MOSHI UNIVERSITY COLLEGE OF CO-OPERATIVE ABD BUSINESS STUDIES (MUCCOBS). THE CONSTITUENT COLLEGE OF SOKOINE UNIVERSITY OF AGRICULTURE.

FACULTY OF CO-OPERATIVE AND COMMUNITY DEVELOPMENT DEPARTMENT OF COOPERATIVE DEVELOPMENT AND MANAGEMENT

ASSIGNMENT 1

QUESTION: Give an account of how cooperatives started in Tanzania but with a brief history of origins of present mode of cooperative in the world.
I.
INTRODUCTION.

Various scholars and organizations including International Labour Organization (ILO) have produced various definitions of cooperatives. But both definitions converge on a more general legal definition adopted by the International Cooperative Alliance (ICA). ICA defines cooperative as 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 (1). This implies that in cooperative people come together with a common goal willingly without coercive force, join on their own will. It also means that cooperatives are created by pooling or mixing interests, properties or labors. Members throw in their lot with other members who do the same, with a view to realizing benefits impossible by acting on those impossibilities one after another. Such benefits may include economies of scale, increases in productivity, retention of profits by workers or the comradeship of coordinated group action. Cooperatives are democratically controlled means that management of the cooperatives is on the basis of democracy whereby the top decision making organ is the general assembly ( the meeting of all members of the cooperative organization) of which the one is a member. The general assembly therefore, formulates the policies and guidelines for managing the organization. It also elects the board members of which the pillar of democracy of one member one vote dominates. Cooperatives are jointly owned meaning that all the members are owners of the enterprise and its goal is the mutual benefit of members themselves, with the result that if a co-operative is for-profit, profit is a means only, not an end, and such profit may be sacrificed, and if loss occur it is for all members. Co-operatives are autonomous in the sense that they should not be interfered with regard to states or any other party, though they are typically socially-owned in undivided shares and serve a public good. There are various forms cooperatives which show the same structure of organization both nationally and internationally. These cooperatives were formed with the people of the same goals and interests such as to reduce high life standards in their areas of domicile, to fight for

their rights in the work place, to improve housing conditions and so on. In Tanzania cooperatives were dominated by the peasants who were small scale producers and they formed producer cooperatives. So various forms cooperatives that existed in Tanzania are Producer cooperatives such as KNCU, consumer cooperatives such as the Cooperative Supply Association of Tanganyika (COSATA), Transport cooperatives such as Co-cabs and Coast region Transport cooperative (CORETCO) and Savings and credit cooperatives. Cooperatives on their formation are guided by some core values, ethical values and principles. ICA used these as the guidelines that identify the cooperative without which any cooperative cannot be recognized. Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others. ICA also believes that the co-operative principles are guidelines by which co-operatives put their values into practice. They include Voluntary and open membership, Democratic member control, Economic participation by members, Autonomy and independence, Education, training and information, Cooperation among cooperatives, and Concern for community (1). II. ORIGIN OF THE MODERN COOPERATIVES IN THE WORLD.

Cooperative efforts are as old as human history. Since early man cooperated with others to help kill large animals for survival, people have been cooperating to achieve objectives that they could not reach if they acted individually. The Modern cooperatives originated in Europe in the 19th century, primarily in Britain, France and Germany. The Industrial Revolution in Europe had a profound effect on the way society was organized and on the working conditions and economic situations of many people. In response to the depressed economic conditions brought forth by industrialization, some people began to form cooperative societies to meet their needs. Among them was a group of 28 workers who were dissatisfied with the merchants in their community. They formed a consumer cooperative known as the Rochdale Society of Equitable Pioneers in 1844. They began by opening a cooperative store that sold items such as flour and sugar to members, and the Society quickly grew to include other enterprises. The founders also established a unique combination of 3

principles that governed the affairs of the cooperative.

Among these principles were:

democratic control of members, payment of limited interest on capital, and net margins distributed to members according to level of patronage. Based on its success, the Rochdale principles soon became a model for other cooperative endeavors, and became known as the general principles that make a cooperative unique from other business enterprises. Among the great thinkers and founders of cooperative in Europe were Robert Owen (17711858), Dr William King (1786-1865), Franz Hermann Schulze-Delitzsch (1852, urban), and Friedrich Wilhelm Raiffeisen (1864, rural). Robert Owen who was a trader and industrialist believed that putting his workers in a good environment with access to education for themselves and their children would make the society to live in a mutual and friendly manner and address the working conditions of the time. People got interested with his ideas and many cooperatives sprung up (2). Dr William King was inspired by Owens ideas and he even went further by making the ideas more workable and practical. He advocated the development of consumer cooperatives to address working class issues, and his self-published magazine, "The Cooperator", provided information on cooperative practice as well as theory. King emphasized starting small cooperatives with capital that could be supplied by its members. He stressed the use of democratic principles of governance, and the education of the public about cooperatives (2). In Germany, the success story of cooperatives is inextricably linked with two personalities: Friedrich Wilhelm Raiffeisen (18181888) and Hermann Schulze-Delitzsch (18081883).

