How Smallholders became Commodity Suppliers

DGRV supports its project partner in countries of the Global South in the long-term development of their own cooperative structures and institutions. These projects are mainly funded by the BMZ.

Through our work in the diverse projects, we want to achieve that broad sections of the population worldwide make even greater use of the cooperative entrepreneurial idea, as this contributes to a sustainable improvement of local livelihood.

The core elements of cooperative development cooperation are Friedrich Wilhelm Raiffeisen's principle of "help for self-help" and his model of the entrepreneurial cooperative. In cooperatives as voluntary groups, members must be able to decide and the range of services must be adapted to their needs. Through cooperative organisations, members, customers and employees benefit. In the long term, market structures change positively through the development of cooperative systems and in the countries, economic (direct) and social development (indirect) is strengthened.

Our partners around the world appreciate the cooperation at eye level as well as the expertise and the reliability of our work. Our own experience and expertise from our cooperative practice in Germany are directly used for our development cooperation.

Cooperative "4th of October" in Mozambique

A good example of the potential of a specific well-functioning cooperative comes from Mozambique. The country in south-east Africa has so far been dependent on donor support and funding for food security. The effects of climate change (droughts, floods, cyclones) have already been hitting Mozambique hard for several years due to its geographical location. Decades of a socialist planned economy, which used "cooperatives" as an institutional instrument to realise the plan's specifications, have impaired trust in this legal form, especially among small farmers.

Unfortunately, this is the case in many countries of the global South and constantly confronts the project work of DGRV with a special challenge with regard to its advisory service. Successful flagship projects that convince people are needed. The DGRV supports local partners in their efforts to change this attitude towards cooperatives for the better and to establish cooperatives as economic self-help institutions supported and controlled by members. Cooperative networks of this kind have contributed in many places to helping the rural population out of the poverty spiral and to improving their economic situation as well as the food security.

As part of the BMZ's special initiative ONE World -No Hunger (SEWOH), the DGRV has been supporting the cooperative "4th of October" (in commemoration of the signing of the peace agreement in 1992) in Inharrime in rural Mozambique since 2015.

The work started with a small, loosely connected group of small farmers who mainly practiced subsistence farming and had no access to sales markets. Cooperative principles were unknown to the group.

Many smallholders in the region have only a low level of education. Therefore, the DGRV developed and conducted seminars and training courses adapted to local conditions specifically for this target group. The pre-cooperative group, which was still informal at that time, was familiarised with the basic principles of a cooperative: self-help, self-responsibility, and self-administration, as well as the advantages of a member-based cooperative self-help institution and its potential to improve economic and social conditions.

Convinced of the advantages of cooperative cooperation, the previously loosely operating group officially registered as a cooperative with the support of the DGRV. Organised in this way, the small farmers, who had previously lived on subsistence farming, learned to act with more self-confidence and to represent their interests more effectively together. The first successes soon became apparent:

As cooperating small enterprises, they were able to jointly gain a market for their agricultural products. With advice from the DGRV, cultivation methods could be modernised, the crops grown diversified and the yield increased. Before the cooperative was founded, only cassava was grown for own consumption and for sale on the local market. Today, in addition to cassava, pineapple and small maize cobs are also produced for the national and international market.

Despite this diversification, the cultivation and sale of cassava remains the cooperative's largest source of income. But instead of only selling the members' crops on the local market at fluctuating prices, the market has been expanded vigorously. Today, the cassava of the "4th of October" cooperative can be “tasted” all over Mozambique. Moreover, it is not only sold as a raw product any longer. In the meantime, the brewery group Cervejas de Moçambique (CDM) buys a large quantity of the cassava needed for production from the cooperative for brewing the well-known beer "Impala". This is advertised with the fitting slogan "O sabor das nossas machambas", which means "The flavour of our fields".

As in many countries in southern Africa, the Mozambican government's support focuses mainly on  large private enterprises. It is only gradually being realised what opportunities decentralised, entrepreneurial cooperatives offer for poverty reduction and food security. With the help of the DGRV's cooperative advisory work, the "4th of October" cooperative was able to take the first steps in this direction. It now serves as a reference for other agricultural producer groups and cooperatives in Inhambane province and beyond.

What's next?

Since the beginning of the project, the DGRV has supported active exchange between the partner cooperative and other (pre-)cooperative groups. An actively lived national and regional South-South exchange in the SADEC region is an important aspect in the sustainable development of cooperatives in Mozambique and the region. In order to better use the cooperative potential for sustainable economic and social development, the case study described is a valuable first step. At the local level, a cooperative network must gradually be created by founding new primary cooperatives or expanding existing ones. At the same time, secondary cooperative institutions must be established, first at the regional level and then at the national level, with the advice of higher-level institutions. These, too, must be member-based. They must offer services to "their" cooperatives at the primary level that meet their needs, because here, too, the following applies: the owners and users of this multi-level cooperative group are the cooperative members.

According to the principle of subsidiarity, regional or central cooperatives are given the task of supporting and supplementing the primary cooperative institutions in their business activities. An important role among the secondary institutions is played by the federations. They provide advisory and training services to members, their elected representatives and officials in the cooperatives. They act as a cooperative auditing institution with the task of establishing and implementing a sector's own control ("self-regulation") to ensure effective governance and control in the cooperative group.

It is still a long way to get there. But through bottom-up development, a cooperative organisation can grow in a member-oriented way and offer its members/customers services that meet their needs. Here, too, best practices can be made available from BMZ-funded DGRV projects, e.g. in India.