Is the government afraid of cooperatives?

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The cooperative movement in Uganda has contributed to tremendous success. A notable success story is the now Stanbic Bank, the undisputed market leader in Uganda’s banking sector with one of the most active counters at the Uganda stock exchange.

Many of the current bread of politicians and businessmen (now in their advanced age) were educated or accumulated their wealth thanks to commercial agriculture. When you visit any upcountry district you get to see the good old days – glowing but aging iron sheet roofed houses, disappearing lawns, abandoned kraal, and overgrown fish ponds. Back in time, these were vibrant places thanks to the cooperative movements that flourished in the 1960s and ’70s.

Speaking at an Agricultural Policy dialogue at the Golf Course Hotel in August 2015, the then Food and Agricultural Organization (FAO) Chief in Uganda, Achaji Jallow, said his organization and many of its partners’ organizations believed cooperatives are natural allies in the fight against hunger and extreme poverty.  The same message was echoed by the then Netherlands ambassador to Uganda H.E Ambassador Alphons, who said that while the Netherlands is a small country with one season in the year, it is currently the world’s leading producer and exporter of potatoes, onions, and wheat!

H.E Alphons noted that the Dutch Dairy Cooperative which started with modest beginnings a few years ago boasted of US$ 3 billion in annual turnover by early 2015.

Across the border, in Tanzania, cooperatives are flourishing and the farmers have incalculably benefited. The cooperatives are so powerful that they sometimes threaten the government due to collective power.

One wonders whether this could be the reason why the Ugandan government fears a strong cooperative movement in Uganda.

Hon. Amaria Kyambadde, the Minister for Trade, Industry, and Cooperatives urges that the government’s easygoing attitude towards cooperatives is simply because Uganda’s economy is a private sector-led, and that government has so many priorities including infrastructural development. Unfortunately, this argument by the Honorable Minister fails the mutually exclusive test. Promoting the cooperative movement is a clear complementary to economic growth initiatives by the government. Cooperatives just require a champion within the government structures and a clear legal framework to flourish. Country over, initiatives that empower the locals are easier to execute as they are people driven not the other way round. By far the success of in-house company SACCOs and savings groups is attributed to the principle that two are better than one. And that is what a cooperative movement does.

One of the key challenges with cooperatives is that it empowers people financially, and tends to create cohesion and teamwork. People work more closely as cooperative movements strengthen communities, as a prerequisite for their success. This mode of allocation puts the market in a dominant driving seat. Demand and supply determine the day thus cooperatives as seen as private sector actors. Research suggests that when many people are financially empowered they tend to become more politically active, and less susceptible to bribery and manipulations.

According to Prof. Kizza of Makerere University, Uganda adopted the economic linearization model prematurely. He urged that sensible governments cannot side back and allow the private sector to take the lead in face of unnecessary competition, even in critical sectors like health, education, and manufacturing.

Statistics revealed 69 percent of cooperatives registered in Uganda are either Saccos or agricultural marketing cooperatives.  The challenge with this, according to Prof. Kizza, is that Sacco’s are micro-finance institutions that cannot deliver sensible outcomes. Saccos only deliver micro results. The solution lies in a cooperative bank. Economic liberalization is only for those who are best organized and Uganda is unfortunately not yet there.

Following the collapse of marketing boards and cooperatives in Uganda, powerful individuals emerged taking over coffee, cotton, tea, etc buying and exporting, never mind that these are purely for individual profit not for the mass population.

Analysts say Uganda will only achieve inclusive and structural transformation if the government resurrects her primary role to steer the economy by playing a strategic role in the management of the critical economic sector. The current private sector-led growth model is a total failure for two reasons: there are few local Ugandans with the capital and resources required to run key industries. This means that capable foreign investors, with easy access to low-cost capital from their national cooperative banks, have the opportunity to establish big farms in the country and run the economy. Only the government can come in to fix this mess, otherwise, the economy risks slowly being under the direct control of the legendary “invisible hand” talked about in economics class. Only this time, it is real. So when the Uganda shilling slides against the dollar and bank of Uganda is toothless to do anything, do not ask.  The FDI invisible hand would be at work.

Economists urge that the 1980’s economic liberalization rolled back reforms that saw cooperatives driven into comma, pushing the private sector into the driving seat. This gave rise to talk that the government plays no role in business. It was a fallacy. Until we wake up to reality, it will remain so. The challenge is the quality of economy the 40-80’s generation will pass on to the next generation.

Western world double standards

Economists contend that liberalization is a wrong model for Uganda. As Prof. Kiiza put it, “as a researcher I have visited and met governors of countries and heads of department in the USA who say the business of government is the business of business. We shall give tax holidays to local businesses to promote their growth. The gospel that is preached to us by Europeans is do-as-I-say, not as I do. We must rethink this gospel.”

Whereas for Uganda it is open entry and exit. In Europe, getting a visa is a tug of war. In Uganda, investors get free land and lots of free incentives to the extent that some poor “investors” come to the country with nothing just to get the free government offerings and spend over 5-10 years doing nothing on the free land. It is a shame. In Europe, to even lease land, you must be very highly liquid with prove track record of wealth.

And that “globally sensible governments that support cooperatives grow to compete favorably. The argument, therefore, is even if cooperatives are private sector actors, they still need government support till they grow and become competitive.”

The fact is over 75 percent of our farmers are smallholders. 65% of private-sector firms die before celebrating their 5th birthday. In this context, introducing economic liberalization was extremely premature if not harmful. These statistics favor government hand in business:

Bring back cooperatives!

There is a consensus that cooperatives must be resurrected, with the introduction of the cooperative bank to provide affordable financing to coop societies throughout the region. It is worth to note that much as the old cooperatives did wonders, they lacked key critical components that must be incorporated before they are re-introduced.

The cooperatives did not have a value-added component which is key today. The old cooperatives gave out inputs, did marketing and forgot value addition – these are critical links that must be reintroduced to ensure re-ignition of our economy.

United we stand. The cooperative movement gave us this moto, and we should not disappoint our elders. The forefathers of this country.


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