Bugisu Co-operative Union Limited premises in Mbale. PHOTO | FILE
On August 25, 2023, the Sectoral Committee on Tourism, Trade and Industry received instructions from the Rt Hon Speaker of Parliament to conduct an Inquiry into the status, governance, resourcing and value for money for public funds allocated to cooperatives during the period of financial years 2011/12 - 2022/23.
The Committee has effectively carried out the inquiry as instructed and now reports.
Background
Between 1964 and 1990 government supported cooperative financing through the cooperative bank. After restructuring of the banking industry, several banks were closed including the cooperative bank. The government undertook to compensate all depositors the full amount of their deposits, over and above the insured limit of $2,000 (about Shs7.3m).
The liberalisation of the economy led to closure of the cooperatives bank and due to losses arising from the 1979-2006 wars, some regional and national level tertiary cooperative unions collapsed. These included Uganda Cooperative Central Union, Uganda Cooperation Transport Union, the Cooperative Insurance of Uganda and the Cooperative Bank for Financial Services, Uganda Credit Cooperative Union for all SACCOS.
The government took a decision to revamp the cooperatives through compensation for losses incurred during the liberation wars of 1978-79 and 1980-86. An inter-ministerial committee was put in place to verify the claims received from the cooperatives for compensation. The initial compensations were made by the
Ministry of Justice and Constitutional Affairs, later on the MTIC was tasked with the responsibilities of settling the war compensation claims from the various cooperative unions and cooperative societies as approved by Parliament.
In a letter dated August 25, 2023, addressed to the Committee of Tourism, Trade and Industries, the Rt Hon Speaker stated that there were some queries regarding the budgetary allocations and disbursements to various Cooperatives during the period spanning FY2011/12 up to 2022/23.
The letter further stated that these queries raised red-flags to whether indeed public funds were disbursed to beneficiary Cooperatives and utilised for their intended objectives. It is against this background that the Committee was instructed to carry out this inquiry.
History of Cooperatives in Uganda
The evolution of Cooperatives in Uganda can be traced to present-day Mubende District in 1913, where four farmers decided to market their crops collectively. They became known as “The Kinakulya Growers”. This was in response to the exploitative marketing systems that were against the native farmers.
The colonial arrangement was that the native farmers would be engaged in the production of cash crops, such as coffee and cotton, while the Europeans and their Indian allies would concentrate on the processing and marketing of such produce.
The racial division gave Europeans and Indians a chance to gain from the production of these crops at the detriment of the Africans. They then realised that forming cooperative would give them a common voice, purpose and strong bargaining power.
With the colonial administration forcing Africans to produce high-quality crops and sell at low prices, some Baganda farmers in the Midwest of Buganda Region formed the above mentioned pseudo cooperative in 1913.
Nevertheless, the continued exploitation of African farmers ignited strikes that culminated in the formation of many other parallel farmers’ associations, such as the Buganda Growers Association in 1923 and the Uganda Growers Cooperative Society in 1933.
Cooperatives operated under those restrictions until 1946 when the cooperative “ordinance was enacted to legalise their operations. However, some farmers saw it is a legislation that intended to increase government interference and control in their business and many refused to register under it and those registered were considered as stooge organisations
In 1952, Governor Sir Andrew Cohen Listened to complaints of old-formed cooperative societies and instituted a commission of inquiry into the operation and progress of these cooperatives.
The commission report submitted in June 1952, stipulated that it was not proper for the government to continue guiding the private enterprises and that the cooperatives would be stronger if were independent of the government.
Going forward, the government amended the cooperative ordinance of 1946 and enacted the 1952 Cooperative Society Act which was more accommodative and provided a framework for rapid economic growth that made registration acceptable to cooperatives that had defied the 1946 ordinance.
It also provided for both elimination of discriminatory price policies and offered private African farmer access to coffee processing. Thus the co-operative movement expanded immensely and by 1961, Uganda had 21 registered co-operative unions, including the Uganda Co-operative Alliance and 1,662 primary co-operative societies, with a membership of 252,378. By 1960, cooperatives handled 89,308 tonnes of produce, a rise from 14,300 tonnes in 1951, with a turnover of over £9 million annually.
