From the ISET Economist news (http://www.iset.ge/news/?p=3311)
By Eric Livny
(Summary of a debate hosted by ISET as part of SDC-supported Inclusive Growth Dialog series.)
There are many reasons to love the concept of farmer cooperation (and cooperation more generally). To begin with, there is a great aesthetic value in seeing people coming together, sharing resources and helping each other. After all, instinctive collectivism was the basic condition of human existence from time immemorial. But, there are also powerful economic reasons for farmer cooperation.
Smallholders are often too small to independently access markets, and can be easily exploited by middlemen and local monopolies. Service cooperatives can increase the bargaining power of smallholders versus banks, service providers, input suppliers, processors and … government. This light form of cooperation is quite effective and relatively easy to manage and sustain, which explains its prevalence in North America and Western Europe.
A more ambitious (and far more demanding) form of cooperation is about pooling fragmented smallholdings into larger farms. Examples of such production cooperatives are the Israeli kibbutz and Soviet collective farms. These are said to benefit from economies of scale in primary agricultural production.
Yet, despite its aesthetic value and compelling economic reasons, farmer cooperation (of both types) has been a spectacular failure in many transition economies, and particularly on the territory of the former USSR, including Georgia. In the words of Tim Stuart, development practitioners in the post-Soviet space are often confronted “with the reality of failed farmer groups that evaporate once the project ends, with unused equipment rusting in the corner of a field, an image, which has become a cliché of dysfunctional development in the popular press. And for many people engaged in development, farmer groups are a byword for failure.”
Of course, failure and success are terms to be defined relative to expected results. For the likes of Juan Echanove, coordinator of EU’s ENPARD program, the journey of a thousand miles in farmer cooperation begins with a single step. His expectation is that the dramatic changes in the legal and financial context for agricultural cooperation in Georgia will encourage the creation of bottom up farmer organizations based on traditional forms of mutual help and resource sharing that have always existed in Georgia. According to Juan, Georgian farmers have been always establishing informal groups and associations, in many cases without any external support and by their own initiative. Such groups often focused on a very narrow but functional scaling up of everyday economic activities including joint arrangements for pasture management and feeding, livestock management, collective work on plowing and harvesting, etc.
WHO IS TO TAKE FARMER COOPERATION TO THE NEXT LEVEL?
While bottom up cooperation may indeed flourish in the new policy context, there is agreement among all analysts that for farmer cooperation to move to the next level – beyond its primitive forms – Georgian villagers have to be provided with the prerequisite skills and resources. A related question, posed by Simon Appleby, an Australian agronomist and agribusiness consultant with many years of experience in South East Asia and Georgia, is “If development agencies are the “wrong” people to be involved in farmer groups and co-ops, who are the “right” players to be involved?” To his mind, “while it may be jarring to the collectivist sensibilities of some, it is worth looking at corporations as enablers and incubators of co-ops.”
Indeed, Juan sees a very wide spectrum of possibilities for private sector involvement, with or without donor assistance. For instance, some farmer groups will emerge to gain access to better and/or cheaper inputs (fertilizers, seeds, fuel) or services (mechanization, vet services, artificial insemination). In these cases the key business partners are not the buyers of the products, but providers of services and inputs. And, importantly, donors – ENPARD, and USAID’s REAP program – will target these businesses rather than farmer groups.
Juan is quick to admit that the issue becomes trickier if the goal is to create farmer groups jointly selling their primary products. Anyhow, even in this case there will be groups such as mandarin or hazelnut co-ops who will face no problem selling their products to a myriad of middlemen, processors and exporters. If these coop do things the right way, argues Juan, they will have more or better quality product to sell. The buyers are already there, and farmer groups won’t need any help in engaging with the private sector.
Finally, there will be co-ops directly placing their products in the local markets, and there is nothing wrong with that, according to Juan. Producing more and/or at a lower cost in the nearby town marketplace would be an easy and realistic improvement. In many parts of Georgia there is simply no alternative, and we don’t always have to be looking for complex solutions.
One problem with Juan’s arguments, however, is that in none of the simple cases private sector actors would have the incentive to provide Georgian villagers with the skills and resources to do things the right way and to manage cooperation. For instance, while input providers would be quite interested in marketing their products (e.g. fertilizer) to individualfarmers, there is no advantage for them in helping organize and train groups of farmers who, once organized, i) would be much tougher to negotiate with and ii) could switch to competing providers. For exactly the same reason, no single buyer of hazelnuts or mandarins would invest time and effort to help organize and train farmer co-ops even though it may be more convenient for him/her to deal with larger and more reliable growers.
