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Re: Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises

Jacques Berthelot Solidarité, France
31.07.2012
Jacques

We should not idealize the cooperative model
Jacques Berthelot (jacques.berthelot4@wanadoo.fr), Former lecturer in agricultural policies at universities of Tananarive (Madagascar), Lomé (Togo) and Toulouse. PhD thesis on Les coopératives agricoles en économie concurrentielle, Editions Cujas, 1972.

There are profound contradictions between, on the one hand, small scale Northern and Southern agricultural cooperatives proritizing a strategy of food sovereignty centered on domestic food needs, agro-ecological and labour intensive farming systems and, on the other hand, large-scale Northern cooperatives. Taking the case of the EU – where cooperatives represent 60% of the turnover of the collection, processing and marketing of agricultural products –, the largest cooperatives pursue a strategy similar to the large private agro-industries, creating capitalist subsidiaries abroad and prioritizing the competitiveness of the cooperative business over the prices paid to farmers. To maintain their farmer members' competitiveness they agree with the necessity to enlarge the size of farms with input intensive production systems despite their negative impacts on farm employment and the environment. On the trade side, the EU apex cooperative body, COGECA (Cogeca, Brochure - Agricultural cooperatives in Europe - main issues and trends, 24 November 2010, http://www.copa-cogeca.eu/Main.aspx?page=Papers&lang=en&id=20125), pleads to maintain an efficient import protection within the EU although some large cooperatives prefer a freer trade, but all deny the trade-distorting impact of the huge direct payments received by the EU farmers so that they don't care about their dumping effect and import-substitution effect.

The evaluation by Rainer Kühl of the EU cereals cooperatives concludes: "The larger the size (in turnover or number of members) of the cooperative becomes the more the institutional governance of cooperatives deviates from the traditional cooperative model. More and more the board of directors or the management takes the final decision and there is a growing separation between the member relationship functions, which are assumed by the regional councils and the operational functions, which are assumed by the management. The procedures of internal governance in these cooperatives become more and more similar to those of investor-owned firms. This observation could be made for nearly all cooperatives in all sectors that were analysed" (http://www.lei.dlo.nl/wever.internet/applications/leirapporten/images/sp...).

H.H. Hansen, speaking particularly of Danish cooperatives, is more precise: "Both cooperatives and capital owned companies usually have the objective to ensure owners the highest possible earnings… Profits of member of a cooperative will come through dividends and through more favorable sales or purchase prices… Among the 100 largest food companies in Denmark, 52 per cent of the turn over comes from cooperatives, and 48 per cent from capital owned companies… In recent years, Danish cooperatives have been very focused on global off shoring of production and the use of foreign commodities. For several large cooperatives production abroad now exceeds exports based on the members’ own production… Globalization of cooperatives in the form of foreign members, increased use of foreign commodities, investments in foreign production, etc. will imply a shift of paradigm for many cooperatives" (Henning Otte Hansen, Agricultural cooperatives and globalization: A challenge in future?, 2009, http://www.ifmaonline.org/pdf/congress/09_Hansen.pdf).

This globalized strategy can also be seen in France. The French sugar and cereals cooperative Tereos distributed the 13 September 2011 to each of its 12,000 sugar beet Members 180 euros for each of their 173,700 hectares as dividends paid by its private subsidiaries Guarani in Brazil and Companha Sena in Mozambique producing sugar cane and ethanol. Which corresponded to an average dividend of 2,600 euros per cooperative Member (http://www.tereos.com/rapport-annuel-2011/Tereos_rapport_annuel_2011.pdf) but the average revenue of each cooperator from his average 14.5 hectares of sugar beet was of 50,600 euros (including dividends, additional prices and interest on the cooperative shares). However the average beet producer has a farm of around 100 ha – of which about 75 hectares of cereals and 10 hectares of oilseeds and pulses – which generates a decoupled direct payment (the Single Payment Scheme) of around 350 euros per hectare, adding 35,000 euros of revenues per cooperator. And this without taking into account the revenues from high market prices for their cereals, oilseeds and pulses. In other words these sugar beet cooperators are among the richest French farmers.

