REVIVING COOPERATIVES IS GOOD BUT LET US DO IT PROPERLY

The collapse of cooperatives in the 1980s has stunted rural development and killed an emerging saving culture, moves to revive them are good but we are best advised to do it properly if we are to reap the long term benefits.

The collapse of the produce cooperatives was a result of bad management, which was exposed with liberalisation of produce trade. A lot of ills in a company can be papered over when it is a monopoly but when competition comes they catch up.

The savings cooperatives suffered a loss of confidence with the high inflation of the 1980s.

Cooperatives are tailor made for underdeveloped countries like Uganda, whose mechanisms for aggregating resources are underdeveloped or none existent.

"We are not poor for lack of resources but for our inability to marshal these resources and leverage them to our benefit...

The new found determination to revive them, though at least 20 years late, is welcome for the above reasons and many more. However how this is done can end up ruining them.

Already we are hearing stories of Savings &Credit Cooperative Societies (SACCOS) collapsing after promising starts a few years years ago. In several cases the seeds of their destruction were sown by the handouts they got from government to start up. Others buckled under the weight of the loans they contracted from government.

If we really want to support cooperatives we would best advised not to throw money at them.

The best thing government can do is offer sensitisation to those not yet involved in cooperatives on how to set them up and the governance issues that come with them. And for those already up and running, offer advisory services on how to be more effective and efficient.

"Cooperatives build up self sufficiency in communities, government charity short circuits the process or worse, attracts nefarious types who do not have the community's well-being at heart...

The cooperative is a powerful tool for societal transformation.

It's most obvious benefit is the mobilisation of resources allowing members to take advantage of economies of scale.

Across the border in Kenya the Mwalimu savings cooperative is the biggest in the country by membership and deposits. With more than 50,000 members and more than $200m (sh700trillion) in savings the sacco that was started in 1974 has developed so far it now offers 15 year mortgages to its members, the teachers of Kenya.

At the height of its powers the Kenya Cooperative Creameries, which was supplied by thousands of small holder farmers, was processing about a million liters of milk daily. By providing ready market for farmers' milk it helped develop the dairy industry to the point that Kenya is a leading dairy producer on the continent.

"Beyond aggregating resources and also because of that cooperatives can serve as powerful attractors of investment. Often working in places out of reach of conventional investors, they serve to stimulate new production and open up markets where there were none before...

In addition they can serve as credible partners for investors looking to spread their risk of entry into markets. Say for instance a coffee roaster wants to enter the market, he may find Bugisu Coffee Union a useful partner as a provider of his raw material. It would be a lot easier buying from BCU than investing millions to build his own supply chain.

And the potential of cooperatives is virtually unlimited.

The French Credit Agricola Group, is listed as the largest cooperative in the world. A banking Union, it was founded at the end of the 19th century by farmers who wanted access to credit tailor made for them. In 2013 the group reported a net income of 31 billion Euros (sh100trillion) or greater than the size of Uganda economy.

The challenge for cooperatives in rising to their full potential for the benefit of their members is that they are often hijacked by politicians or connected individuals who run them into the ground.

The importance of a vibrant cooperative movement can not be overstated but how we pursue this project can set us on the real path to development or leave a bad taste in the months of potential benefactors and set us back many years, again.

BREXIT AND WHY YOU SHOULD PAY ATTENTION TO PEOPLE IN LARGE NUMBERS

Last week the headlines were all about the shock UK vote to leave the European Union (EU).

By a four percentage point margin the British were scared into believing that immigrants from eastern Europe, the middle East and Africa would overwhelm their shores, and a vote to keep them out would be better than staying wed to the largest economy in the world.

The size of the EU economy stands at about $18 trillion compared to the US whose GDP is $12 trillion.

"One can expect that while the pain of the UK's exit will be felt far and wide, the British will feel it more as business relocate to the main land, impediments to their products, services and people are raised in the EU and their holiday trips to the mainland become more expensive...

The UK, despite their hanging on to the prized pound have in fact retooled their economy to life in the EU. While Britain was at the head of the industrial revolution, it's great industrial concerns churning out everything from clothing to cars one end, while chugging great plumes of smoke and spewing effluent the other side, it has over the last few decades shifted away from production to services.

For every $100 of economic activity in the UK $80 is generated from service, $14 comes from production $0.6 from agriculture.

The ease of movement of goods around Europe rendered British industry, with its unionised labour and over reliance on coal, uncompetitive.

Riding on its historical links to its former colonies the UK, rejigged itself into the financial capital of the world.

This shift meant British industry was hollowed out, and with this went the low value jobs that come with manufacturing, the subsequent resentment serving as useful fodder for the Brexit champions.

The brexit lobby think they can reverse this trend and bring manufacturing jobs back to Britain. It is difficult to see how this can happen in the modern world.

The UK has no competitive advantage in manufacturing. They can attempt to throw up trade barriers to support the rejuvenation of their industry but that will only trigger a predictable retaliation from EU their biggest market and that would be that.

"Under the current circumstances even the UK's much vaunted financial services are under threat from Frankfurt and Paris. More job losses...

It's hard to see how Britain benefits.

Of course they can be more stringent in their immigration policies but as The Economist reported last week UK immigrants provide a net benefit to the economy.

Immigrants do the menial jobs the citizens can not be bothered to do, while allowing the British to engage in higher paying more productive work.

But we shouldn't wail more than the bereaved. The British will be just fine in their diminished role in global affairs.

However, their action raises some interesting questions.

The assumption that the benefits that accrue from the free movement of goods and services are obvious and that the general population will not roll them back casually has been found to be that -- an assumption.

This confirms the historical record. That development is never initiated by mass action but by visionary leadership.

It also confirms that such economic shifts as dramatic as from manufacturing to services, which demand a qualitatively better work need to be accompanied by a revamping of the education system and a mass retooling of the existing workforce. Leaving this social engineering to the devices of the market can lead to revolt that is detrimental to everyone.

"The benefits of merging markets, allowing the free movement of goods, services and people and a general improvement in welfare is hard to dispute...

The political processes that try to materialise such desires is often the problem.

Hence the need for a leadership that is not only steadfast in its pursuit for greater markets but one that can drive the consensus in that direction.

Brexit should not be brushed off as something that happened to them, but an event we should study seriously in light of our own efforts to create a regional union.