Thus, while businesses may be the (only) right players to be involved in enabling and incubating farmer co-ops, special government or donors schemes would have to be developed to incentivize potentially interested corporate actors. While costly, such schemes could be justified if the resulting supply chain relationships have the potential to be sustained without additional subsidies beyond the necessary period of incubation.
As Simon Appleby explains based on his experience in South East Asia, the government could compel large food processors to take on co-ops as supply chain partners. Government (and donors) could also use carrots, such as tax holidays, low interest loans, or grants. That said, there would be no need for the government to play an active role in micromanaging farmer groups. With corporations providing suppliers with a comprehensive support package (finance, inputs, training, and guaranteed forward contracts), co-ops would pop up in response to business opportunities. Given their small size (3-5 families) and blood or friendship bonds on which they are often based, internal management issues of typical co-ops would not be very complicated. According to Simon, over time co-ops could diversify their activities from basic post-harvest treatment, storage, and logistics, to deep processing, foodstuffs trading and financial services, but this process may take many decades. Rushing the process, however, carries huge operational and financial risks.
THE CASE OF TKIS NOBATI
The challenge of incentivizing corporations to integrate smallholder co-ops into their supply chains is not a trivial one. Mind it that corporations – e.g. large processors – have other options. They can choose to go it alone by developing own supply base or contract large farms that don’t need incubation, and can be trusted to deliver on time and in consistent quality.
Yet, as one can also learn from the recent Georgian experience, there would be situations in which businesses have the incentive to engage in nurturing formal or informal farmer groups. While exceptional, these situations provide an excellent sense of the underlying economics.
In 2008, upon graduating from ISET, Gaga Abashidze has taken over a small family business which has been for years buying and processing rose hips gathered by Georgian villagers in the Shida Kartli region. The business model was extremely simple. Villagers harvested and delivered the fruit. Gaga processed and exported rose hip juice to Europe and Japan. Villagers saw no advantage in cooperation, and Gaga saw no need to engage them as a group.
Things changed when Gaga “discovered” the lucrative market of organic rose hip products, which required adopting a more complicated business model. First and foremost, moving to organic production required certifying all stages in the process, from harvesting to post-harvest treatment/storage to processing. Now, as Gaga quickly understood, there was simply no way to certify hundreds of villagers. To acquire international organic certification his supplier had to be a legal entity which could be trained and certified. Of course, once incorporated, his supplier could also come into possession of necessary equipment, contributing to the efficiency of harvesting, post-harvest treatment and storage, reducing processing costs and improving the quality of the final product.
Gaga had two options of re-organizing his supply chain: help create, and work with, a farmer organization, or expand own business. In weighing these two options, Gaga chose the farmer organization/outsourcing alternative for two main reasons.
- Many of the startup costs could be shouldered by the village community, including labor and land. While there was little to be saved in labor costs by hiring own workers, the co-op could be eligible for donor assistance to offset capital, training and certification costs.
- Gaga knew that the co-op would be a reliable business partner. On the one hand, he had a long history of working with individual members of the group and trusted its leadership. On the other, having access to a lucrative export market he could afford paying a premium for organically certified rose hips, essentially killing any incentives for the group to switch to a different buyer. As much as Gaga needed the group to supply him with a certified product, the group needed him to gain access to the organic export market. Thus, both parties were to be locked into a sustainable win-win relationship.
This particularly account of Tkis Nobati, a small Georgian cooperative in the vicinity of Saguramo is not meant to detract from the role of other players (e.g. the Regional Communities Development Agency, which channeled donor funding, and Elkana, which assisted in the bio-certification process). Rather, the point is to draw attention to the economic rationale for private sector engagement with Georgia’s budding agricultural co-op movement.
The most important insight to be gained from the exceptional story of Gaga Abashidze and Tkis Nobati cooperative is that while the costs of private sector engagement in incubating smallholder “supply” co-ops could be subsidized by donors or governments in the short term, supply linkages thus created are likely to be quite fragile. In the presence of alternative suppliers, co-ops would have to be very well managed to maintain consistent quality and reliability. Otherwise, we may see many more disturbing images of “equipment rusting in the corner of a field”.
