Cooperative Development Policy

THE UNITED REPUBLIC OF TANZANIA COOPERATIVE DEVELOPMENT POLICY, 1997 MINISTRY OF AGRICULTURE AND COOPERATIVE DAR ES SALAAM JANUARY 1997 - ' COOPERATIVE DEVELOPMENT PO~ICY, 1997 TABLE OF CONTENTS DEFINITION . (i) 1. INTRODUCTION 1 1.1 Background I 1.2 folicy Justification 4· 2. OBJECTIVE OF COOPERATIVE DEVELOPMENT POLICY 4 3. POLICY STATEMENTS 6 4. IMPLEMENTATION STRATEGIES 8 4.1 Overall Strategies 8 4,2 Strategies for Agricultural Marketing Cooperatives. 10 4.3 Strategics for Rural Financial Service.s 12 4.4 Strategics for Livestock Cooperatives 13 4.5 Strategics for Housing Cooperatives 15 4.6 Strategies for Industrial Cooperatives 15 4.7 Strategies for Other Types of Cooperatives 15 5. POLICY MONITORING AND REVIEW 16 6. CONCLUSION 16 Definition of a Cooperative Society A Cooperative Society is an association of persons who have volwitarily joined together for the purpose of achieving a common need through the formation of a democratically controlled organiz.ation and who make equitable oonttibutions to the capital required for the formation of such an organization, and who accept the risks and the benefits of the undertaking in which they actively participate. (i) THE COOPERATIVE DEVELOPMENT POLICY 1. INTRODUCTION 1.1 Background The International Cooperative Alliance (ICA) celebrated its centenary in 1995. However, the year 1995 was also one htm.dred and fifty years since the first modem cooperative society was established by Rochdale Pioneers in UK. The rise and expansion of the modem cooperative movement have their roots in the far reaching economic, social and political changes w1iich took place in Europe in the late eighteenth and all through the ninetieth century, especially the industrial revolution and the liberalization of the peasantry from the fonner fc~stic system. The traditional system disintegrated. Capitalism brought about urbanization which led to appaulling social conditions among the working class. In rural areas small holder f~ers became increasingly indebted to usurious money lenders. The resulting social unrest and insecurity provided a fertile grotm.d for a new social and economic order. ' Since then, the cooperative challenge and goal has been to redress the social and economic system in 1 favour of a better world characterized by democracy, equality, equity and self help. fri Tanzruria; the cooperative idea dates back from 1925 with the formation of the Kilimanjaro Native Planters Association (KNPA). The social and economic unrest wrought by white settlers and Asian businessmen forced small scale peasants to establish cooperatives for social and economic emancipation. ,It is estimated for instance that 40% of cotton bought by Asian businessmen during l 930s & 1940s was not paid for. Before independence, cooperatives were formed from the initiatives of the members. The role of the government was prov1smn of information, sensitization, education and training, inspection and supervision. Cooperative societies maintained their autonomy and practiced the principle of self help. Indeed most of the cooperative assets like buildings, machinery etc. we see today are a heritage from this epoch. After independence, on account of the successful cooperative movement in some pockets of the country, the government took the lead in cooperative development. The state actively promoted the establishment of cooperatives. In the process, cooperatives became increasingly integrated with national objectives rather than members aspirations 2 and interests. As a consequence, capital formation from within the cooperative movement dropped drastically. Ultimately cooperatives became completely dependent on the state through loans. Furthermore, the human resource development and institutional capacity building previously undertaken by the movement died and became the responsibility of the state. From mid 1970's cooperatives came under active government control and absolutely lacked the international standards of a cooperative society. With limited government resources cooperatives became a burden on the government and ~e national economy in general. However, cooperatives in their various forms are becoming an indispensable factor in the economic and social development of all countries, promoting the fullest possible participation in the development process of the all population groups, including women, youth, disabled persons and the elderly. Since the government recognizes the potential of cooperatives in contributing . to the solution of •• economic, social and environmental problems, it will observe and respect ICA Cooperative Principles which are:- 3 • Voluntary and open membership • Democratic member control • Member economic participation • Autonomy and independence • Education training and information • Cooperation among cooperatives and • Concern for community. 1.2 Policy Justification The absence of a comprehensive cooperative policy in the cowitry has to a large extent invited a profuse of experiments like according a village the status of a cooperative society with compulsory membership contradicting the fundamental principles of cooperation. The presence of a cooperative policy, with clear defined goals, objectives and strategies is likely- to minimize deviations from ICA set standards and thus allow • maximum deployment of cooperative principles and practices for social and economic emancipation of the majority of citizens. 2. OBJECTIVES OF COOPERATIVE DEVELOPMENT POLICY Unlike businessmen knowledgeable of, and experienced in modern production and management methods, cooperatives aim at people witho\,11: such 4 2.1 2.2 2.3 2.4 2.5 knowledge and experience. Cooperatives arc formed by disadvantaged groups sllch as small scale holder farmers, the landless, women, youth, craftsmen, disabled and the elderly. It is government interest to see that all its citizens are .. engaged in gainful employment. Therefore the main objectives of the cooperative development policy are the following:- To underscore the fact that cooperatives are important instruments for social, economic and cultural develop~ent as well as human advancement for its citiuns. To acknowledge the contribution of cooperativ~ democratic control of economic activity and .adrutaDle distribution of surplus. To observe and respect cooperative ideol, •. e. new social and economic order) and p e thus guaranteeing autonomy of the cooperative • ernent. To create a conducive environment in which peotne­ are free to associate in exploiting their resources for social and ccotromic development. To provide assistance to cooperative development, particularly in areas of human resource development 5 and institutional capacity building without effect on their independence. 