Friedrich Wilhelm Raiffeisen was the founder of credit unions in germany. This was an aid association which he created to help farmers and small craft businesses who found themselves in a desperate financial situation. They were burdened by having to pay off their former lords and were inexperienced in the independent management of a business. Failed harvests and famines in the years 1846/47 further worsened the situation. They got into deeper and deeper debt and often lost their livelihood(2).
Hermann Schulze on the other hand, began a campaign of aid whose goal it was to come to the assistance of financially struggling craftsmen in more urban areas. He developed credit 4

structures for artisans and small entrepreneurs. In Schultze-Delitzschs view, it was only possible to achieve a sustainable improvement of economic conditions through bringing together weak individual traders and abandoning heteronomy. According to the principles of self-help, self-administration and self-responsibility, he founded the first raw materials association for carpenters and shoemakers in 1847 and the first thrift and loan association. These small traders become independent (2). In France, the establishment of cooperatives in France dates from the 1750s when several cheesemakers mutual societies were established in the Franche-Comt region. The main founders were the Charles Fourier, Philippe Buchez and Louis Blanc. Buchez and Blanc started Worker productive cooperatives with the aim of assisting workers group by providing them with credit loans (2). III. COOPERATIVES IN TANZANIA

Cooperatives in Tanzania started as early as 1925 with the organization of the Kilimanjaro Native Planters' Association to help African coffee farmers. This cooperative was unregistered. The First Act of Parliament on Cooperative Societies was passed on 12 February 1932 and marks the legal beginning of cooperatives in this country. The Kilimanjaro Native Cooperative Union (KNCU) was then the first legal cooperative in Tanzania, which was registered with its eleven affiliated primary cooperatives on 1st of January 1933. (3) In 1930s in Songea, the Ngoni-Matengo cooperative marketing Union with its three affiliated primary cooperatives was registered. The aim was to buy coffee and tobacco from producer cooperatives. (4) In the 1940s and 1950s other important cooperatives and unions were formed and registered. These were the Bugufi Coffee Cooperative Society in Ngara district, the Mwakaleli Coffee Growers Association in the Rungwe district. The latter went on to change its name to Rungwe African Cooperative Union. Others were the Bukoba Native Cooperative Union in Bukoba district, and the Lake Province Growers Association in the Lake Victoria area, which later changed its name to the Victoria Federation of Cooperative Unions Limited (VFCU), in Shinyanga, Shinyanga cotton cooperative union. (5). The VFCU was a remarkable organization that has gone down in history as a landmark. It grew dramatically in marketing and ginning cotton that was produced by peasants in the lake zone. It 5

facilitated the supply of low priced inputs, such as cotton pesticides and seeds to members, which it purchased in bulk from manufacturers or wholesalers. It also started an industrialization process in the lake zone distinguishing itself in the operation of cotton ginneries. The federation bought and loaned tractors to its members; its famous building (Pamba House) in Mwanza town, where new tractors were on display for members to buy, was almost a meeting centre for cotton farmers in the whole of the lake zone. By the 1960s the VFCU was the largest cooperative in Africa (4). Cooperatives increased rapidly in the country with firm support from the government. Agricultural marketing cooperatives were dominant, but different types of cooperatives were encouraged by the government. Hence the introduction of consumer cooperatives, such as the Cooperative Supply Association of Tangnyika (COSATA) and the Moshi and District Consumer Cooperative Society, the latter of which is still vibrant today. Transport cooperatives, such as Co-cabs and Coast Region Transport Cooperative (CORETCO) were formed, as were savings and credit cooperatives. These formed a cooperative union the Savings and Credit Union League of Tanganyika (SCCULT) (6) After the formation of these cooperatives there was an increased production of agricultural products. Many agricultural products were being exported. Despite the achievements from its beginning, cooperatives faced some challenges. Many of the cooperatives formed after independence began in a hurry and little preparation was undertaken. Many people equated independence with economic development and there was political expediency to open many cooperatives, some of which were not feasible. Complains of mismanagement and corruption were common. In 1966 the president started a special commission of inquiry to find out the problems facing cooperatives in the country. The report short-listed the following five basic problems facing cooperative movement: shortage of the appropriate manpower; presence of an uniformed membership; lack of democracy at union level; lack of skilled manpower; susceptibility of the cooperative movement to political interference. The report later saw the decline of cooperative movement in the country because the government rejected some of the key issues in the report. Instead worked on the recommendations such dissolution of Victoria Federation of cooperative Unions (VFCU), the Tanganyika cooperative Trading agency(TACTA) and the Cooperative Supply Association of Tanganyika (COSATA). (Report of Presidential Committee of Enquiry 1966).

