War over funds threatens co-op revival

A cash-fuelled dispute between cooperative unions and their apex body is stifling the planned revival of Uganda’s cooperative movement through which the country’s small-scale farmers would bulk their produce for collective marketing and selling.

Apparently, Uganda Cooperative Alliance — whose members, by law, are secondary cooperative societies — is recruiting new but arguably illegal members among primary societies, with whom it prefers to implement a Ush32 billion ($16 million) programme.

It has constituted a board of directors that is presiding over a new stream of members, excluding past members who say this is illegal.

According to its by-laws as amended in 2005, any registered society is eligible for membership, but this appears to be in contravention of the Cooperative Societies Act.

The secondary societies, which comprise national and district cooperative unions, have taken the alliance to court over the matter and have applied for the money directly from the government through a business proposal they say will get the movement back on its feet.

The government set aside Ush32 billion in the 2008/09 budget to build microfinance infrastructure through savings, credit and cooperative organisations and an extra Ush2 billion ($1 million) for market research and implementation of cooperative activities.

In January this year, the alliance presented a concept note to the Finance Ministry through the Microfinance Support Centre (MSC), a state-owned company created to manage the rural microfinance support project.

The concept note, titled “Empowering farmers through an integrated marketing system”, does not however show any involvement of cooperative unions.

It instead proposes to create primary cooperative societies and area cooperative enterprises, arguing that most of the unions’ historical members have either closed down or work at negligible capacity.

The concept paper also suggests that the apex body wants to do the same work as its members — providing storage facilities, delivering primary society members’ produce to warehouses, providing members with market information, and bulking and marketing produce.

The EastAfrican has learnt that before the alliance presented its concept note, secondary cooperative unions had taken it to court seeking an order to ban recruitment of “illegal” members and reinstate the “legitimate” board of directors.

The two later agreed to settle the matter out of court and the unions’ lawyers withdrew the case, but the alliance is alleged to have secretly presented the note to the government.

A ministry official is said to have tipped off the unions, who quickly instructed their lawyers to write to the State Minister for Microfinance explaining the situation and advising that no money for cooperative marketing be approved on the basis of the concept paper.

The unions’ letter reads in part: “To our surprise, on February 2, 2009, Uganda Cooperative Alliance had opted out of the court settlement by approaching your ministry to directly finance their activities by a concept paper which is to be presented to your ministry. Our clients’ complaint is that the concept paper excludes them and yet they are members of Uganda Cooperative Alliance.”

The Ush32 billion at stake was allocated by then finance minister Dr Ezra Surumabut is yet to be absorbed. Erisa Ngereza, chairman of the Uganda National and District Unions Association, said they would obtain the money as an association and not through the alliance.