To conclude, farmer co-ops can indeed serve many different purposes. Yet, significantproductivity improvements in Georgia’s agricultural sector would only be possible on the basis sustainable supply relationships between farmers and downstream processors and retailers. Only such linkages (embodied in explicit or implicit forward contracts) can provide the basis for new technology adoption and investment.
As Georgia starts exporting to new markets—to Europe under the DCFTA, for example—there will be stronger incentives for smallholder farmers to come together in order improve product quality and achieve market access. Cooperatives and farmer associations may certainly provide the organizational vehicles to take advantage of new export opportunities. Additionally, however, the Georgian parliament and government may want to consider amending the Law on Cooperatives in a manner facilitating corporate involvement in the creation of smallholder co-ops. For example, corporations could be allowed to acquire a stake in co-ops (or “smallholder partnerships”) in return for investment in commonly managed storage or processing facilities.
The 46thApimondia Congress 2019, the most significant event in beekeeping worldwide, took place from 9th of September to 12th of September, in Montreal, Canada. For the second time in Apimondia’s hundred years of history, Georgia was at this world forum, represented by the Ministry of Environment Protection and Agriculture (MEPA), the Georgian Beekeepers’ Union (GBU) and Kakhetian Traditional Winemaking company, exhibiting the different types of honey of its members and promoting Georgian honey and beekeeping.
Apimondia promotes scientific, ecological, social and economic apicultural development in all countries and the cooperation of beekeepers' associations, scientific bodies and individuals involved in apiculture all over the world. This event is a unique opportunity for Georgia to promote itself as a honey producer and claim a place next to world leading honey producers. The recent placing of Georgia on the list of third countries for honey only further cements the credibility of Georgia as a viable producer country.
Georgia has been extensively promoted internationally as the birthplace of winemaking. Apimondia provides the opportunity to put energy into a new promotion of Georgia as the homeland of the oldest honey ever discovered, preserver of ancient beekeeping traditions as shown in the Jara movie and producer of a wide variety of artisanal natural honey and bee products fueled by the un-paralleled flora of Georgia’s uniquely bio diverse and unspoiled landscape.
The Georgian Beekeepers Union (2018) as an umbrella association for advocating and representing beekeepers’ interests developed Honey promotion video, websites/catalogues of Jara Honey and Georgian Honey for further promotion of Georgian honey.
The first participation at the congress was facilitated by the Swiss Agency for Development and Cooperation (SDC) project the Mercy Corps Georgia implemented Alliances Caucasus Programme (ALCP) in cooperation with the Ajarian Beekeeping Business Association (ABBA) operating under the Ajara Chamber of Commerce and Industry (ACCI) in Istanbul, Turkey in 2017.
Follow the links on the Apimondia Congress 2019: Interpressnews, Palitranews.ge
The Women’s Room in Alaverdi municipality, Armenia was officially opened on the 25th of July by the Governor of Lori Province, Andrey Ghukasyan, the Head of Alaverdi Municipality, Sasun Khemuchyan and the ALCP Team Leader, Helen Bradbury. The Head of the Department of Family, Women and Youth of the Ministry of Labour and Social Issues, the Head of the Municipality, the representative of Association of Lawyers, local businesswomen and other guests attended the opening ceremony. The Mayor of Keda Municipality of Ajara region and the Manager of Women’s Room in Keda were invited, representing one of the most successful Women’s Rooms in Georgia. Keda and Alaverdi Municipalities forged links when the representatives of Alaverdi Municipality were invited to the Women's Business Forum held in Batumi, Ajara in March, 2018.
“This service is very important for women and their families to improve their business skills. I would like to thank all of the initiators and supporters of the project and I am ready to discuss the opening of this service in other municipalities as well” - Andrey Ghukasyan, Governor of Lori Province.
“The Idea of the opening of the Women’s Room in Alaverdi came when we visited the Women’s Room in Keda, Ajara region three years ago. The Alliances Caucasus Programme expressed their readiness to share their experience with us how to establish and operate the WR. This service will help women with accessing resources and training to get finances for their businesses. When we help women, we strengthen their families’ Sasun Khemuchyan, the Head of Alaverdi Municipality.
