Industrializing East Africa through Co-operativesConference on Harnessing East Africa’s Industrial Potential

29th Feb. – 2nd March 2016Laico Regency Hotel - Nairobi

Unlocking Human Enterprise Potential to realize the industrialization dream

Speaker: Prof. Henry M. Bwisa (PhD)

bwihem@gmail.com; www.professorbwisa.com

Full professor of entrepreneurship @ Jomo Kenyatta

University of Agriculture and Technology (JKUAT)

Chairman: African Agribusiness Incubation Network (AAIN)

Director- Sorghum Value Chain Development Corporation

(SVCDC)

TZ2025

R2020

UG2040

K2030

THIS CONFERENCE IS

ABOUT EAST AFRICA’S

INDUSTRIALIZATION AND

EVERY EAST AFRICAN

COUNTRY HAS A VISION

B2025

INTRODUCTION

Source: http://www.coolgeography.co.uk

NIC= Newly Industrialized CountryLEDC= Less Developed Country

My focus5th coop principle

But wait a minute... What is industrialization? SEVERAL DEFINITIONS…

slideplayer.com

Let’s read between the lines.Large scale introduction is NOT NECESSARILY large scale industries. Mahatma Gandhi warned ... poor countries will not develop via mass production but via production by the masses. I need not tell India’s story of SMEs

www.haikudeck.com

Industrialization

occurs when industry

is introduced on a

large scale to a region

or country www.vocabulary.com/dictionary

This conference is saying that the cooperative way is a good path to East Africa’s industrialization. This, in some academic jargon, will read...

e.a.ind. = ƒ(coops) East Africa’s industrialization is a function of cooperatives

We are saying.... cooperatives are

east Africa's important......

....variables in the process of

industrialization

Coops CAN

Coops CAN

Independent

variables

Dependent

variable

Intermediary

variable

Some facts about east AfricaCountry Rural

population(%)

Contribution of agriculture to GDP (%)

Contribution of agriculture to employment (%)

Burundi 73 30 90

Kenya 75 24 75

Rwanda 72 35 80

Tanzania 69 25 75

Uganda 84 23 60

East Africa 75 27 76

Message = we can ignore the rural and

agriculture sector at our own peril. Rural

and agric coops are a necessity for E.Africa

• To unlock the human enterprise (coop principle 5) potential to realize the industrialization dream for east Africa we cannot afford to sideline the rural scene.

The hope for

rural

transformation:

A

rejuvenating

cooperative

movement in

Rwanda

Espérance

Mukarugwiza

The cooperative

model as an

alternative

strategy for rural

development : a

policy analysis

case study of

Kenya and

Tanzania

Awuor Dondo

We need more of this type of talk

Some benchmarks for the power of rural cooperatives: Milk Vita Coop model Bangladesh, Anand Model in India, kibbutz coops in Israel

Message: we need vertical diversification of agriculture and the cooperative sector has that ability

Cooperative participation largely mean agriculture-led

industrialization

NOW

AND

NEEDED

•Lets talk a little about cooperatives and challenges they face

IF YOU KEEP DOING WHAT YOU HAVE ALWAYS DONE YOU WILL KEEP GETTING WHAT YOU HAVE ALWAYS GOT

• Collective action has been the logical cooperative strategy to achieve the integration of smallholders into dynamic markets. Small scale farmers have been organized into producer organizations to increase their bargaining power vis-à-vis other actors in the value chain.

• Challenge 1:

Value addition to the

context in which farmer

Cooperatives operate

• Observation confirms that many coops have impressed conventional features of entrepreneurs. Innovations are observed e.g. product innovations, process innovations etc

• But cooperatives also require the capacity to build new partnerships and to make strategic use of networks and relations with other stakeholders.

• I am aware that such a transition towards a more entrepreneurial mindset is also conditioned by the socio-political context. For example, cooperatives that were created according to restrictive models, were under government control or operated in a protective environment may find a move towards more entrepreneurial performance much harder.

• Challenge no. 2: formation of effective partnerships outside the cooperative sector

IF YOU KEEP DOING WHAT YOU HAVE ALWAYS DONE YOU WILL KEEP GETTING WHAT YOU HAVE ALWAYS GOT

IF YOU KEEP DOING WHAT YOU HAVE ALWAYS DONE YOU WILL KEEP GETTING WHAT YOU

HAVE ALWAYS GOT

• Observations show that cooperatives are today operating amidst emerging consumer demands, global standardization processes, market concentration, stricter market requirements and price instability.