Co-operative unions handled over 61 percent of the cotton in the country, 40 percent of the Robusta coffee and 90 percent of the arabica coffee. By 1971, there were over 2,500 primary co-operative societies, with over 750,000 members and 36 unions owning 53 cotton ginneries and 31 coffee factories. The co-operative movement had assets valued at Shs500 million.
After Uganda attained independence in 1962, the Government then went on to vigorously promote the establishment and diversification of the cooperative movement in the country.
With the government assertion’s that “the cooperative sector of the economy should attain a position of prominence”, agricultural cooperatives that engaged in marketing, processing and export of cash crops became prominent.
The practice of thrift through cooperative enterprises provided a medium for mobilising local savings to finance some of the marketing, processing and credit activities of these agricultural cooperatives. The resultant growth was rapid, as the business handled by these cooperatives increased progressively and prosperity for the farmers was eminent.
In 1968, all cooperatives functions were handled by Ministry of Agriculture, in 1970 they were placed in ministry of Cooperatives and marketing, 1972 they were taken back to the Ministry of Agriculture and in 1976, they split off and in 1981 taken back to cooperatives and marketing.
Status of cooperatives in Uganda
There are various types of cooperatives in Uganda, but the most common ones include agicultural marketing cooperatives, fishing cooperatives, consumer cooperatives, savings and credit cooperatives (SACCOs), farm supply cooperatives, dairy cooperatives, insurance cooperatives, transport cooperatives, cooperatives in crafts services, housing and building cooperatives, poultry cooperatives, mining cooperatives, industrial cooperatives, health cooperative, education cooperatives, and rural electrification cooperatives. Indeed, there could be as many types of cooperatives as the number of economic activities that are undertaken in the country.
According to Ministry of Trade, Industries and Cooperatives, as of August 30, 2012, Uganda had a total of 13,179 cooperatives spread across the country; 46 percent of the SACCOs are located in the central region, followed by Western at 24 percent, Eastern with 21 percent, and Northern at 9 percent. The Western dominated in the area of dairy and livestock with 54 percent, while the Eastern region dominated in the area of crop farming and marking with 47 percent.
The collapse of cooperatives
The death of cooperatives started in 1971, when Idi Amin assumed the country’s presidency through a coup, overthrowing Milton Obote. Military governance under Idi Amin (1971 - 1978) was unfavourable for cooperative development.
The absence of the rule of law, uncertainty of the future, the international embargo on Uganda and insecurity all culminated into bad internal governance to the detriment of not just cooperatives, but the economy as a whole.
The subsequent periods were no better in terms of security and favourable conditions for cooperative performance. Some of the federations that had been formed in the 1960s and early 1970s, such as the Uganda Cooperative Central Union, the Uganda Wholesale Consumer Cooperative Union, and the Cooperative Bank, were adversely affected and most of them simply collapsed.
Further, Amin declared ‘the economic war’, expelling Asians from Uganda in 19722. The departure of other expatriates that followed, coupled with the fleeing into exile of capable leaders and managers, worsened the situation.
Increasingly, pressures of economic and political self-interests, to which those in charge succumbed, invaded co-operatives, leading to mismanagement, corruption and embezzlement.
This marked the beginning of the collapse of the economy, as prices of controlled crops like cotton and coffee were very low, with farmers abandoning them in favour of maize, beans and ground nuts. Cotton production fell from 466,775 bales in 1970 to 32,160 bales in 1980.
Due to smuggling and mushrooming of many coffee factories, the co-operative market share dropped from the near 100 percent to about 37 percent by the time Amin was deposed in 1979,” the research paper says.
Liberalisation of the economy in the early 1990s became the last straw that broke cooperatives’ back. Economic liberalization and privatisation saw the closing of the Ministry of Cooperatives, the divesting of the Cooperative Bank and the privatisation of agicultural produce marketing.
The loss of their assets, including social assets, and the overnight loss of their histoical monopoly over marketing and exportation, without a transition period to the new competitive environment, disabled them. It became nearly impossible for co-operatives to seize opportunities that the liberalisation policies potentially offered, losing to skilled multinationals and shrewd pivate business people.
