Tryaksh International Journal of Business & Management


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Volume-1 Issue-1, 2021


Performance Effectiveness of Agricultural Cooperatives in the Egyptian Newlands: Case Study of the Agricultural Cooperatives in Nasr Canal Command Area of New Nubariya

Diaa O. El-Ansary

Associate Professor, Precision Agriculture Laboratory, Department of Pomology, Faculty of Agriculture, Alexandria University, 21545, Egypt.

Suggested Citation :

Basma Saad, Diaa O. El-Ansary and Sherin Sherif. Performance Effectiveness of Agricultural Cooperatives in the Egyptian Newlands: Case Study of the Agricultural Cooperatives in Nasr Canal Command Area of New Nubariya, Tryaksh International Journal of Business & Management (TIJBM), Volume 1 Issue 1: Tryaksh. 1(1): 1-13.

Abstract

Abstract
Egypt has a long history with consumer and producer cooperatives that dates to the late 1950s and till today. Both types of cooperatives are government-owned and operated. While consumer cooperatives evolved smoothly over the years with a significant improvement in effectiveness with the economy gradually switching to a complete market system, producer cooperatives suffer from lack of effectiveness. Farmers complaints about lack of effectiveness of the agricultural cooperatives is a popular debate in Egypt. The main objective of this study is to quantity an effectiveness measure taking into consideration the points of views of the farmers and the cooperative managers. Agricultural cooperatives were surveyed via personal interviews. Six cooperative managers and two hundred farmers are interviewed face to face. In assessing effectiveness, the study has extended and modified the Robert Elkin and Mark Molitor model.

The effectiveness measure modifications resulted in having a measure of the organization’s degree of effectiveness of agricultural cooperatives through the estimation of four indicators: capital (four items), human resources (four items), administrative (four items) , and the cooperative objectives fulfillment (fifteen items). Results show overall effectiveness levels below average with ratios of 42.81% and 46.92% for farmers and managers, respectively. The organizational and administrative indicator being the weakest from the farmers perspective. Cooperative managers cited that the indicators of human resources and capital resources to be the weakest. Both the farmers and the managers commonly conformed that the indicator of the cooperative goals fulfillment to occupy first place in impacting effectiveness.
Keywords: producer cooperatives, performance effectiveness, Egypt’s Newlands.

Full Text

Introduction Background and the Problem Egypt is probably one of few world economies that wedged with cooperatives for decades. Both of consumer and producer cooperatives emerged in the late fifties, ever since the political system in Egypt was of the socialist command type. At that time, the country has switched from the monarchy ruling to the socialist command system, with the latter’s philosophy well lasting till the 1980s. For over six decades, going back to the year 1954, Egypt has adopted the cooperatives system as a way of mainly availing agricultural produce and food to the Egyptian population through consumer cooperatives. Farmers cooperatives mainly aimed at helping the poor farmers by availing inputs of production. At that time, Egypt was experiencing food shortage due to the government embracing a philosophy that the economy is less developed because of relying heavily on the agricultural sector; a vision proved disastrous later on and adversely impacted Egypt for decades to follow till the day.

Lack of having an efficient market economy then, combined with abandoning investments in the agricultural sector resulted in the country experiencing severe food shortage. Egypt turned to be a major grain and food oil importer, among others, after being a food exporter for tens of decades. Agriculture contribution to the country’s GDP dropped from over 40% during the monarchy era to 11.7% in 2019 (CAPMAS, 2019). Food prices skyrocketed, black markets emerged, deadweight loss resulting from the misallocation of resources kept creeping up, and most food products could hardly be found in the retail markets. On the other hand, farmers suffered from low incomes, non-availability of needed agricultural inputs, and several marketing problems due to having small to tiny acquisitions because of the agricultural reform laws and legislation adopted by the socialist governments for decades.

To overcome that, the socialist governments found the answer to these problems in the initiation of governmentowned and operated cooperatives. The country started with the establishment of consumer cooperatives to avail food at reasonable prices to the growing population. Nevertheless, long queues and disputes were a common scene on the gates of these cooperatives with consumers trying to grab food while it lasts. A phenomenon well lasted till the end of the 1990s. With the political system gradually switching to the market system, consumer cooperatives kept improving in shape and performance. This is mainly because of the enormous investments made in the agricultural sector, particularly from the year 2014 and on. Consumer cooperatives lasted till the moment, but in a much modern view, making consumer cooperatives looking somewhat likesome privately-owned supermarkets, except for offering less varieties of products, particularly the imported ones, at reasonable prices (ElShazly, 2010).