• Challenge number 3: a SWOT analysis to identify coping strategies

Challenge no.4 attracting the youth into the cooperative movement

• Global youth unemployment is affecting more than 73 million young women and men. East africa is not spared

Country Youth unemployment (%)

Source

Burundi 10.70 World bank 2013

Kenya 67 Kenya country report 2014

Rwanda 0.7 World bank 2013

Tanzania 14.0 World bank 2016

Uganda 64 The Uganda Bureau of Statistics - 2012

The import of the challenges• These challenges will require different roles and capacities

from cooperatives operating in agri-food value chains .

• Instead of holding on to the defensive role they used to play in the past (such as trying to set more favourable prices for producers by reducing the market share of intermediaries, for instance), cooperatives are now challenged to take on a more pro-active role in marketing, updating their organizational structure and engaging in value chain integration.

• A successful transition to this new role requires the unlocking of Human Enterprise Potential through acquisition of particular managerial capacities, especially in the domain of ‘collective entrepreneurship’.

THERE ARE HUMAN CAPITAL RELATED TOOLS

COOPERATIVES CAN USE TO FLOURISH• Capacity building especially in the relevant

technical areas;

• Entrepreneurship and business

development, to energize improvement of

old and formation of new coops.

• Management training to promote and deploy

collaboration.

• Consulting services to meet standards and quality.

•Back to the four challenges mentioned

earlier

•Challenge 1/4: Value addition to the context in which farmer cooperatives operate

•Value addition calls for a more entrepreneurial approach to doing business: such may be entrepreneurial networking

WITHOUT LIFTING YOUR HAND /PEN OFF THE PAPER AND WITHOUT TOUCHING ANY SINGLE DOT TWICE USE ONLY FOUR STRAIGHT LINES TO JOIN ALL THE NINE DOTS HINT: TO SUCCEED

THINK FORWARDS,

BACKWARDS, THINK

VERTICALLY,

THINK

HORIZONTALLY,

THINK

DIAGONALLY, THINK

BEYOND THE DOTS

THINK OUTSIDE THE

BOX

Pliz do me an

exercise

WITHOUT LIFTING YOUR HAND /PEN OFF THE PAPER AND WITHOUT TOUCHING ANY SINGLE DOT TWICE USE ONLY FOUR STRAIGHT LINES TO JOIN ALL THE NINE DOTS

THIS IS A

DEMONSTRATION

OF THE POWER OF

NETWORKING. THE

SOLUTION OF

YOUR PROBLEMS

MAY NOT ALWAYS

BE WITHIN YOUR

OWN BOUNDARIES.

YOU MAY NEED TO

LOOK FOR IT

ELSEWHERE.

1

2

3

4

START AT

HOME IN

KENYA AND....

.....GO BEYOND KENYA

TO TZ TO FIND OUT HOW

THEY DO IT THERE

COME BACK TO KENYA AND TEST THE SOLUTION

YOU MIGHT NEED TO GO AND BENCHMARK IN RWANDA AS WELL

FINALLY YOU WILL SOLVE THE PROBLEM USING INPUTS FROM

YOUR NETWORKS

LET US SAY YOU ARE A KENYAN LOOKING FOR

AN INNOVATIVE COOPERATIVE APPROACH

1

2

3

4

WITHOUT LIFTING YOUR HAND /PEN OFF THE PAPER AND WITHOUT TOUCHING ANY SINGLE DOT TWICE USE ONLY FOUR STRAIGHT LINES TO JOIN ALL THE NINE DOTS

SO, CAN THIS CONFERENCE DECLARE AN EAST AFRICAN COOPERATIVES NETWORK???

The entrepreneurship challenge for cooperatives

• Due to its multiple owners and purposes, the entrepreneurial function within a cooperative tends to be less clearly allocated than in an investor-owned firm.

• First, members have a greater incentive to devote time to private entrepreneurial tasks on their own farms, since the returns to entrepreneurial efforts at the cooperative level will always be distributed among the group.

• Second, capital accumulation tends to be a problem in cooperatives, due to the fact that dividends have to be paid to a large number of members. Capital constraints could mean that wages offered to managers are not high enough to attract the most entrepreneurial ones.

