History & Legal Framework of Co-operatives in Tanzania

1. History & Legal Framework of Co-operatives in Tanzania Hamudi I. Majamba 20th June 2019

2. Preliminaries No. of theories on evol. of coops – Main:- • Traditional; (modes of prod. - hunter gathers - agrarian – feudalism – socialism- capitalism) – traditional vs. State capture. • Colonial; & • Utopian - (oppressed masses forged alliances to effectively fight capitalist exploitation.)

3. Preliminaries… • Genesis of Cooperatives as known today. • Europe – 1830: (UK – Rochdale Township – near Manchester) Millers (grain producers) pooled resources to purchase items from wholesaler. – challenges – over crediting ; • 1843 – Weavers experiencing similar problems like millers decided to pool their own resources to overcome challenges.

4. Preliminaries… • Weavers (Rochdale) established their own stores with following characteristics/rules:- • (i) All members had contributed to purchase materials 4 store; • (ii) No credit – all payment strictly cash; • (iii) To purchase only from store (even if far!); • (iv) Profit to be distributed by purchase not on basis of contrib. of capital @ had invested.

5. Preliminaries… • Above led to – “Rochdale Equitable Society” & Rochdale Principles of Cooperative Societies – amplified as follows: • Democratic Control – all equal voice in mgt; • Open membership (all joined in eq. terms); • Profit thru’ surplus; • No Credit; • Sell of pure goods (no adulteration);

6. Preliminaries… 7. Educate @ other 8. Political & religious neutrality. • In 1845 (within a yr.) huge benefits, new members – grew tremendously influencing et al jurisdictions in Europe, Asia & Africa (with colonial tags in latter two); • EA – K (1908 – Dairy); U (1913- cotton); R (Belgians – before 1964)

7. Tanzania: History • Colonial & independencegovernments of Tanganyika/Tanzania supported cooperatives as institutions for peasants. There were crop booms in the country from 1950s up to the early 1970s - mainly as a result of cooperatives which contributed to increase in crop output.

8. Tz. History… • Peasants in Tanganyika (now Mainland Tanzania) started informal (unregistered) cooperatives in 1925; • 1st Cooperative Union in country was Kilimanjaro Native Cooperative Union (KNCU), registered with its 11 affiliated primary cooperatives in 1933.

9. Tz. History… • The Ngoni-Matengo Cooperative Marketing Union & its 3 affiliated Primary Cooperatives were registered in 1936 in Songea region. Focused on tobacco - output rose to 120 tons in same year from one ton in 1930 & output reached 4 figure Nos. in 1950s.

10. Tz. History… • In 1940s & 1950s et al important Coops & Unions formed & registered: • Bugufi Coffee Cooperative Society (Ngara); Mwakaleli Coffee Growers Association (Rungwe) - later Rungwe African Cooperative Union; • Bukoba Native Cooperative Union & Lake Province GrowersAssociation. L. Victoria area, later Victoria Federation of Cooperative Unions Limited (VFCU) – cotton production.

11. Tz. History… Victoria Federation of Cooperative Unions Limited (VFCU) – grew tremendously, engaged in marketing & buildings – largest in Africa by 1960s. • 1968 Tanganyika had the largest cooperative movement in Africa & 3rd largest cooperative in the world in terms of % of market share of agricultural exports.

12. Tz. History… • Altho’ agric marketing coops were dominant, govt. encouraged different types of coops. This led to introduction of consumer cooperatives, e.g. Cooperative Supply Association of Tanganyika (COSATA) & Moshi &District Consumer Cooperative Society. In transport sector, there emerged Co-cabs & Coast Region Transport Cooperative (CORETCO). Savings & Credit Coops also emerged e.g. Savings & Credit Union League of Tanganyika (SCCULT).

13. Tz. History… • Cooperative Bank of Tanganyika was launched in 1962 & replaced by National Cooperative Bank (NCB) in 1964. NCB provided loans to cooperatives to purchase crops. Cooperatives held shares & maintained current & fixed deposit accounts in bank. • The NCB also received overdrafts from Central Bank of Tanzania. It was a success & landmark in history of cooperative movement in the country with backing of law in 1964.

14. Tz. History… Mushrooming of coops after independencecame with challenges. - Formed in hurry with little preparation. - People associatedindependence with economic development & there was political expediency to open many cooperatives. - Complaints of mismanagement & corruption common. In 1966 President appointed a special Committee of Enquiry to look into the problem.

15. Tz. History… Enquiry Team’s Report to government in same year listed basic problems of the cooperative movement: • • shortage of appropriate & skilled manpower. • • presence of uniformed membership. • • lack of democracy at Union level; & • • susceptibility of the cooperative movement to political interference.