3. POLICY STATEMENTS 3 .1 The government supports The cooperative vision of eliminating social and economic injustices in society. 3.2 • The government respects and guarantees the autonomy of the cooperative movement but shall de­ register societies which fail to live up to the cooperative standards. 3.3 The government recognizes the diverse nature of the cooperative sector which without limitations includes:- ,6gricultural productive and processing cooperatives, Rural supply cooperatives Agricultural marketing cooperatives ~cl improvement cooperatives Consumer cooperatives Fishery cooperatives Service cooperatives Handicrafts cooperatives Workers productive cooperative societies Labour contracting cooperatives Savings and credit cooperatives societies Cooperative Banlcs Housing cooperatives 6· Transport cooperatives Insurance cooperatives ~ Health Coopctatives 3 .4 The government shall protect cooperatives through appropriate legislations. 3.5 The government will play the role of facilitator and catalyst. with emphasis on information provision, sensitiz.ation, -education, training, inspection and supervision. 3.6 The government will encourage women participation in cooperatives by removing inhibiting traditional laws, customary values., and any other constraints. 3.7 The government will register. de-register and liquidate cooperatives where appropriate. 3.8 The government will introduce cooperative education in schools and colleges to prepare the youth for self h~lp and self employment. 3 .9 The government will encourage research into fields affecting their activities such as improvement of quality of commodities, production techniques, • investments and expansions. 3 .10 • The government will continue to foster healthy relations with various donor agencies and 7 governments with emphasis in human resource development and institutional capacity building. 3. 11 The government will assist where appropriate in human -resource-development and capacity building of the cooperative societies. 3 .12 lhe government will encourage cooperatives to move from present mercantilistic approach dominated by production enhancement to the integrated approach, thus linking production enhancement with processing, marketing and maximum use of by• products to meet farmer objectives of net income maximiz.ation. 3 .13 The government will support cooperatives in their efforts to preserve the environments. 4. IMPLEMENTATION STRATEGIES 4.1 Overall Strategies The present social, economic and political environment is conducive for cooperative development. The success of the cooperative movement depends on many factors including increased membership, increased efficiency, transparency and accomtability by the, cooperativ~ leadership to members and mem~ pmlp,cipation in the management of cooperatives. 8 The following g-eneral strategies will be deployed. 4.1.1 Facilitate member empowerment through intensive and extensive member education on obligations and rights. 4.1.2 Facilitate amalgamations of primary societies to raise their economies of scale and raise their relative power vis-a~vis unions. 4.1.3 Introduce decentralized participatory management structures which will enhance members access to information and transparency. 4.1.4 Provide cooperative legal instruments which will ensure accoW1tability of the cooperative leadership to members and sanctions in case of non compliance. 4.1.S Enhance inspection and audit of societies so as to take preventive and deterrent measures before it is too late. 4.1.6 Introduce systems whereby the sector pays for services of education, training, inspection and audit. 4.1.7 Institute security of employment in cooperatives so that good personnel are attracted and retained in the ·cooperative movement. 9 4.1.8 Put into practice the self help principle of cooperatives through nusmg share capital, establishment of trust funds and ,,introduction of cooperative financial institutions. 4.1.9 Government and political leaders at all levels, should refrain from taldng leadership position m .. cooperatives. 4.2 Strategies for Agricultural Marketing Cooperatives I Agricultural Marketing Cooperatives should develop into centres for provision and dissemination of agricultural inputs, implements, technology and information to farmers to empower them to enhance their bargaining position vis-a-vis competitors, participation in the market, income levels and standard of living. In order to achieve this broad objective the following strategi~s are envisaged:- 4.2.l Transform farmers from subsistence farming to commercial farming through application of recommended farming practices and accessing to market informations. 4.2.2 Animate farmers to undertake critical problem analysis, resource assessment, \lllderstand the 10 av~lable alternative- opportunities, production costs and market prices so that they can allocate their resources efficiently by producing relatively high income crops and animal products. 4.2.3 Enlighten farmers on environmental issues and sustainable use of resow-ces to spur their actions in limiting soil erosio~ soil acidification, deforestation and pollution. 4.2.4 Install transparency and accountability systems in the cooperative society. 4.2.5 Enhance farmers income through processing of produce to obtain added value on product and 'through introduction of quality regimes. 4.2.6 Train agricultural extension officers in bottom up techniques so that in collaboration with cooperative officers they can deliver better quality and integrated messages to farmers . . 