maintaining community ownership of production.
2. Reducing costs through investment in capital.
3. Getting the best possible price for product—particularly
keeping the maximum amount of end product value.
4. To build infrastructure that enables them to develop
as a community, including schools, health centres and access to
clean water and electricity.
We can certainly argue that if we look at producer interests
in this way, the best way in which donors can develop the interests
of producer communities in developing countries is through encouraging
investment in co-operative solutions.
B—WHAT CO-OPERATIVES
DO
1. Co-operatives enable small scale producers to stay
on their own land, and retain ownership.
2. They provide a mechanism through which producers can
come together and buy capital, thus allowing them to maximise
gains from economies of scale.
3. If co-operatives gather to form a co-operative union—this
allows farmers to increase the price that they receive from their
goods (see the example of Oromia Co-operatives Union in part D).
4. Co-operatives provide a natural framework for community
investment, given that their very existence defines the boundary
of the said community.
C—CO-OPERATIVE
DEVELOPMENT
Co-operatives provide a delivery vehicle that offers an alternative
both to government institutions or private companies. Whilst the
former have sometimes suffered from problems of efficiency, transparency
and corruption; for the latter, shareholder interests come first,
and profits are often made at the expense of significant social
and welfare losses. This economic model also puts people, rather
than business or governments, at the centre of development. By
empowering individuals within their communities, it allows them
to trade their way out of poverty.
In short, co-operatives can deliver economic development
controlled by the very people who are to benefit, doing so in
a democratic way, through the one member, one vote system. Moreover,
community development is part of the core values and principles
of the Co-operative Movement, including investment of profits
in running water, health or education, for example.
D—CASE STUDY:
THE OROMIA
CO-OPERATIVES
UNION
The Oromia Coffee Farmers Cooperative Union was established
in June 1999 to bring farmers together to enable their survival
under the market conditions of the time. Founder Tadesse Meskela
stated its main aim as being "to bring more money into the
coffee growers' pocket ... and improve the farmers' lives."
Farmers within these co-operatives are not required to sell their
coffee to the Cooperative Union. So the success of the Union depends
on a fair price to the farmer-members for their coffee.
And the Union has certainly been a success!
The table below illustrates the growing number of co-operatives
joining the union, and the households it represents.
|
| Member
| Farmer Members
|
| Year | Cooperatives
| Male | Female
| Total |
|
| 2000 | 34 |
21,342 | 1,161
| 22,503 |
| 2001 | 34 |
21,589 | 1,232
| 22,821 |
| 2002 | 34 |
21,793 | 1,250
| 23,043 |
| 2003 | 34 |
22,336 | 1,257
| 23,593 |
| 2004 | 34 |
22,336 | 1,257
| 23,593 |
| 2005 | 74 |
45,237 | 2,675
| 47,912 |
| 2006 | 101
| 70,816 | 3,909
| 74,795 |
|
| Note: The number of women listed in this table represent widowed women only. The denomination "Male" actually represents households, as we have been told by the Union representative.
|
In the same period, it has seen its net surplus increase
from 289,000 birr (£17,400) to 6.9 million birr (£412,400)
and its working capital from an initial investment of 825,000
birr (£50,000) to 17.4 million birr (£1.05 million).
This represents an overall increase in business size of over 2,100%
over six years, entirely owned by its farmer members.
What happens to the profits?
Seventy percent of the Union's profits from selling and exporting
coffee are distributed back to the 74 co-operatives. They then
distribute these dividends back to the farmer-member. The other
30% of the Union's profits are used for expansion of capacity
building assets, for reserves against poor harvest years, and
for community development. Recently, the Union has even obtained
special permission to bypass the auction market and sell directly
to its clients, ensuring a more stable and sustainable price in
the long term.
Supporting the Community
Another way the Union supports its farmer-members is by undertaking
community improvement projects. In the past year, as its fair
trade business has grown, the Union spent 2.7 million birr (£165,000)
on community development projects. In practice, this has brought
the construction of four new schools, with 25 new classrooms and
5,000 more children receiving an education. Three villages have
received a clean water supply, ending the danger of water borne
disease for approximately 3,000 people.
In addition, four new health centres have also been built,
with more than 6,000 visitors every year. For those who previously
lived in these areas, serious illness meant that they had to carry
friends, relatives or neighbours for three to six hours just to
get treatment. Now the Co-operative Union is bringing clinics
to the villages. By working together, farmer-members are able
to pool their resources, and their work benefit not just their
own households, but entire communities.
For Tadesse Meskela, the most important aspect of the Oromia
Union's work is the impact that it has on the prices that its
members receive for their crops. During the crisis in the coffee
market of 2002-03, it was giving its members a price 250-300%
above that of private enterprise, and now still pays around 80-100%
more than such companies. What this means, in very simple terms,
is that farmers can now send their children to school and buy
them adequate clothing. It means that families can build better
quality houses. For every additional penny received, it brings
both families and communities one step closer to lifting themselves
out of poverty.
The next step
The future for the Co-operative Union is to be able to control
more of the supply chain, allowing the producers of the coffee
to capture the bulk of its consumer price. It already is a part
owner in Café Progreso, a chain with three outlets in London.
But much of the supply chain still remains outside of the Union's
hands.
Asked about what donors countries such as the UK could do
to support his efforts to trade his and his farmer-members ways
out of poverty, Tadesse Meskela said:
"Empower the poor, help us to acquire washing stations,
coffee processing plants ... and make big corporations pay a better
price for the coffee." Tadesse told us of his hope for
the development of a roasting plant in the UK owned by fair trade
producers such as the Oromia Union as an example of what he hopes
his next step will be. This investment in infrastructure is vital
to further success and would allow them to compete with international
corporations such as Starbucks.
Tadesse ended by saying that, "if you give me money
to buy food, tomorrow I have to ask you again ... Give me the
investment in infrastructure, and you will never have to give
us money again."
The example offered to us by Tadesse Meskela and the Oromia
Co-operative Union states better than we could the role played
by co-operatives in international development, and why it is vital
that they should be fully acknowledged and promoted.
CONCLUSION
The role that we would like donor countries to take is to
actively encourage the development of co-operatives in developing
countries. This support has to translate at two levels:
1. Training local farmers and producers into developing
their co-operatives. This could be achieved by sending specialist
consultants who could run training session on site.
2. Offering preferential tariffs [no VAT for example]
to products fairly traded through co-operatives. Given that part
of the profits made by co-operatives is invested in communities
and in infrastructure, such preferential tariffs could actually
end up saving money in aid given by DfID, and with the added value
of saving administrative costs and ensuring that the aid money
is going where it is needed.
February 2007
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