16. Tz. History… • Govt. accepted all BUT the one on political interference! • Commission of Enquiryrecommended formation of a Unified Cooperative Service Commission (UCSC), to be responsible 4 recruitment, discipline, terms of service & dismissal of all employees of registered cooperatives. • The UCSC was created & organized in almostsame way as Civil Service Commission. There was compromise of cooperative members’ autonomy & democratic rights to hire & fire people of their choice. A further blow to the movement was the dissolution of the National Cooperative Bank and the National Development Credit Agency in 1970.

17. Tz. History… • 1976 all primary coops abolished by govt. Their crop marketing functions taken over by communal villages. Coop Unions also abolished & their functions taken over by Parastatal Crop Authorities – these had to buy crops directly from villages. • Abolished Coop Unions never bought crops directly from peasants, but thru’ Primary Coops. Et al services which were rendered by abolished coops e.g. wholesale & retail trade, were taken over by State owned Companies, e.g. Regional Trading Companies & District Development Corporations.

18. Tz. History… • Crop authorities failed in buying peasant crops & provision of price incentives. They did badly in supply of farm inputs & credit. • Impact on crop output quickly felt as govt. faced shortage of foreign exchange due to decline in peasant production. • Treasury also lost potential of local revenue that would have resulted from increased crop production.

19. Tz. History… • Govt. formally announced re-introduction of primary coops & coop unions in 1982. But damage already done. • Coops lost property & highly trained personnel during abolition. Impact felt today - not fully recovered. • Morale of members & potential members went down. Members became disenchanted with coops & mistrusted the sincerity of new efforts to them & the rhetoric that went with it.

20. Tz. History… • Coops re-introduced in 1982 mainly due to negative impacts their abolition had. • Placed under TANU by law. Membership became almost compulsorydue to village control – most villages under TANU. • Coops did not fully recover, some went under liquidation & et al placed under receivership. • 1980’s saw emergence of Savings and Credits Coops (SACCOS) – these managed to survive but membership predominantly peasants.

21. Legal Framework for Cooperatives. Colonial Era: Coops as formal institutions with defined legal structures & policy was introduced in EA in 1920’s by British colonial govt. Colonial admin valued role of coops & tried to maintain & manage them: Caution was exercised in expanding them beyond unmanageable proportions - dissolved any considered a burden or threat in meeting colonial administration’s objective.

22. Legal Framework for Cooperatives… • Legislation: Colonial regime introduced to the Tanganyika coops laws modeled on Indian Cooperative Societies Act, 1904. • In 1931 Colonial administration contracted an expert from India to develop a cooperative policy to form the basis of the law envisaged.

23. Legal Framework for Cooperatives… • Expert recommended introduction of cooperative legislation drawing experiences from cooperative legislation of Sri-Lanka, Burma, Jamaica, Queensland & Malaya. • Emergence of 1932 Cooperatives Societies Ordinance, Cap. 11 of 1932, Laws of Tanganyika.

24. Legal Framework for Cooperatives… • Independence govt. adopted the 1932 Ordinance. (control by gvt. key) • 1932 Ordinance amended by Cooperative Societies Ordinance in 1963. (control by gvt. key) • 1932 Ordinance repealed by Cooperative Societies Act, No.27/1968. (control by gvt. Key/ Ujamaa villages) • Unified Cooperative Service Commission Act No. 44/1968 also introduced. (to address problems noted earlier above).

25. Legal Framework for Cooperatives… • 1968 Act was repealed and replaced by the Cooperative Societies Act No. 14/1982. • Cooperatives Societies Act, No. 15/1991 – replaced the 1982 Act. • 1991 Act amended in 1997 by the Cooperative Societies (Amendment) Act, No. 5/1997. • 1997 amendment – gender equity, cooperatives to join with other private or public non-cooperative companies or firms with a view to establishing joint ventures.

26. Legal Framework for Cooperatives… • 2002 - Govt. sought to address perennial problems - set up a Presidential Special Committee on Revival, Strengthening & Development of Cooperatives. • Led to new Cooperative Development Policy of 2002 & Cooperative Societies Act of 2003 (Act No. 20/2003). • 2013 – Cooperative Societies Act, No.6/2013 emerged – repeals 2003 Act.

27. Legal Framework for Cooperatives… Cooperative Societies Act, No.6/2013: Overview • To provide for establishment of Tanzania Cooperative Development Commission; formation constitution, registration & operation of cooperative societies & promotion of cooperative development. • Came into force in 2014

28. Legal Framework for Cooperatives… Cooperative Societies Act, No.6/2013: Overview • Underscores role of gvt. as one directed towards provision & creation of conducive social, economic & legal environment for development & prosperity of Co-operative societies. • Major change - establishment of Tz. Cooperative Development Commission as independent dept of govt.

