UNIT 7
Agriculture Institutions: Cooperatives
OBJECTIVES
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Define cooperatives as a form of business
Explain the origin of agricultural cooperatives in Namibia
Explain the basic economics of cooperatives
List the characteristics of cooperatives
List the types of cooperatives in Namibia
List the advantages and disadvantages of cooperatives in
Namibia
Explain how to organize and operate a cooperate
WHAT ARE COOPERATIVES AND ARE THEY
NEEDED?
Def: Cooperative is a voluntary business owned and
controlled by its member-patrons and operated for
them on a non profit or cost basis.
 Why farmers organize agriculture cooperatives?
 Problems faced by farmers:
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Sell cheaply as producers and buy high as consumers.
Relatively small share of the consumer price.
Solution: Form cooperatives to gain control over the
purchase of farm inputs, the marketing of farm
outputs and the provision of services unavailable in
the communities. Also to provide a wide range of
services to help sell farmers products and help
farmers purchase their needed inputs.
HISTORICAL DEVELOPMENT OF AGRICULTURAL
COOPERATIVES IN THE REPUBLIC OF NAMIBIA
Early agricultural cooperatives
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Before 1990, all functions of controlling cooperative in Namibia were
performed by the Registrar of Cooperatives in Pretoria, RSA, under
Ordinance No.15 of 1946. This function was transferred to Namibia after
independence.
Amended: Co-operatives Act, 1996 (Act 23 of 1996)
Ordinance prevented most cooperatives other than
agricultural
marketing & supply (AGRA coop) & consumer cooperatives from being
legally registered in Namibia.
Encouragement of cooperatives in Namibia started during 1990, when
government passed important legislation which encouraged the
development of cooperatives.
There are currently 84 registered cooperative in Namibia. Examples;
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AGRA
ALFA
PAMWE- specialize in communal areas
SENTRABOER
South African cooperative with subsidiaries in Nam
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ORANJE
MEATCO
BASIC ECONOMICS OF COOPERATIVES
What the major considerations for the existence of
cooperative?
 (a) Commodity sector.
 (b) Imperfectly competitive markets.
 (c) Farmers lack market power.
 (d) Cooperatives enable farmers to vertically integrate.
 (e) Joint vertical integration through cooperatives
often benefits farmers.
PRINCIPLE OR LEGAL CONCEPTS OF
COOPERATIVES
The following are some of the main legal concepts for an
entity or organization to be considered or operate as a
cooperative in Namibia:
(a) Ownership and Control concept:
Owners are patron who control and own the entity but not
investors.
 Cooperative attempt to
minimize cost and attain maximum
satisfaction for its owner-patron.
 To ensure that no patron controls the cooperative there are bylaw
that stipulate one person, one vote regardless of the amount a
patron invest.
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(b) The concept of equitable distribution of returns over cost.
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Returns after deducting cost are returned to owners on an
equitable basis. This ensures that cooperative operates for the
mutual benefit of members.
PRINCIPLE OR LEGAL CONCEPTS OF
COOPERATIVES………
(c) The concept of limited returns on owners capital
Owners invest in cooperatives to benefit from the services
offered rather than expecting profit on investment.
 This ensures that a great emphasize is placed on promoting
efficiency in marketing or buying activities.
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(d) The voting right concept
One vote per member regardless of the amount invested by
each member.
 Ensure
that all users are given fair treatment by
cooperative and large investors or users do not dominate
control of the organization
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TYPES OF COOPERATIVE ORGANISATIONS
(a) Independent local associations
 People hold direct membership and participate in all affairs of the
cooperative.
 The opinion and actions of each member have an influence
because of small area coverage and the small number of members.
 They are limited in what they can do because of their small size.
 They often join other large cooperatives to conduct mass
marketing, purchasing or manufacturing operations.
(b) Federated associations
 Composed of several local association operating together as an
integrated unit.
 Farmers are members of the local association which is a member
of a regional association.
 The banding together is to secure greater business power and
efficiency.
TYPES OF COOPERATIVE ORGANIZATIONS…..
(C) Centralized cooperative associations
 Patron is a direct member of the central organization and
exercise control through delegates sent from different areas
to the annual meeting of the central organization.
 Advantage: Centralized control that makes possible prompt
and uniform decisions for all local outlets.