In September 2011 21,909 employees (excluding the sugar beet cooperators) of Tereos International were working in Brazil and Mozambique or 82.2% of the total 26,657 employees. Tereos annual report for 2008-09 stresses the "cooperative spirit" motivating its actions: "Since its creation, Tereos has drawn from its cooperative origins a specific approach of its development… Tereos begun as soon as the 1990s a diversification allowing it to enlarge its field of activities in new zones (European Union, Brazil, Africa, Indian Ocean)… under the status of subsidiaries of its hard core constituted by the cooperative. This successful diversification is a response to markets globalization and the critical size of its customers and competitors… Thus Tereos' historical activities, its international development and its diversification continue in obeying to the cooperation values – transparency, solidarity and equity –, but with a modern and prospective vision. Tereos is built owing to its cooperative members but also its 13,500 employees who share a well agreed mutual interest, anchored on the various territories" (http://ligaris.dokineo.eu/Tereos).

However, the employees of its sugar factory Sena in Mozambique do not seem to "share a well agreed mutual interest" with the 12,000 Tereos cooperators, as they were periodically on strike. In early July 2008, 7,000 cane cutters accused Sena for not paying the work made on public holidays and not providing the boots and protection equipment required by law (http://ligaris.dokineo.eu/Tereos). The 8 August 2009, 3,000 cane cutters began a strike for 4 days and burnt 150 hectares of sugar cane to protest against the too low wages – the minimal wage in the sugar sector in Mozambique was of 54.3 dollars (38.9 euros) per month in 2009 – and the lack of protection equipment requested the previous year. The 18 September 2009, as the company did not fulfill its commitments to raise wages, the striking employees burnt an ambulance and six of them were injured after police intervention (Na Companhia de Sena: Falta de diálogo precipitou a greve - conclui ministra Helena Taípo, http://macua.blogs.com/moambique_para_todos/2009/09/na-companhia-de-sena...). The situation worsened in 2010 when Brazilian replaced the Maurician managers: the transport premium was suppressed and some employees must walk 10 kilometers, with wages reduced in case of late arrival to the factory (http://portaldesena.blogspot.com/2011/03/mau-relacionamento-na-companhia...). On the other hand the population of Marromeu, where the factory is situated, complains that the ground water is polluted by the leakage of the irrigation water, full of pesticides and fertilizers, and the effluents of the factory (Rodrigues Gaspar, A população de Marromeu preucupada com a agua potavel, 3 de Setembro de 2009, /2009_09_01_archive.html; http://macua.blogs.com/moambique_para_todos/2011/03/mau-relacionamento-n...). Such a situation would likely worsen as Tereos intends to raise the irrigated area from 7,000 ha in 2011 to 10,000 ha in 2014 and finally 30,000 hectares later on, given the irregularities of pluviometry.

On the other hand the control of Sena by Tereos is a good example of the land grabbing going on all over Sub-Saharan Africa. Tereos International, which controls 75% of the Sena company capital, received a concession of 98,000 hectares for 50 years, renewable, with a possible extension of 15,000 hectares. According to Tereos, producing sugar and ethanol in Mozambique presents three advantages: the land belongs to government (what about the traditional land rights?), there are large tax exemptions (reduction of income tax by 80% and total exemption of taxes on dividends) and duty free-quota free exports to the EU, Mozambique being a less developed country benefitting from the EU "Everything but arms" decision of 2000 (http://www.mzweb.com.br/tereosinternacional/web/arquivos/20100608_Tereos...). According to the World Bank (World Bank, Rising Global Interest in Farmland, Can It Yield Sustainable and Equitable Benefits? 7 September 2010, page 30 : http://www.responsibleagroinvestment.org/rai/node/692), investment in the sugar-ethanol chain in Mozambique values the land price at 9,800 dollars per hectare whereas it is rented by the State at 0.6 dollar per hectare per year for 50 years. Such an increase in value implies a profitability rate of 21.4 % per year (0.6 dollar invested at that rate would generate 9,800 dollars after 50 years).

