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Collective Action
Collective action refers to actions jointly undertaken by a group of people whose
goal is to enhance their status and achieve a common objective. New institutional
economics (NIE) identifies this form of action as being governed by institutional
rules, including behavioural norms, by which economic agents interact to achieve
desired outcomes (World Bank 2002). The theory asserts that formal rules and
regulations, norms of collective action and enforcement mechanisms play key roles
in agricultural markets. These means of governance are vital for dissemination of
information to members and business partners, mediating transactions, facilitating
the transfer and enforcement of property rights as well as managing competition
(Peacock et al. 2004; Valentinov 2007). These instruments and enforcement mechanisms can be used to remedy market imperfections in rural markets. Institutional
innovations that reduce transaction costs and enhance market coordination through
producer organizations and marketing groups are vital in overcoming some of
these problems.
Farmer organizations, particularly co-operatives, play a key role in coordinating
agricultural and production services in SSA (Bingen et al. 2003; Kydd and Dorward
2004; Shiferaw and Muricho 2011). Historically, earlier co-operatives were introduced by colonialists to promote the production of cash crops. These institutions
were inherited by decolonizing governments, intensively promoted even in areas
where the concept was new or unpopular, highly subsidized and involved in many
aspects of the production, marketing and trade of agricultural commodities (Baffes
2003; Shiferaw et al. 2009). During this period, the performance of co-operatives
was generally impressive because of the dedicated government support through
intensive market regulations and interventions. However, over time, governments in
SSA incurred huge expenses to sustain these institutions, leading to economic hardships and fiscal deficits that required major reforms to restore macroeconomic balance and efficiency. Thus, many sub-Saharan countries were forced to adopt
structural adjustment policies and liberalized their economies in the 1990s. One of
the preconditions to liberalize the economies was an immediate withdrawal of government support to co- operatives (Develtere et al. 2008). This withdrawal created a
void that was not immediately filled by the private sector. The private sector emerged
slowly in areas of high agricultural potential where commercial crops were grown,
and there was a tendency to purchase produce from commercial farmers rather than
smallholder farmers in low agricultural potential areas (Jayne et al. 2002). To date,
the prevailing institutional environment and the internal governance structures of
co-operatives have not fully adjusted to accommodate the changing economic conditions. The most significant challenges for co-operatives in SSA include the adoption of ineffective means to promote members’ participation and independence,
along with the absence or incompleteness of legal instruments to ensure adequate
oversight on co-operative affairs (Kydd and Dorward 2004; Develtere et al. 2008).
An assessment of the adoption of this means of vertical coordination, and the
effectiveness of the adoption, reveals that co-operatives in SSA may not offer all of
Integrating Smallholder Farmers to Commodity Value Chains in Sub-Saharan Africa…
Collective Action
Collective action refers to actions jointly undertaken by a group of people whose
goal is to enhance their status and achieve a common objective. New institutional
economics (NIE) identifies this form of action as being governed by institutional
rules, including behavioural norms, by which economic agents interact to achieve
desired outcomes (World Bank 2002). The theory asserts that formal rules and
regulations, norms of collective action and enforcement mechanisms play key roles
in agricultural markets. These means of governance are vital for dissemination of
information to members and business partners, mediating transactions, facilitating
the transfer and enforcement of property rights as well as managing competition
(Peacock et al. 2004; Valentinov 2007). These instruments and enforcement mechanisms can be used to remedy market imperfections in rural markets. Institutional
innovations that reduce transaction costs and enhance market coordination through
producer organizations and marketing groups are vital in overcoming some of
these problems.
Farmer organizations, particularly co-operatives, play a key role in coordinating
agricultural and production services in SSA (Bingen et al. 2003; Kydd and Dorward
2004; Shiferaw and Muricho 2011). Historically, earlier co-operatives were introduced by colonialists to promote the production of cash crops. These institutions
were inherited by decolonizing governments, intensively promoted even in areas
where the concept was new or unpopular, highly subsidized and involved in many
aspects of the production, marketing and trade of agricultural commodities (Baffes
2003; Shiferaw et al. 2009). During this period, the performance of co-operatives
was generally impressive because of the dedicated government support through
intensive market regulations and interventions. However, over time, governments in
SSA incurred huge expenses to sustain these institutions, leading to economic hardships and fiscal deficits that required major reforms to restore macroeconomic balance and efficiency. Thus, many sub-Saharan countries were forced to adopt
structural adjustment policies and liberalized their economies in the 1990s. One of
the preconditions to liberalize the economies was an immediate withdrawal of government support to co- operatives (Develtere et al. 2008). This withdrawal created a
void that was not immediately filled by the private sector. The private sector emerged
slowly in areas of high agricultural potential where commercial crops were grown,
and there was a tendency to purchase produce from commercial farmers rather than
smallholder farmers in low agricultural potential areas (Jayne et al. 2002). To date,
the prevailing institutional environment and the internal governance structures of
co-operatives have not fully adjusted to accommodate the changing economic conditions. The most significant challenges for co-operatives in SSA include the adoption of ineffective means to promote members’ participation and independence,
along with the absence or incompleteness of legal instruments to ensure adequate
oversight on co-operative affairs (Kydd and Dorward 2004; Develtere et al. 2008).
An assessment of the adoption of this means of vertical coordination, and the
effectiveness of the adoption, reveals that co-operatives in SSA may not offer all of
Integrating Smallholder Farmers to Commodity Value Chains in Sub-Saharan Africa…