4.2.7 Identify off farm activities to augincttt income and provide employment to farmers in o:ff season periods. 4.2.8 Establish a sister society, at every agricultural marketing society. for saving mobilisation, and credit delivery- to farmer members and to the agricultural society to finance the marketing operatiOQ&-; 11 4.3 Strategies for Rural Financial Services Todate, cooperatives arc heavily dependent on loans to run their various activities. Internal savings, creation of trust funds, raising of capital, creation of banks have been non existent since 1970s. Cooperatives will be encouraged to put into practice the self help principle. It is anticipated, through concerted efforts of the cooperative movement, that within seven years, the cooperative movement will be to a great extent financially independent in tenns of term loans and in tum therefore enhance their autonomy, productivity and incomes to members. The following strategies will be deployed to achieve the goals. 4.3.1 . Sensitization and education to increase membership in cooperatives. 4.3.2 Introduce incentives for members to increase share capital. 4.3.3 Societies will be encouraged to establish trust funds for various purposes like inputs supply, crop procurement. 12 4.3.4 There will be general promotion of savings and credit cooperative societies which will provide financial services pcrta;oiog to deposits, interest and loans, 4.3.5 Promotion of district/regional cooperative banks will also be given due weight. 4.3.6 Human· resource development and institutional capacity building of the rural financial institutions will receive maximum support. 4.3.7 The government will strengthen· the cooperative department to enable it offer education, and training.· 4.3.8 The government will strengthen inspection and audit services of the rural financial institutions. 4.3i9 The object and means of cooperative development is members. Member. empowerment through provision of informations, regular ~cial statements, management of the rural financial institutions and audited accooots will be enfo~ble by law. 4.4 Strategies for Livestock Cooperatives Tanvmia has a large resource base in livestock industry with 60 million hectares of suitable livestock lahd with canying capacity of 20 million heads of cattle. However, the subsector has remained un­ developed thereby failing to contribute optimally to 13 the well-being of livestock keepers themselves and the national economy at large. Strategies for livestock cooperatives are:- 4.4.1 In collaboration with livestock division, the Cooperative Division will undertake action research to understand the environment, study existing marketing arrangements, appraise potential for group action and identification of critical development constraints. 4.4.2 Promotion of livestock cooperative societies jointly with livestock extension staffs. 4.4.3 Rai~ members awareness on importance to increase shares, esta~lish trust funds for purposes of acquisition of veterinary drugs, equipment, feeds, maintenance of dips and other investments. 4.4.4 Institute appropriate training programmes to livestock marketing cooperatives personnel by revision of Hand book for Managers of livestock marketing societies. 4.4.5 Develop and maintain appropriate physical marketing infrastructural facilities for the domestic market in Tanzania. u 4.5 Strategies for Housing Cooperatives The Ministry of Lands and Housing will continue to provide technical services for housing cooperatives in collaboration with the Ministry of Agriculture and Cooperatives. 4.6 Strategies for Industrial Cooperatives The Office of the Vice President (poverty alleviation) the Ministry of Industries and -Trade. (SIDO and SICATA), the Ministry of Labour, Ministry of Minerals and Energy will support emerging groups, associations, precooperatives and cooperatives of industrial nature including mining cooperatives by provision of detailed ac;lvice, practical assistance and relevant training. 4. 7 Stratepes for Other Types of Coo~eratives Although all cooperatives will get appropriate support, more attention will be dircc~ to Agricultural Marketing Cooperatives, Livestock Cooperatives and Rural Financial Services where with concerted and joint action of key players, , positive results can be realized in medium term.. - 15- - 5.0 POLICY MONITORING AND REVIEW This policy document as for all oolicv formulation is based on the current perception of the socio­ economic environmental matrix. In view of this fact, the government will carry out regular evaluation of the impact of the policy as a basis for carrying out policy reviews. • 6.0 CONCLUSION 'Jhc importance of Cooperative Societies as people• s organizations is reflected in the opporttmities they provi4"e in the mobilization of local resources for local development.· In the foregoing, the government has briefly stated the support which will be given to th~ cooperative movement to enable its members to realize • their inherent strength and to contribute positively to the overall national efforts towards devel9pment; Through cooperatives, people will be encouraged to take active participation in the shaping of the economy along their wishes. The cooperative movement in this case is not only a means to economic ends but it is also an instrument through which the cooperators have a say in various policy formultrtions and implementation of the same, It is the belief and sincere hope of the government that the 16 people will respond to the call for them to form these important democratic organi7.ations. The--J)Olicy----&bo-affirms government's recognition of coopera.tjves which are service oriented as distinct from other types of private enterprises like companies or partnership which re essentially profit oriented. The government will endeavour to formulate workable strategies in order to tackle problems that currently face cooperatives at their different levels, those that are anticipated and those that have not been dealt with in this policy or in any other policy documents of this country. 17