An Assessment on the Role of Cooperatives in Livestock Marketing in Borana Zone of Oromia Region, Ethiopia

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1 An Assessment on the Role of Cooperatives in Livestock Marketing in Borana Zone of Oromia Region, Ethiopia By: Roba Huka Dido (MA) Lecturer in Department of Cooperatives College of Business and Economics Hawassa University Paper presented in National Conference on Cooperatives Development in Ethiopia jointly organized by FCA & Hawassa University May 7-8 Hawassa, Ethiopia

2 BACKGROUND OF THE STUDY Ethiopia has the leading livestock population in African continent and the animal population census (CSA, 2004), estimates the livestock population of Ethiopia at million cattle, million sheep, million goats and 2.31 million camels. Livestock production is a major livelihood in the pastoral areas of Ethiopia. Although herd building is a priority motivation for pastoral survival, pastoralists in Africa traditionally have sold animals and animal products to obtain modest amounts of cash income (Solomon 2005). The semi-arid Borana Plateau in Southern Ethiopia is home to 1,113,538 Borana pastoralists and supports over one million head of cattle as well as large number of goats, sheep, and camels (BZRMEO, 2010)

3 Cont d However, Many social, economic, ecological, and policy factors have been cited as constraints that limit commercial livestock trade among the Borana pastoralists (Coppock et al., 1994). There are 840 primary livestock cooperatives in Ethiopia for which 552, 146, 67, 52 & 23 from Oromia, SNNPR, Amara, Somale and Afar Regions respectively with the total capital of 9.2 million ETB and the total members of 34,746 (FCA, 2010). Cooperatives were emerged as defense mechanism to fight against rugged individualism and totalitarian economy. LMCs were established in Ethiopia with the main aim of improving the living standard of pastoralists and agro pastoralists

4 STATEMENT OF THE PROBLEM Preliminary studies in Borana zone and other reviews related to livestock marketing of the zone have been attempted on the performance of Cooperatives in live animal market to be poor in both export and domestic market. The major challenging problems of Borana people include low productivity, lack of sustainable credit provision, lack of fair market for their livestock, drought and very poor saving culture. To alleviate these socio-economic problems, few primary cooperatives have been organized in the area. However, these primary cooperatives could not solve problems related to livestock marketing (Habtamu, 2008)

5 Cont d Lack of access to funds to capitalize trading and insufficient connections with livestock buyers had both been mentioned by pastoralists as key bottlenecks limiting more active involvement by pastoralists in livestock markets. The pastoral savings and credit groups and the cooperative were weak in bargaining for higher prices and they had to accept what the major buyers offered (Solomon, 2006). Because the indigenous system is no longer capable of providing a subsistence level of food production for the human population, people like the Borana must diversify their livelihoods and become more involved in livestock and grain markets in order to prosper (Gebru, 2009). The need for local traders and pastoral groups to organize themselves into a larger marketing association or LMCs is evident. This move could give them a betternegotiating position. There is dearth of studies on the role of cooperatives in livestock marketing in study area. Therefore, this study makes an attempt to bring forth the role of Cooperatives in livestock marketing in Borana zone of Oromia region.

6 OBJECTIVES OF THE STUDY The main objective of the study is to analyze the role of Cooperatives in livestock marketing in Borena Zone of Oromia Region. To achieve the major objective, the study specifically focused to analyse the business profile of LMCs and its contribution, members perception towards LMcooperatives and factors affecting contributions of livestock marketing coops.

7 STUDY AREA AND METHODOLOGY Description of the Study area Borana zone is one of the seventeen administrative zones of Oromia Regional State, located at about 570 kilo meters south of Addis Ababa on the way to Kenya. According to Borana zone report monitoring and evaluation office, 2010, Borana zone coves total land area of 63,939 km square with the total population of 1,113,538 (male 563,540 and female 549,998) of which 881,121(91%) and 232,417 (9%) were residing in rural and urban areas respectively.

8 METHODOLOGY Data source - both primary and secondary data sources were used Primary data - members and management bodies of LMCs Secondary data - annual reports of selected woredas CPOs and documents of the selected societies like: by-laws, audit report, accounting records, manuals etc Sampling Techniques - Multi-stage sampling procedure was used for the study Tools data collections - Semi structured interview schedule was prepared to collect first hand information from randomly selected samples. Secondary data were collected using data sheet prepared by researcher. Method of data analysis - The data gathered through semi structured interview schedule were summarized using descriptive statistics to give a condensed picture of the data. Multiple linear regression model was used to analyze factors affecting livestock marketing ofcooperatives.

