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1. Co-operatives as resilient organisations
Introduction
In this section, I will cover the following topics:
- a brief review of what co-operatives are and how they are organised
- why co-operatives are considered to be resilient organisations
- resilience in the African context
- the importance of resilient alternatives
- other reasons to be resilient.
At the end of the section, there is a ‘Reflection’ which has an activity that asks you think about the content of the section in relation to your own experience. There is also guidance about how you can access some of the documents I refer to.
1.1 What are co-operatives?
To make sure we are all on the same page, I will start with a few observations about the nature of co-operatives.
In 1995, the International Co-operative Alliance provided a framework for conceptualising co-operatives as different from other types of economic organisation. A summary is provided in Table 1. The values are intended to inform the principles through which co-operatives carry out their activities.
| Definition | A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. |
| Values | Self-help, self-responsibility, democracy, equality, equity, and solidarity Ethical values: honesty, openness, social responsibility, and caring for others |
| Principles | Voluntary and open membership Democratic member control Member economic participation Autonomy and independence Education, training and information Co-operation among co-operatives Concern for community |
Table 1 demonstrates that there are particular aspects to co-operatives that distinguish them from other commercial organisations or businesses. This difference is evident most particularly in how co-operatives are governed; for example, the joint ownership and democratic control, and the strongly ethical approach to business and the wider community. Some of the values and principles may be found or espoused in other enterprises, but the overall package is unique to co-operatives.
1.2 How are co-operatives organised?
Co-operatives are of different types, for example:
- retail or consumer co-operatives that supply goods and services
- producer co-operatives, which usually consist of particular types of producer who come together to market their output (agricultural co-operatives being one of the most common)
- worker co-operatives where people join together in production and the joint ownership of their company
- credit unions, where members can save and borrow money (for example, Savings and Credit Co-operatives (SACCOs)).
There are also hybrid organisations that have some of the characteristics of a co-operative, such as community groups that operate co-operatively but have not set themselves up as a formal co-operative.
In general, co-operatives generally have a similar structure:
- a general assembly
- a board of directors
- a set of officers
- a committee system
- possibly some hired management and/or paid employees.
They typically also involve members buying shares – or investing – in the co-operative to provide it with working capital. Shares will be for a specified amount and/or quantity (although members may have different quantities of shares) depending on the kind of co-operative and the working capital needed.
Co-operatives are seen as the primary unit and are often organised into unions (the secondary level), which in turn may be part of a national federation or apex organisation.
1.3 Why co-operatives are considered resilient organisations
In recent times, there has been much concern about the effects of the financial crisis in Europe and the United States of America (USA). This concern has been both in Europe and the USA, as well as other parts of the world. When markets dry up, businesses start to close down and people lose their jobs or sources of livelihood, there is increasing interest in enterprises that survive and in what enables them to survive in difficult conditions.
Co-operatives are one type of business that seems to have a certain resilience in the face of crisis. Well-known co-operatives researcher, Johnston Birchall, has written on this subject with respect to co-operatives in the global North. By global North, I mean those countries that are relatively economically developed, compared to the global South, where countries are economically less developed. These categories also tend to signify historical power relations between different parts of the world as well, but it is important to remember that they are not rigidly defined or static categories, as the current rising powers and emergent economies make clear.
First, in 2009, after the banking crisis of 2008, Birchall wrote a working paper with Lou Ketilson for the International Labour Organization (ILO) which argues that in the finance sector, co-operative banks and savings organisations are more risk-averse (Birchall and Ketilson, 2009). Birchall and Ketilson also note that where co-operatives have taken big hits over time, such as in many African countries, they are on the rise again and growing fast in some countries, such as Uganda.
Their argument for the resilience of co-operatives is based on what co-operatives are intended to be as organisations and the values and principles that guide them (see Section 1.1). In this and a later paper (Birchall, 2013), Birchall points out that the membership-owned nature of co-operative businesses will afford different advantages depending on the type of co-operative. These are summarised in Table 2.
| Derived from ownership | Derived from control | Derived from benefits | |
| Consumer OBs | Prevents cartels or monopolies that damage consumer interests. Enables trust in long-term relationships under uncertain contracts. |
Focuses the business on what matters to consumer members. Enables ethical choices to be made. Manages risk effectively. |
Patronage refund acts as a ‘cost price’ mechanism providing consumers with goods at lowest possible cost. |
| Producer OBs | As above in relation to producer interests. | As above in relation to producer members. | As above in relation to supply, and with second payment for goods marketed adjusting to cost of providing the service. |
| Employee OBs (as a subset of producer OBs) | Prevents employers from exploiting workers when labour is in a weak bargaining position. | Prevents asset stripping, hostile takeovers. Provides choice over working conditions, prevents redundancy. |
Footnotes
(Note: OB means Owned Business)Although Birchall has simplified the types of co-operative in this table, it gives an idea about why co-operatives or member-owned businesses may be more resilient than other types of business. You may want to pause and reflect on this table in relation to your own experience of co-operatives.
1.4 Resilience to crisis in the African context
While Birchall and Ketilson have focused primarily on co-operative resilience in the global North, other researchers have examined what is happening in the African continent. Allen and Maghimbi, who also produced a working paper for the ILO in 2009, report on the issues that they found, both in general terms and with respect to financial and agricultural co-operatives. In their summary, they observe:
It is found that co-operatives are being affected by reductions in global demand and volatility in commodity markets, as these factors have potential to undermine the income of members. It is expected that unemployment and the number of people in extreme poverty will increase substantially, with individual producers likely to be the worst affected by the financial crisis in Sub-Sahara Africa. Given this context, co-operatives need to closely monitor their operations to ensure that their net worth does not deteriorate.