The Arusha Declaration in 1967 was also a stumbling block to the cooperative movement. The Socialist Government looked at co-operatives with suspicion. They were seen as semi-capitalist organizations and as a base for political opposition. In 1967 the Government suddenly dissolved all marketing co-operatives and based this upon accusation of inefficiency and corruption. In their place the Government established parastatal organizations. The Government of Tanzania then instituted a policy that resulted in cooperatives being formed on a "top down" basis without sufficient consideration of economic viability, the availability of trained management, or in most instances, the desires of the members themselves. This move, however, created more problems than it solved. In spite of considerable evidence that the cooperative system was working, the government in 14th May of 1976 issued a decree abolishing the cooperative unions. The primary societies that had served as distribution and procurement point for the farmers were also legally abolished and replaced by multi-purpose cooperative societies under the 1975 "Villages Act." Officially the assets and liabilities of the unions were in most instances turned over to the parastatal marketing and distribution authorities. Much distrust and dissatisfaction were caused among members by these actions. (6) Since the abolishment of cooperatives, the Tanzanian government has been struggling to reestablish the cooperatives. The cooperative societies act of 1982 provided the legal basis for this action. IV. RE-ESTABLISHMENT OF COOPERATIVES IN TANZANIA

After failures of the parastatals which were given responsibility of buying peasant crops and providing price incentives to the farmers, the government formally announced the re-introduction of primary cooperatives and cooperative unions in 1982. Although some of the cooperatives were started again but they couldnt do better as before because most of them went bankrupt. Various cooperative development policies were adopted since then but still there is poor performance of these cooperative societies. Concerned about the continuing poor performance of cooperative societies, the Government appointed a Presidential Committee in March 2000 to look into the contributory factors and advise the government on appropriate measures to be adopted.

The major constraints identified by the Committee included the following:- Inappropriate structure of the Cooperative Movement; Weak capital base; Poor management, misappropriation and thefts; Inappropriate policy and legal environment; Weak cooperative support institutions; Cooperatives out-reach limited within a few sectors; and Lack of cooperative education and training.(7) Recently there has been a rapid growth of Savings and credit cooperatives (SACCOS) than the crop marketing cooperatives. According to SCCULT (SAVINGS AND CREDIT CO-OPERATIVE UNION LEAGUE OF TANZANIA), SACCOS is now the leading type of cooperative in terms of numbers and members. This is partly because many people are now involving in microbusiness activities than before the pre-abolition period. V. CONCLUSION.

The government has done a lot by trying to rejuvenate the cooperatives movement by showing policy reforms since 1982. They have instituted strong institutions such as SIDO and MUCCoBS to support the advancement of the movement in the country. More efforts are needed to be put in areas of alleviating poverty as some of the members are still very poor. Problems of strong politician penetrating in the cooperative societies may lead to the cooperatives to lack autonomy and heteronomically depend on these few politicians in decision making. This should also be address by putting a legal boundary so as to avoid political domination in the cooperative. Another area of concern is transparency and accountability. Accounting records and auditing reports must be disseminated to the members of the cooperatives so as build members trust and commitment to their cooperative. Any kind of mismanagement and embezzlement of cooperative resources should not be condoned. SACCOS should strive to start their own microfinance bank so as to deal with soft credit loans to their own members. This will increase members incentives to participate in micro-business activities that will increase their income and thus meet their economic and social goals.

References:

1. Website of International Cooperative Alliance (ICA) Uniting, representing and serving

cooperatives world-wide, www.ica.coop Accessed on 17th Nov 013.

2. Jack Shaffer, Historical Dictionary of the Cooperative Movement, The Scarecrow Press,
Inc. Lanham, Md., & London 1999

3. Kimario, A.(1992) Marketing Cooperatives in Tanzania: Problems and Prospects,Dar es

Salaam, Dar es Salaam University Press.

4. Maghimbi, S. (1990) Cooperatives in Agricultural Development, in ONeill, Norman and

Kemal Mustafa (Eds) Capitalism, Socialism and the Development Crisis in Tanzania, Aldershot, Avebury.

5. University Press of Africa (for Ministry of Information and Tourism, United Republic of
Tanzania) (1968) Tanzania Today, Nairobi, Aldershot, Avebury.

6. Maghimbi, S. (1992) The Abolition of Peasant Cooperatives and the Crisis in the Rural
Economy in Tanzania, in Forster, Peter G. and Sam Maghimbi (Eds) The Tanzanian

Peasantry: Economy in Crisis, Aldershot, Avebury

7. URT, April 2005: The Cooperative Reform and Modernization Program CRMP: 2005 2015

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