On the Road with NCBA: Strength in Numbers

This entry was posted by Thursday, 12 August, 2010
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From Andrew McLeod, communications specialist for the National Cooperative Business Association (NCBA). Learn more about him and his trip to Mozambique here in his first CUNAverse post.

Yesterday I got a look at the grassroots of NCBA’s CLUSA International program. These are the associations formed by a few dozen individual farmers, and the second level “forums” through which associations band together to do work that is beyond the capacity of a single association.

The typical forum involves hundreds of farmers, putting them in a position to reach markets that would be well out of reach for an individual with a small plot and no vehicle. But these too are limited in a global market filled with transnational corporations.

This morning I picked up the story with a visit to IKURU. This is a trading company partly owned by 29 forums, representing more than 200 associations and 20,000 farmers. This is all not terribly different from the federated structure found in many U.S. agricultural co-ops.

Each association sends a delegate to its forum, which in turn chooses a delegate to send to the annual general assembly of IKURU. There, five farmers are elected to the board of directors, which meets quarterly and also includes two representatives from GAPI and Oxfam NOVIB, which together own most of IKURU. Although the farmers currently contribute only 14 percent of the company’s equity, they have control of the board.

About 80 percent of IKURU products are sold domestically. However, one of the services provided is certification for fair trade and organic, which brings a premium for the 20 percent that is exported through groups like the U.K.’s Twin Trading. IKURU also provides research and development, as well as supply of seeds and processing of outputs.

IKURU's cleaning operation

Because IKURU has aggregated the produce of many farmers, it has some leverage to seek help from organizations like Twin and Root Capital. The way the system works is that Twin makes a contract to buy a certain amount, which can be taken to Root Capital as a sort of collateral. Since IKURU’s founding in 2003, annual sales have grown to $1.4 million.

Still, IKURU’s biggest problem is cash flow. Farmers face two problems in the world of finance, which aren’t automatically solved by aggregation: Crops are seasonal, so there are times of no production and therefore no income. More challenging, the expense of farming comes long before the product is ready to be sold – and even longer before it actually is sold and payment is received.

One worrisome effect I heard from Forum Netia yesterday is that IKURU has not bought product that it was expected to buy, leaving Netia with more than 4,000 tons of grain and beans sitting in a warehouse. There are only about two months left before this harvest is too old to sell.

IKURU’s manager Moises says that they need at least $300,000 or more to get to the next level. Getting this formidable amount is complicated by Mozambican law, which prohibits international transfers of more than $5,000. So at least 60 separate loans would be needed.

CLUSA’s work has also addressed another obstacle facing farmers: the threat of aflatoxin contamination. This is a fungus commonly found on groundnuts or corn, which can cause serious liver damage. It is especially hazardous to people infected with hepatitis B or HIV, both of which are common in Mozambique. To identify and fix production problems that cause contamination, CLUSA was a partner in establishing a lab at Lurio University, known as UniLurio. Typically, testing has cost $150 and taken three weeks or longer, but this lab cuts the cost by 76 percent and reduces the wait time to a matter of hours.

Collecting samples to send to the lab

The lab is not certified, but it does provide preliminary results. This has greatly helped IKURU by identifying problems before the shipping process starts. And it has helped the people of northern Mozambique by reducing the prevalence of this hazardous toxin in their food supply.

UniLurio has attracted the attention of the World Food Program, which has provided $100,000 toward expanding the lab. That would facilitate WFP’s Purchase for Progress program and lay the groundwork for certification and expansion into other types of testing.

IKURU and UniLurio have a symbiotic relationship, in which the trading company provides the bulk of the lab’s business while the lab helps improve the quality of product. Together they have opened markets that individual farmers previously had no way of reaching.

PS: I just got word that Donn Teske – a Kansas Farmers Union volunteer for the NCBA/CLUSA Farmer to Farmer program – is blogging about his trip to advise cooperatives on the other side of Africa. He has way more interesting border-crossing stories than I do, and if you want a whole different glimpse into the wide world of CLUSA, check it out.

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