•Need arises for national entrepreneurship policies to unlock the human enterprise capacity of cooperatives

No, the existing small and medium

enterprise (SME) policies are not

entrepreneurship policies

Definition of Entrepreneurship

Policy

• Policy measures

– Aimed at the pre-start, the start-up and post-start stages of the entrepreneurial process

– Designed and delivered to address the areas of motivation, opportunity and skill

– With the primary objective of increasing the supply of entrepreneurs and new firms• t-n to t+42 months

SME policy

1. Help existing

SMEs to overcome

problems currently

faced

2. Focused on firms

(existing

enterprises) and

Business

environment

3. Applies after a

firm comes into

existence

Entrepreneurship policy

1. Encourage people

to set up business to

think entrepreneurial

2. Focused on

people

(entrepreneurs) and

Entrepreneurial

culture

3. Operates to assist

an individual bring a

firm into existence

The interconnection between SME and entrepreneurship policies

Pre-start up

period

Nascent

period

Start up

period

Post-start up -42 months

period

42+ months

period

Entrepreneurship

policy

SME policy

BUILD AN

ENTREPRENEURIAL

CULTURE

CREATE NASCENT

ENTREPRENEURS

CONVERT

NASCENT

ENTREPRENEURS

SUPPORT SURVIVAL

& GROWTH PATH

The three pillars of an entrepreneurship policy = MOS (MOTIVATION, OPPORTUNITY, SKILLS)

ObjectivesDevelop entrepreneurial climate and culture (Favorable attitudes to entrepreneurship to increase business start-up rate)

1. MOTIVATIONPROMOTION OF AN ENTREPRENEURSHIP CULTURE; PROMOTION OF ENTERPRISE; REDUCE STIGMA OF FAILURE, USE OF ROLE MODELS

3. OPPORTUNITYBUSINESS START UP SUPPORT (INCUBATION, MENTORING,

NETWORKS), START-UP FINANCES, REDUCTION OF

ENTRY BARRIERS ETC

2. SKILLSENTREPRENEURSHIP

EDUCATION AND TRAINING AT ALL LEVELS OF EDUCATION

1. GIVE PEOPLE

THE DESIRE&

WILLINGNESS

TO GO INTO

SELF-

EMPLOYMENT

2. GIVE PEOPLE THE

ABILITY TO

SUCCESSFULLY OPERATE

AS SELF-EMPLOYED

3. REMOVE

OBSTACLES TO

START UPS AND

SUCCESSFUL

OPERATION AS

SELF-EMPLOYED

INCLUDE COOPERATIVE EDUCATION

•Challenge no. 2/4: formation of effective partnerships outside the cooperative sector

• I am trying something in Bungoma – one of the 47 counties in Kenya

SUNFLOWER FARMER

ON LAND FISH PONDS

CAKE PROCESSING

VEGETABLE OIL PRESSING

KILN ROOF/RUNOFF RAIN WATER HARVESTING

MARKET

SEED

CAKE

CHARCOAL BRIQUETTES

BIOGASORGANIC MANURE

OIL

THE BUNGOMA 4F (FOOD, FEED, FUEL, FERTILIZER) CLUSTER APPROACH TO INDUSTRIALIZATION: DEMONSTRATIONAL RESEARCH

(On-going research)

DIGESTER

ZEO GRAZING &POULTRY

STALKS

FISH/ANIMAL

FEED

MARKET

FOOD

FEED

FERTILIZER

FUEL

How many value chain based coops can you see?

How are they networked and linked? Any cluster?

Some preliminary lessons learned from my demo research:

• Expand to other organic crops besides sunflower; e.g. sesame, soybean and ground nuts ( crop rotations practiced by farmers) i.e make it a sectoral approach – the oil crop

• On-time, full payment to farmers creates “trust” that is crucial for any partnership.

• Include technical support and other transaction costs, particularly for threshing, packaging etc

1. Private sector e.g. private practitioner/company

• Support of:

Input supply, production, marketing & trading, quality control & certification, processing capacity

2. Consortium of public sector e.g. government/university

• Capacity strengthening for:

Organizational management , Intermediation with service providers (e.g. credit, R&D) , Monitoring for learning

Support to producer organizations can

take a two tracks approach

I propose a PPP cooperative model

Private processing

(value addition) company

Public consumer

institutions e.g.

Government departments

, schools, hospitals,

etc

Cooperative society

Co-operators

co-operators

Co-operators

The governmentIncentives, training, conducive policy,

R&D, regulations etc

Appropriate buying modes

e.g. Pay on order

Appropriate buying modes, subcontracting,

quality control etc

Goods

Services

The AAIN can help.