29. Legal Framework for Cooperatives… • ‘Cooperative Society’ – society registered under Act – includes primary, & secondary societies, Apex & Federation; • S. 27 – Types of Societies – agricultural, financial, mining etc.. • Objectives of Cooperative Societies: - Part II (promote ec. & soc. interest of members, by common undertaking based on mutual aid & following coop. principles…

30. Legal Framework for Cooperatives… • Coop Principles – S. 3 (2) – 8 Principles – see also Section 134 & Item 3 of 2nd Schedule on Code of Conduct for Coop (International Cooperative Alliance (ICA) – [NGO Coop Federation] Coop Principles) – voluntary assoc, democratic gov. et al

31. Legal Framework for Cooperatives… Cooperative Societies Act, No.6/2013: Overview • Commissioners role – regulatory & promotional.(Chair appointed by President/et al by Minister); • Functions: registration /deregistration of Co-operative societies, inspection/supervision/keep and maintain the register of all Co-operative societies/ensure names of societies (registered or de-registered) published in Gazette.

32. Legal Framework for Cooperatives… Cooperative Societies Act, No.6/2013: Overview • Functions…(contd.) – Dispute settlement/ • Promotional: Commission required to supervise, co-ordinate & collaborate with sector Ministries, Local government authorities & et al stakeholders. • Education/training

33. Legal Framework for Cooperatives… Cooperative Societies Act, No.6/2013: Overview • Office of Registrar under Commission. Registrar - appointee of President (URT) - CEO of Commission & overall in-charge of operations of Commission - administration & management of affairs of Co-operative societies, management of funds, property & business of Commission.

34. Legal Framework for Cooperatives… • Powers of Registrar: Part 10 – inspection of affairs of Coops, regulating voluntary amalgamation of coops, canceling same for public interest, regulation of amendments to coops by-laws etc…. • More detailed regulatory powers over coops autonomy provided for in subsidiary legislation.

35. Subsidiary Legislation • Cooperative Societies Regulations, 2015 - GN 272/2015; (s. 141/Act – Min power to make) • Savings & Credit Cooperative Societies Regulations (SACCOS) Regulations, 2016 - GN. Nos. 496/2014 & GN. No. 450/2015; • Cooperatives Societies Rules, 2004 GN No. 280 of 2004; - Made by Commission – s.142/Act • By-Laws of Cooperative Societies (Ss.52 – 54 & 59 of Act)

36. Conclusions • History of legislative framework of cooperative societies reveals some fundamental contradictions; - Left on own coops have sometimes operated against well known cooperative principles (e.g. Zanzibar - 1965 coops operated along racial lines – vs. principle of voluntary & open membership. Gvt. intervened – banned them.

37. Conclusions… • Governance issues - Some cooperatives had serious issues of management – corruption, abuse of positions etc. • Potential of operating along political lines – need for intervention. By who? Gvt.? • Change in law (repeal/amendments) has ensured gvt. control – autonomy not granted.

38. Conclusions… • Challenges • Powers of Commission & Registrar in to regulate Coops in some cases amount to usurpation of autonomy. • Registration – possibility of cancellation. • Control over say in use of funds & property. • Powers of inspection & dispute settlement. • Freedom to amalgamate restricted.

39. Conclusions • Challenges…contd. • Language of law – Act, Regulations, By-laws limits comprehension, engagement & ownership of coops by members; • Fees & charges required – no or limited consultation. • Political interference – appointees - Commission & Registrar not really independent.

40. Conclusions…contd. • Prospects • Left of own, possibility of corruption & mismanagement – back to base! • Possibility of use of political space to demand space, to avoid abuse of power by Commission & Registrar. • Lobby for autonomy & non-interference at International Coop Alliance (ICA) meetings. (ICA Regional Office in Africa exists)

41. Conclusions… contd. • Prospects • Use et al international forum – e.g. world cooperatives day (1st Sat of @ July) & labor day (ILO) to raise voices for change. • @ Local level, use Tanzania Federation of Cooperatives 4 training & lobbying 4 change in law & translation of laws into Kiswahili. (Guidelines in place in Kiswahili).

42. Conclusions…contd. • Prospects • Cooperatives have a central role in implementing Government’s Vision 2025 et al policies & strategies focusing on industrialization, education, employment & improved livelihoods/reduction of poverty. • Existence of a wide range of social media outlets an opportunity to lobby for change.

43. Conclusions… • Cooperative Societies should be accountable to the members not the State. • Over-regulation by State removes the essence of Cooperatives – Autonomy & Democratic Control of Members. • The General Meeting of Members (who have been sensitized) should be Supreme Authority of Cooperatives.

44. Conclusions • Govt. role as regulator should be limited to support and development- NOT control of cooperatives – “State capture.” • Govt. support & dev. role should take the form of “hands off – eyes on” approach. (Tech/R&D)

45. Thank You… Asanteni sana…..Tuendelee kujadiliana hmajamba@gmail.com