Let us add that Tereos, which produces 40% of the EU sugar, received 117.9 million euros of export refunds for the marketing year from 16 October 2008 to 15 October 2009 (http://news.smh.com.au/breaking-news-world/eu-sugar-companies-big-winner...), plus 12.7 million euros received by its subsidiary of the French overseas department La Réunion, la Sucrerie du Bois Rouge. Incidentally, given also the predominance of cooperatives in the EU cereals and dairy sectors, they were also the main beneficiaries of the EU export refunds, at least before 2010 when they were discontinued.

To conclude we should not be obsessed by the cooperative statutes, in the North or the South. Cooperatives can be the best or worst types of enterprises and it is not necessary to adopt these statutes to put in practice the spirit of cooperation and solidarity. What is clear is that in the EU as in the other Western countries cooperatives share the same profit maximizing objective for their shareholders cooperators as private companies and do not claim to change the CAP rules and the WTO trade rules even though they are unfair for developing countries farmers. In fact COGECA, the coordination body of all EU cooperatives, is closely linked with COPA, the coordination body of the EU mainstream farmers unions which tend to defend the interests of the largest farmers, first of those of arable crops. As most COPA leaders are also national leaders of large cooperatives, they have a clear tendency to defend CAP rules prioritizing the interests of large cooperatives, which are almost the same as the private agro-industries. Which helps to understand why the EU leaders of COPA-COGECA and their national colleagues have no appetite to change the CAP rules and the WTO Agreement on agriculture (AoA) rules, despite their unfair impact on DCs farmers, and to rebuild them on the food sovereignty principle.

In West Africa there are presently few formal cooperatives within the ROPPA network of national platforms of family farmers associations ("organisations paysannes"). Legal statutes much more flexible than cooperatives, as those of "groupings of economic interest" ("groupements d'intérêt économique" or GIE), were largely adopted in Senegal (http://news.smh.com.au/breaking-news-world/eu-sugar-companies-big-winner...), at least to run the economic activities not implying foreign trade. But all these small farmers organizations belong at the same time to national platforms, members of ROPPA (Network of peasant organizations and agricultural producers of West Africa), which defend clearly the necessity to rebuild their national agricultural policies on the promotion of small family farms, agro-ecological production systems and to rebuild the AoA on food sovereignty, a principle they also defend against the Economic Partnership Agreement (EPA) that the EU pressures them to sign. The same positions are shared by the other regional platforms of African farmers organizations – EAFF (East African Farmers Federation), PROPAC (Regional platform of peasant organizations of Central Africa), SACAU (Southern African Confederation of Agricultural Unions), UMAGRI (Farmers Union of Maghreb) –, grouped together in the PFAOP (African platform of peasant organizations). It is this political dimension which is lacking in Western cooperatives which have lost the spirit of solidarity which characterized the founders of the cooperative movement in the 19th century, all viewing cooperatives as a means to build socialist economies.

At a joint conference on 24 April 2012, organised by Euro Coop (consumer co-operatives) and COGECA in Brussels, entitled ‘Co-operatives working towards a fair and competitive food supply chain’, Claire Bury, Director at Directorate E (Services), backed the idea of integrating co-operative values and principles into the supply chain. Ms Bury said: “The founding fathers of the Equitable Pioneers, in Rochdale, who founded the principles of co-operative movement, brought social conscious into business, which echoes very loudly into the world. These principles are still relevant and make business sense” (http://2012.coop/en/media/news/creating-fair-food-chain-co-operation). For sure but this social consciousness into business should not stop at the EU frontier.