•Challenge number 3/4: a SWOT analysis to identify coping strategies

OPPORTUNITIES1. INTERNATIONAL

COOPERATIVE MOVEMENT2. POLITICAL WILL3. DEVOLVED GOVERNMENT

(KENYA)4. EDUCATIONAL INSTITUTIONS

THREATS1. STIFF COMPETITION2. GLOBAL INSECURITY3. GLOBAL WARMING4. STRINGENT NATIONAL

REGULATIONS

STRENGTHS1. Rich Natural Resources2. Fair infrastructure3. Cheap Labor4. Large markets

MAXIMAXI STRATEGIESSTRATEGIES GENERATED BY MATCHING STRENGTHS AND

OPPORTUNITIES (SO STRATEGIES) –OFFENSIVE STRATEGIESWRITE PROPOSALS TO

DEVELOPMENT PARTNERS

MAXIMINI STRATEGIESSTRATEGIES GENERATED BY

MATCHING STRENGTHS /OPPORTUNITIES AND THREATS

(ST STRATEGIES) –DEFENSIVE STRATEGIESFORM PPP

MINIMAXI STRATEGIES. STRATEGIES GENERATED BY

MATCHING WEAKNESSES AND STRENGTHS/OPPORTUNITIES (WO

STRATEGIES) –PARTNER WITH EDUCATION

INSTITUTIONS FOR TECHNOLOGICAL ACCELERATION

WEAKNESSES1. Inadequate Liquid Capital2. Slow Technological

Advancement3. Unexploited Sources of

Energy4. Inadequate new forms of

Business Organization

MINIMINI STRATEGIESSTRATEGIES GENERATED BY

MATCHING WEAKNESSES WITH THREATS (WT STRATEGIES) –

MERGE RS

SWOT ANALYSIS TEMPLATE

East African

industrialization

SWOT analysis

Overall recommendation1. Carry out national training needs analyses (TNA) in

the cooperative movement.

Objective: to construct Training of Trainers (ToT) for cooperatives e.g. cooperative entrepreneurship

2. Carry out regional, national, local SWOT and stakeholder analyses on cooperatives.

Objective: to design strategies to unlock human enterprise potential through appropriate strategies including networking models

3. Design entrepreneurship policies on “add-on to MSE policy” basis. Objective: make cooperative movement and agribusiness “sexy” for the youth

Some references

• Galor, Z., 1990, –Conditions for the Success of a New Moshav: The Stage-by-Stage Approachü, Hassadeh Quarterly, Israeli Review of Agriculture, Vol.1, No:2, March, Israel.

• Galor, Z., 1995, The Production Co-operative ” a Tool for National Development, Cooperative Dialogue, Volume 4, No 2, May-September 1995, an ICA ROAP Journal.

• Galor, Z.,1998, Small Scale Industries-Concepts and Realizations: The Israeli Case Study- The Creation of Non-Agricultural Employment (NAE), International Institute of the Histadrut, Israel.

• Galor, Z., 1998a, The Moshav, The International Institute of Histadrut, Israel.

BEFORE I FINISH...

• I HAVE JUST RETURNED FROM KISII COUNTY ENTREPRENEURSHIP SUMMIT WHERE I WAS A JUDGE FOR INNOVATIONS AND A PANELLIST

A chain is as strong as its weakest link

BANANA

PROCESSING

WEAKEST KISII LINK

100+ PRODUCTS

PACKAGING

ETC

FERTILIZER

FINANCE

TRANSPORT

EQUIPMENT

BOTTLING

CHEMICALSPROCESSING

MACHINERY

FARM

MACHINERY

KISII HAS A COMPARATIVE ADVANTAGE IN BANANA PRODUCTION

... AND FINALLY• I am the chairman of the continental African

Agribusiness Incubators’ Network (AAIN) a membership organization born in Rwanda and now registered in Ghana, Kenya, Uganda and soon in S. Africa as a company limited by guarantee. We partner with Forum for Agricultural Research in africa (FARA) and have MOUs with many e.g. The AU. Membership is open to organizations and individuals. Key benefits: agribiz incubation, networking & information sharing. Cooperatives can benefit immensely. Online registration enabled

www.africaain.org

02-Mar-16 H.M.Bwisa -- www.professorbwisa.com 42

THE END

THANK YOU 4 LISTENING and have an entrepreneurial

day – won’t u

Q & A

START COOPERATING WITH YOUR OWN DAUGHTER

I hope I

provoked

u

www.professorbwisa.combwihem@gmail.com