9 FINDINGS Profile of LMCs The finding of the study shows that; LMCs of Zone were young when compared with other types of cooperatives operating inthe area. Capital - The total capital of LMCs shows an increasing trend. However, the increase in capital structure of societies is highly dominated by gifts and borrowing. Majority of LMCs were not successful in their business operations. Reason:- Lack of regular audit and frequent loss due to financial embezzlement. Majority of the societies were failed to distribute patronage dividend to their members Reason:- Loss and known business results

10 livestock sale - majority of the LMCs members sale livestock for their personal needs like household consumption, housing and Clothing to live but not for the marketing purpose. They consider their livestock as the means of saving and accumulation of wealth. Contribution of Livestock marketing cooperatives (LMCs) Advantages of membership in Cooperatives Majority(76%), of LMCs members indicated as they never get significant advantages by being members of Cooperative society. Implication:- members were unsatisfied by being members of LMCs.

11 Access and Source of training 70% of members signify that, they have training access and the rest 30% indicates that, they did not get training access. Training Sources, 79% (NGOs),14%(GO) and 7% (Cooperatives). This implies that, the Contribution of LMCs in providing training to their members in the study area is very low. Access and source of Credit 60% of members availed credit from different sources and 40% did not get credit for the last three years. Credit source, 57%(NGOs), 27%(GOs)and 16% (cooperatives) Implication:- the contribution of cooperatives in providing credit to their members was found to be insignificant. Preference: NGOs

12 Payment of dividend 75% of respondents indicate that, the cooperatives did not pay them dividend This implies that, LMCs in the study area were not playing their expected roles in distributing dividend to members. Market information Majority, 90% of respondents get market information before they went out to sell their livestock. Sources, 46% (own market visit), 22% (Neighbors), 15%(Cooperatives), 9.2%(Relatives) and 6.4%(extension workers) Conclusively, LMCs in the study area are not strong in delivering market information to their members. Majority, 43% of respondents preferred own market visits

13 Community service According to (ICA, 1995), cooperatives are expected to provide community service to the societies reside in the area. However, LMCs of Borena zone did not provide service to the community of the area. Linkage among cooperatives Majority, 75% of members respondents indicate that their cooperatives did not have linkage with other Implication - LMCs were not at good position to make linkages with other cooperative societies.

14 Members perception on the role of Cooperatives Members perception towards the cooperatives role is unfavorable, these is assured by majority of members as more than 80% of them oppose the statements that LMCS provides; market information, training and credit, input supply, ranching and veterinary services, dividend to members Linkage among cooperatives and Community Service

15 Factors Affecting Livestock marketing of Cooperatives Factors affecting livestock marketing of members were identified. Market information, Transaction cost, Saving Habit, Members Education level, Grazing land, Water Source, Prevalence of livestock disease, Access to credit, Seasonal variation, Financial Problem, Competition, Market Participation, distance from market place and total livestock holding were identified as the major factors that may affect livestock marketing of members through cooperatives. By using Multiple Linear Regression Model statistically significant variables were identified. Accordingly, Access to credit, Prevalence of disease, Transaction cost, Seasonal variation, Access to market information, level of members Participation and distance from market place are identified as the top factors limiting livestock marketing in Borena pastoralist area.

16 Discussion on the Significant ExplanatoryVariables Among 14 independent variables used in the model, 7 variables were found to be statistically significant.these variables include: Access to credit Significant at P=.048 and B= Prevalence of disease Transaction Cost SeasonalVariation Significant at P=.023 and B= Significant at P=.006 and B= Significant at P=.001 and B= Access to market information Significant at P=.037 and B= Level of Members Participation Significant at P=.003 and B= Distance from the market place Significant at P=.051 and B=-0.100

17 CONCLUSIONS Business profile of LMCs is far from satisfactory due to: Weak financial position Capital structure is highly dominated by gifts and borrowing Unknown business results because of Lack of regular audit Minimal increment in membership position Contribution of LMCs in livestock marketing is trivial since they failed to provide training, credit facilities, divided payment, market information, community service, and improved markets for their members as whole. Members perception towards the cooperatives role is unfavorable and this can be an evidence that cooperatives are not playing their expected role in improving livestock marketing of members. Generally, the role of cooperatives in livestock marketing is insignificant because of poor financial position, low contribution in livestock marketing, members dissatisfactions and influence of various factors from different directions

18 RECOMMENDATIONS Based on the findings of the study, the following recommendations are forwarded Stakeholders of the cooperatives should strive to seek solutions to increase the cooperatives own capital. The appropriate authority should have to enforce cooperatives to audit their accounts at least once in a year and pay dividend to their members whenever they get profit. Moreover, the appropriate Authority with management committee of cooperatives must take the necessary action when the funds or assets of cooperatives had been misused or corrupted. Borana pastoralist produce and sale livestock mostly for basic needs not for marketing purposes. Therefore, LMCs and all other stakeholders should try their best to change attitudes of pastoralist community through awareness creation.

19 Due attention should be given by the cooperatives and government for members training and education. To get bargaining power in the market and financial strength, LMCs should collaborate together to form livestock marketing union. Moreover, the cooperatives should focus on creating conducive atmosphere that motivates members to participate in cooperatives affairs and developing the habits of saving inpastoralist area. Further, market research needs to be undertaken by GO and NGOs to identify problems and constraints in the marketing system and to know the requirements of the livestock market demand.

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