There is evidence to suggest that co-operatives may be exercising caution in responding to the loan requests of members. For instance, loans portfolios of savings and credit co-operatives grew at an average of 12 per cent, which is lower than growth rates of previous years (35.3 per cent in 2007; 21.2 per cent in 2006). It was reported that some SACCOs have been scaling down loans associated with export commodities in order to protect themselves from potential loss. There is also evidence that marketing co-operatives that sell export commodities have suffered from the global downturn and required government assistance to enable continuing provision of services.
As with all evidence, there will be other (and perhaps more recent) evidence that suggests African co-operatives are growing or declining – indeed there is likely to be a mixed picture depending on the type of co-operative, its membership base and access to markets. As you will see from the later sections of this unit, there are ongoing challenges for resilience.
1.5 The importance of resilient alternatives
The concern about the effects of the banking crisis and continued challenges for economic growth has raised many broader questions about how people want to live their lives and generate well-being. These questions are generally about values, ethics, lifestyles and even questions about the direction of society and societal development. While these questions have definitely given rise to debates in the global North, they are even more serious when livelihoods, food security and access to basic services are at stake, as in many contexts in the global South. In the African context, for example, there is a new focus on the prospects for youth in particular as many countries have a large proportion of young people but limited opportunities for adequate livelihoods.
A number of writers and researchers have been looking at alternative ways of organising economies and businesses that provide different pathways for fulfilling and secure livelihoods and ways of living. The Nobel Laureate, Joseph Stiglitz, has argued that co-operatives help to create a plural economic system, with more democratic control over enterprises, less exploitation of vulnerable populations and more potential for collective innovation (Stiglitz, 2009). Others have discussed the ‘solidarity economy’ in which forms of economic organisation should be sustainable, innovative and promote social justice. One example is a collection of studies edited by Manuel Castells et al. (2012) in which co-operatives are discussed as an alternative for the future. Birchall (2013, p.18) also notes:
…if the potential of MOBs [membership based organisations] were realised we would quickly come to a new world economic order that is more stable, more trustworthy, more equitable, and driven not by profit but by the desire to meet people’s needs.
In parallel, in the context of developing countries, there is also growing interest in producer organisations and collective action. Academics and policy makers alike have argued that producer organisations have the potential to:
- engage in collective action to protect members
- enhance market linkages
- bring about innovations in products and processes
- reduce poverty, and
- support development - not only for their members but in the wider community.
The extent to which this is the case is explored further in later sections.
1.6 Is resilience only about crisis?
Economic crises underline the need for resilient forms of social and economic organisation. However even when there is no crisis, businesses need to be in a position to resist, adapt to or take advantage of sudden changes in their working environment, whether those changes are social, political, economic or technological.
Again, in the context of developing countries, a working paper written by Borda-Rodriguez and Vicari noted (2013, p. 3):
Case-study based research suggests that co-operatives have played a major role in defending members’ bargaining power ‘at a time of high commodity prices where middlemen can enter markets and try to take advantage of individual farmers by buying low and selling high, securing most of the benefits for themselves’ (Fairtrade Foundation, 2009). Similarly, international institutions have acknowledged that co-operatives ‘empower their members economically and socially and create sustainable rural employment through business models that are resilient to economic and environmental shocks’ (FAO, IFAD, WFP, 2011). A number of international organisations concerned with development and other scholars have highlighted the role of co-operatives in supporting small agricultural producers, women (Ferguson and Kepe, 2011; Majurin, 2012) and youth (Smith et al., 2005). Through co-operatives these vulnerable groups have been able to have improved access to markets, natural resources, information, communications, technologies, credit, training and warehouses. Other benefits have included participation in decision-making and more defined property rights. The combined effect of these positive outcomes has significantly contributed to both food security and poverty alleviation, while diversifying production for local, domestic and international markets (FAO, IFAD, WFP, 2011).
In the following section, I am going to ask you to reflect on what you have read so far. I will also explain how you might access some of the documents I have referred to, if you wish to deepen your knowledge and understanding.
1.7 Reflection
Activity 1 Reviewing co-operative resilience
If you have not already paused to reflect on the sections above, now is the time to do so.
First take about half an hour to write some notes in response to the following prompts:
- Identify any examples of co-operatives or collectively organised producer or consumer organisations known to you that seem to have been particularly resilient in your view.
- Make a note of what you think the main reasons are for this resilience.
- Now think about any examples of co-operatives or collectively organised producer or consumer organisations known to you that do not seem to have been resilient.
- Again, make a note of what you think the explanation is.
If you wish to take your study further, you might search for and read one of the documents I have mentioned above. Obviously feel free to search for others if you wish to extend the activity, depending on the time you have available and your personal reading speed.
You can find both Birchall and Ketilson (2009) and Allen and Maghimbi (2009) on the International Labour Organization website.
There is also a policy brief to be found on the ILO website, which discusses the resilience of co-operatives: ‘The resilience of social and solidarity enterprises: the case of co-operatives’, Global Jobs Pact Policy Brief No 10. To find this, go to the ILO website, search for Global Jobs Pact Policy Briefs, and that will take you to a full list of the Briefs, where you can find Brief No 10.
The Birchall (2013) article can be found in the free online Journal of Entrepreneurial and Organizational Diversity.
The working paper by Borda-Rodriguez and Vicari (2013), which also contains a review of literature about the Ugandan co-operative movement, can be found on the website of the Innovation, Knowledge and Development Centre of The Open University: http://www.open.ac.uk/ ikd/. Go to Publications and then click on the link for Working Papers.