 Disadvantage:
Lack direct membership participation
possible in federated cooperatives and local units also have a
limited amount of autonomy.
(d) Mixed associations
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These cooperatives
are both totally centralized and
federated.
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They have both the marketing and purchasing operations.
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The combine into regional and national association in order
to operate manufacturing enterprises or enhance bargaining
power with non-cooperative concerns.
KINDS OF COOPERATIVES BY FUNCTIONS
(a) Marketing Cooperatives
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Cooperatives through which farmers sell their products.
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They may collect members products for sale, grading and
packaging and other functions.
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Objective: Obtain the greatest possible amount for the product of
the farmers-owners.
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Marketing cooperative are very important in Namibia. About a
third of Namibia’s total annual raw agricultural product value
are marketed through cooperative. AGRA and ALFA are the
nations largest agricultural marketing cooperatives in Namibia.
KINDS OF COOPERATIVES BY
FUNCTIONS....
(b) Supply or purchasing cooperatives
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Cooperatives through which members buy their farm
supplies.
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Some purchasing cooperatives are engaged only in
either wholesaling or retailing e.g. Likwana Farmers
Cooperatives in Caprivi region that buys agricultural
inputs for its members.
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The objective is to effect saving for member farmers
on the input they buy.
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Saving, from buying at lower prices (discounts from
large input purchases) as well as higher quality and
better adapted supplies and equipment.
KINDS OF COOPERATIVES BY
FUNCTIONS……
(c) Service cooperatives
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Cooperative that provide members with improved
services or services that members could not otherwise
obtain.
Some their services include: credit, insurance, electric
power, irrigation and drainage e.g. the largest service
cooperative in Namibia is the Farm Credit System.
(d) Processing cooperatives
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Cooperative engaged in the packaging or processing of
the farmers product.
Meat processing, fruit packaging and vegetable canning
association are example.
Processing cooperatives are also engaged in the
marketing service of wholesaling the finished products
e.g. AGRA and ALFA
ADVANTAGES OF COOPERATIVE
(a)
(b)
(c)
(d)
(e)
Greater Bargaining power
Cost reduction/increased returns
Quality Product and services
Market Expansion
Expansion into new supply Market
DISADVANTAGES OF COOPERATIVE
(a) Financial and Capital: Cooperatives are unable to
secure additional funds like non-cooperatives that can
sell additional shares. More capital are require in
modern large firm sized in order to make entry into
new fields effective and competitive. How to secure
these amount of capital is a major problem for
cooperative.
(b) Management Making: Problems with selection of
boards of directors. Cooperatives rely on their patronmembers for their director and they might not poses
the needed skills needed to run a large and complex
manufacturing and distribution enterprise.
(c) Decision-making: Cooperatives tend to react slowly
to changing business and economic conditions because
decisions are usually taken by consulting all members
and sometimes takes a long time.
ORGANIZING AND OPERATING A
COOPERATIVE
Preliminary steps of organizing a cooperative:
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Sign up the required number of members.
Obtain the pledged capital and arrange for capital loans.
Draft the legal organisation papers to include the bylaws,
article of incorporation, membership application
procedures, production/marketing agreements, etc.
File articles of incorporation with the Ministry of
Agriculture, Water and Forestry.
Arrange first meeting of members.
Elect board of directors from charter members.
OPERATING A COOPERATIVE
Purpose: Cooperatives are often called non-profit
because profits from their operations are
distributed to members who then pay taxes on
them.
Ownership: Cooperatives are owned by members
and exist solely for the purpose of serving the
members unlike corporations that operate to
serve their investors
FINANCING COOPERATIVES
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Equity capital: Money invested by owners and is normally put
into the business and left there indefinitely.
Debt Capital: Borrowed money, usually from non owners and
periodic interest payments are made on it and there is a specific
date when it must be repaid.
In addition to the above two form of capital for cooperatives
there are other method/form of capital called the In between:
Marketing contract: Mutual agreement between farmer and
cooperative stipulating that the farmer will deliver all contracted
commodity produced to the cooperative. Cooperatives will process and
market all commodities delivered.
 Pooling: Products with the same grade are pooled together and
marketed together. Members are paid the average price received by
the pool. Pooling gives highest return to those who produce the best
quality and spread the risk of fluctuating prices among members.
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END!!! THANK YOU. QUESTIONS??