Taking root: The revival of cooperatives in Ethiopia

Not all stories coming from Ethiopia are tales of tragedy. Here is one of them. Although the economy was ruined and the cooperative idea discredited by 14 years of communist rule in the country, the ILO succeeded in cultivating a cooperative renaissance. Sam Mshiu reports from Addis Ababa, where the ILO recently established its Regional Office for Africa.

ADDIS ABABA, Ethiopia - The Oromia Coffee Farmers Cooperative Union exports coffee to the European Union (EU), the United States and Australia. The Ethiopian cooperative has negotiated fair trade agreements with coffee dealers in some of the EU countries and set up coffee shops in the United Kingdom and Germany. And as a strong supporter of organic coffee farming, which profits from higher prices and a strong demand, the cooperative union also promotes eco-tourism in the coffee growing areas.

The Haromaya and Meki-Bantu Farmers Cooperative Unions are exporting fresh vegetables to the EU. The Ambo Farmers Cooperative Union is exporting oil seed to the United States. But how is all this possible in a country rising from the ashes of prolonged civil war?

A weakened economy, food insecurity, displaced and homeless people, demobilized soldiers and rampant unemployment - this was the scenario in Ethiopia when the ILO Cooperative Branch went there in November 1993 to launch its human resource development and cooperative reform programmes.

The cooperative movement was among those bearing the scars from wounds inflicted in earlier times. Cooperatives were perceived as communist institutions that had no place in a free-market economy, and their members had lost faith in the cooperative idea, which had been discredited by the former Government.

The first thing the ILO had to do at that time was to change people's minds about cooperatives. Study tours to neighbouring countries were organized to expose Ethiopian cooperative leaders to cooperative experience in a free-market system. The tours were followed by training of trainers and cooperative managers as well as leadership development programmes. Together with comprehensive education and training for current and potential members, particularly women and youths, these programmes tried to reach as wide an audience as possible.

A cooperative renaissance

Thanks to these efforts, in the second half of the 1990s the country witnessed a kind of cooperative renaissance. By the end of 1996 the attitude towards cooperatives had changed dramatically - people, especially cooperative members, had become increasingly aware of the role cooperatives could play in improving their lives.

Moribund cooperatives were resuscitated and new ones created all over the country. In rural areas, agricultural cooperatives became powerful instruments of local development. They allowed their members easy access to farming equipment, and added value through further processing and marketing the farmers' produce.

New forms of cooperatives were introduced to meet farmers' special needs, thereby eliminating middlemen. In urban areas, housing, consumer, industrial and craftsmen cooperatives were established, while savings, credit and social service cooperatives flourished in rural and urban areas alike.

Key to the successful development of all these cooperatives was the Federal Cooperative Commission (FCC), the government agency charged with promoting cooperatives in the country.

The success story of Oromia

Most of this development was taking place in the Regional State of Oromia, where much of ILO's support was directed. The region, the largest and most populous of the country's nine regional states, is leading the way in cooperative development in Ethiopia.

To provide common services to their affiliates and to make economies of scale, cooperative grassroots organizations federated and formed cooperative unions. Some of the 34 unions, including the Oromia Coffee Farmers Cooperative Union and the other examples mentioned earlier, have become international trade partners.

The profits from these ventures are passed on to the unions' coffee-growing cooperative members, thus helping to improve their living conditions and reduce poverty. The latest development in the region has been the establishment of the Oromia Cooperative Bank, which responds to the growing financial needs of cooperative members. Established in 2004 with capital raised solely by cooperative members, the bank has opened seven flourishing branch offices in different parts of the region.

In January 2001, the ILO received an award from the Government of the Regional State of Oromia in recognition of the support given to cooperatives in the region from 1994 to 2000. "The attitude of national, regional and local government towards cooperatives is key to their success. They must encourage their efforts and create a favourable environment for the organization of members," said Jürgen Schwettmann, head of the ILO's Cooperative Branch.

   National figures   

   Oromia figures   

   Number of registered cooperatives    14,423    2,720
   Number of individual members    4,513,718    1,453,018
   Capital (in US$)    40 million    15 million
   Number of cooperative unions (secondary societies)       104    34
   Number of cooperative banks, including branches    8    8
   Number of cooperative training institutions    5    3

Cooperatives contribute to MDGs

Cooperatives in Ethiopia play a significant role in poverty reduction and contribute to the Millennium Development Goals (MDGs):

  • by bringing services closer to their members at highly competitive prices, and increasing members' income by eliminating middlemen and reducing production costs;
  • through improved production methods resulting from education and training activities offered to members of cooperatives, enabling farmers to improve incomes, nutrition and food security through higher yields;
  • through profits accruing from efficiently managed business and reverted to the members, again raising their incomes and reducing poverty;
  • through education and training activities for members promoting entrepreneurship and democratic management practices;
  • by promoting job creation and stabilizing existing self-employment in urban and rural areas.

How the ILO cooperative approach helps indigenous communities in Indonesia

The new ILO project "Promoting Human Security and Reducing Poverty among Indigenous Peoples in Papua" responds to the needs of indigenous communities, the poorest and most vulnerable people in Papua, Indonesia. Funded by the Government of Japan, which will provide US$1.5 million, the new project in Papua will work closely with the State Ministry for the Acceleration of Eastern Indonesia and other local organizations.

Project activities include improving access to credit, skills training and assistance in marketing to enable small enterprises and cooperatives to boost self-employment among the poor. This approach has been tested among indigenous communities in other countries by the ILO-INDISCO Programme and will be adapted to the local situation in Papua throughout the project.

The project is part of the ILO's Decent Work Country Programme for Indonesia, which aims to promote opportunities for women and men to obtain decent and productive work. It will primarily assist indigenous and migrant communities and local government agencies in Papua to reduce poverty and eliminate discrimination in employment and education, particularly among indigenous women and girls.

In addition, it will provide the indigenous communities with culturally appropriate tools and methods to strengthen their capacities, aiming to create decent employment opportunities, sustainable livelihoods and income-generation avenues. The project will also facilitate dialogue between indigenous communities, migrant population and local government, thereby contributing to an improvement in the human security situation.