Farmers cooperatives emerged in the late 1950s early 1960s, with the initiation of the agricultural reform laws implemented by the Egyptian governments limiting agricultural acquisitions to a maximum of five feddans per person, among many other “social” measures. Historically, farmers cooperatives are government owned and operated. Farmers belong to the cooperative with insignificant membership fee to be paid. However, if the farmer does not register in the cooperative, he will not be able to receive the inputs of production at some subsidized prices. And contrary to the case of the consumer cooperatives which went from bad to good with the evolution of the market system, farmers cooperatives experienced mismanagement and corruption for decades. Till the date, farmers cooperatives are classified by farmers as being ineffective and do not provide them with the things they need, in either quantity or quality. Complaints about these cooperatives and their corresponding weak performance are the common themes farmers keep spreading (Abdel-Zaher, 2014).

Obstacles and impediments hindering the performance of farmers cooperatives, which are claimed and reported for years by all agents dealing with the farmers cooperatives are those of: lack of trained and experiences staff, less government subsidization and support to these cooperatives, misapplication of the cooperative principles, having smallsized cooperatives which hinders their performance, lack of facilities and weak infrastructure, having multiple governmental monitoring agents resulting in confusion and the like, bad quality of services offered to farmers, implementation of incorrect accounting procedures, weak self-financing, existence of legislative impediments which prevent the development of the cooperatives, and most importantly weak contribution of the cooperatives to availing needed agricultural inputs to the needy farmers (a major objective of initiating these farmers cooperatives), (National Planning Institute, 2001). Most of these impediments are addressed in this study through making a trial to measure the effectiveness of these farmers cooperatives. The quantitative measure of effectiveness the study comes up with would indicate whether the farmers cooperatives are effective or not. This is made considering the farmers on the one hand, and the cooperative managers, on the other.  

Objectives This paper addresses farmers cooperatives effectiveness via surveying a sample of both the farmers benefitting from their services and the governmental managers working and operating these cooperatives. The main aim is to identify the cooperatives bottlenecks hindering performance and the main obstacles limiting their effectiveness. An evaluation and assessment of the degree of effectiveness of farmers cooperatives in the Egyptian newlands region of Nasr Canal Command Area in New Nubariya is the study’s main objective. More specifically, the objectives of this study are: 1. To establish a method of performance effectiveness measurement which could later be applied in other regions of Egypt. 2. To quantify a performance-effectiveness scale in the study area taking into consideration the points of views of the farmers and those of the managers of these cooperatives. And 3. To identify the differences of performance indicators between the farmers and the cooperatives managers, and to recommend what factors should be stressed on to improve effectiveness.

Review of Previous Literature This section presents some of literatures made on the effectiveness of agricultural cooperatives in different parts of the world. Conclusions which could be extracted from these literatures are presented in the end of this section.

Cain et al (1989) examined farmers’ assessment of the effectiveness of cooperatives as compared with proprietary firms in providing goods and services. The areas of consideration were marketing, market share, business functions, service, stability, and public involvement. Farmers indicated that cooperatives’ greatest advantages were in the areas of service and public involvement. Respondents indicated that cooperatives were more willing to provide low profit products and services, establish programs that best meet needs, provide low profit products and services, and provide a more dependable source of supplies and services. Cooperatives further provided a greater enhancement of welfare and in general reduced the risks facing farmers.

Burt and Wirth (1990) reported in their study the results of a survey of attitudes of commercial farmers and supply cooperative managers about agricultural supply cooperatives. Cooperative managers and farmers frequently made significantly different responses to questionnaire statements. With a few expectations, farm size and farmer age did not appear to influence perceptions about supply cooperatives. Whether a farmer was a cooperative member was important in some cases. Lower prices in lieu of easy credit and patronage refunds were found to be acceptable to farmers, but not at the expense of good service. Managers placed great importance on member loyalty to the supply cooperative without regard to price consideration.

Drivas and Giannakas (2006) developed a game-theoretic model of heterogeneous consumers to analyze the effect of cooperative involvement on quality-enhancing product innovation activity, Analytical results showed that the involvement of the member welfare-maximizing coop in R&D can be quality and welfare enhancing by increasing the arrival rate of product innovations and reducing the prices of food products. The effectiveness of the coop is shown to depend on the nature of product differentiation and the relative quality of its products, the degree of consumer heterogeneity, and the size of innovation costs.

