Co-operatives in Africa

Co-operatives in Africa are implemented in different ways in each country. Some do it similar to one another and others do it their own way.

I was surprised to find a statistic the other day which indicates that 17% to 19% of global GDP is generated by co-operatives. However, this made me dig a little deeper. I was curious to understand more about cooperatives, because the South African experience from recent efforts to develop co-operatives has been dismal to be polite.

What I discovered is that in most countries, co-operatives were either used as buying co-operatives in order to lower input costs for SMEs, or as sales co-operatives intended to give SMEs better access to markets without having to lose the focus on the production perspective. Early South African co-operatives were created for the same reasons, and we predominantly agricultural based, where small farmers needed help in reducing costs and / or selling their products.

However, in none of these co-operatives did the business model change. The intent was at all times geared to improving the profitability of the members.

A key problem in the South African context is that the co-operative was perceived as being a new business model, which it was not. It is merely a different legal format for a business. Consequently the business model is often ignored completely, and the result is a dysfunctional co-operative that fails rather quickly. Furthermore, generous funding is simply handed out as a lump sum and without control, often leading to fraudulent misuse of the money.

The South African co-operative needs to get back to the raison d’ etre for co-operatives – communal buying and / or selling. The global Internet bubble of the late 90’s failed for the same reasons, - a total lack of understanding and implementation of a profitable business model. They believed they had a new model which essentially lost sight of the profit motive.

Let us get back to basics and use co-operatives properly.