Lohr and Park (2008) evaluated survey evidence from U.S. organic farmers to identify the factors influencing effectiveness ratings of cooperative extension advisors by organic farmers. A nonlinear logit model is specified for the ratings provided by organic producers, and critical demographic and management factors that influence the ratings are identified. Results indicated that part-time and newer adopters of organic farming methods are more likely to rate extension service providers as effective providers of information. Scenarios to predict extension effectiveness when interacting with specific groups of organic farmers are developed.

Hanson et al (2010) reported that the remade cooperatives and the unions of cooperatives are struggling in Bosnia and Herzegovina. Their paper examined the needs of the agricultural cooperatives in order for them to be more successful and identified what support will likely come from the unions of cooperatives and what support must come from other sources. Data were obtained through: 1) questionnaires to a large group of cooperatives, 2) focus groups with a smaller number of cooperatives, and 3) personal interviews with union of cooperatives representatives. The findings indicated that the unions of cooperatives are working on issues such as registering and auditing cooperatives and resolving land ownership conflicts. The cooperatives also need help in business management, marketing, legal services, and organizational effectiveness. The unions will not be able to help in these areas, so nongovernmental organizations will need to provide these educational programming for farmers.

Katchova and Woods (2011) examined the role that food consumer cooperatives play in the local food networks. Data were collected from three case studies with leading food cooperatives and a national survey of the general managers of food cooperatives. The authors identified the emerging business practices in local sourcing as a differentiation and member recruitment strategy for food cooperatives. The analysis identified several clusters of strategies used for local food procurement, based on the extent to which the cooperative is involved in procurement activities at the farm, at the distribution center, or at the food cooperative. Results showed that when compared to other grocers, food coops have clear advantages in working with local producers and oftentimes played a key role in the producers’ business viability.

Butt et al (2011) revealed that the cooperative effectiveness of agencies such as evaluation will lead to discover the weakness and strengths for further improvement of cooperative programs. Their study was designed specially to see the effectiveness of the working of agricultural extension staff as perceived by 300 farmers in district Okara-Pakistan. Results showed that most 45% of the respondents belonged to the old age (31-40 years) category and most 30% of the respondents were above illiterate. An overwhelming majority 77.33% of the respondents was in fall radio category. Whereas only 29.33% of the respondents reported that they had contact with Extension Field Staff. An overwhelming majority 74.33% of the respondents indicated lack of mobility as the major constraints in approaching agricultural extension education services. It is recommended that educational level of the study area should be increased, and government should ensure adequate availability of rural infrastructure facilities.

Issa et al (2011) placed emphasis on identification of various extension delivery channels used by various agencies and institutions, and the effectiveness of each of the channels in imparting knowledge, skill, and attitude to 600 interviewed selected through multi-stage random sampling techniques in Ogun and Osun States, Nigeria. Descriptive statistical techniques and correlation analysis are used. The study showed positive and significant correlation between the effectiveness of extension delivery channels and level of education, income, membership of association, and farming experience. Farmers’ perceptions of the use of extension delivery channel in the study areas ranked very low showing the ineffectiveness of the delivery channels. The most effective extension delivery channels are other farmers, friends/relatives, radio, and extension agents.

Brown et al (2013) identified that communicating the cooperative value package to member-owners as the most critical challenge among U.S. agricultural cooperatives. Rural cooperatives in three states are surveyed to identify current communications methods and to elicit the effectiveness of communicating key messages through those efforts by conducting a simple regression analysis. Verhofstadt and Maertens (2014) analyzed the inclusiveness and effectiveness of agricultural cooperatives in Rwanda. They estimated mean income and poverty effects of cooperative membership using propensity score matching techniques. Heterogeneous treatment effects across farmers were examined by analyzing how estimated treatment effects vary over farm and farmer characteristics and over the estimated propensity score. Results showed that cooperative membership, in general, increased income and reduced poverty and that these effects are largest for larger farms and in more remote areas. Evidence is found of a negative selection as impact is largest for farmers with the lowest propensity to be a cooperative member. Steklá et al (2015) analyzed the development of the capital structure and capital disparity across the farmers’ cooperatives from fourteen regions of the Czech Republic for time series 2009 – 2013.

The authors found out that one of the major factors, which affect the economic effectiveness, is suitable capital facilities of enterprises. In case of correct adjustment of capital structure, it is necessary to consider a number of factors which operate on the structure of capital. The analysis used the debt leverage indicators and method of comparative statics. Data are obtained and processed from the database of enterprises of Albertina. The impact of capital structure indicators on the profitability of cooperatives seemed to be insignificant during the monitored period.


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