Photo Source: Facebook page of Women's Room in Armenia
All the managers of the municipal Women’s Rooms and representatives of the Governor’s office in Kakheti region attended a training on Business Plan Writing and Fundraising held by the Georgian Institute of Public Affairs (GIPA) with ALCP facilitation. For three days George Turkia and Nikoloz Abuashvili, full professors of GIPA, explained how to transform ideas into real plans and where to find the money for them.
‘This was the most interesting training I have ever had. A lot of women are coming to my room with business ideas but I cannot provide help because of lack of knowledge. Now I am full of enthusiasm and ready to help them. It is also important for me that helping women with starting businesses in rural areas will be supported by the local government through the Women’s Room. We will make it happen’ – Bela Marukashvili, the Women’s Room Manager in Akhmeta municipality.
Background information: Twenty-eight municipalities of Ajara, Kvemo Kartli, Samtskhe-Javakheti and Kakheti have established free information-consultation spaces - Women’s Rooms to support women’s equal participation at local decision making fora and their economic empowerment. In 2016 the Women’s Rooms in Ajara pioneered to help rural women with applying to the government grant programmes and after a year the model was copied by Kvemo Kartli and Samtskhe-Javakheti as well. To date 88 women business start-ups have been funded through the Women’s Rooms in Georgia.
Honey and bee products of four Georgian companies were exhibited at the event WORLD BEE DAY COMES TO LONDON on 21st of May, in the Conway Hall by the initiative of the Embassy of Slovenia to the UK.
The Embassy of Georgia to the UK organized a stand for Georgian companies with the help of the Alliances Caucasus Programme, the Georgian Beekeepers Union, the Jara Beekeepers Association and the Georgia Chamber of Commerce and Industry. Georgian honey was well promoted by the Embassy.
Twenty-seven countries exhibited their bee products. More than 500 guests tasted Georgian honey; Chestnut and Jara honey were one of the favorites.
Photo source: The Embassy of Georgia to the UK
Seven dairy enterprises are using the Georgian Milk Mark: Milkeni Ltd Rustavi, KK; Tsintskaro + Ltd Tetritskaro, KK; Khiza Ltd Akhaltsikhe, SJ; Badri Gogoladze I.E Bolnisi, KK; Gocha Gagashvili I.E Telavi, Kakheti; Tsolak Grigorian I.E Ninotsminda, SJ; Karen Simonian I.E Akhalkalaki, SJ.
Six dairy enterprises are being audited: Imeruli Ltd Marneuli, KK; Zekari Ltd Terjola, Imereti; Tsezari Ltd Khulo, AJ& Tsalka KK; JTA Ltd Tsalka, KK; Ramaz Nazrashvili I.E Gori, Shida Kartli; Tanadgoma Gardabani, KK.
The products with the mark are available in Spar; Nikora; Zgapari; Fresco and Madagoni supermarkets’ chain.
Eleven additional dairy enterprises have already applied to use the mark.
Billboards of the mark are on Tsereteli Avenue, in Vake Tbilisi; Rustavi; Kutaisi and Akhaltsikhe.
Information per enterprise is uploaded on a www.georgianmilk.ge. This allows consumers to look up the products they are buying using a unique register number printed on the label.
GMA international marketing company has been conducting a national promotion campaign to introduce the mark to the public and retailers since the end of March. Facebook of the mark is active with more than 3,000 subscribers/consumers.
The Georgian Milk Mark is officially registered and serves to distinguish dairy products made from natural milk.
Follow the links on the Georgian Milk Mark: Ferma, Agrinews, Imedis Dila, Radio Marneuli, Marneuli TV, Georgiandairy.org, Agrokavkaz.ge, Interpressnews.ge, Ambebi.ge
Up to thirty students of the agri journalism course at the journalism department attended a lecture given by the ALCP programme Team Leader Helen Bradbury in the state university. Agriculture and tourism; environmental protection, preservation and biodiversity; the honey, sheep and dairy sectors; Georgia’s rich cultural heritage and its main treasure - people/farmers with their strong traditions were the main themes of the lecture.
All the students highlighted that the lecture was inspirational, they did not know many things, found different perspectives of agriculture and environment and they will report about the themes in the future.
‘Agriculture is about people and you should do your work with your heart if you want people to be opened to you. Try to understand the process and choose your own path. Be different and always find something new that no one else can see.’ - Helen Bradbury, Team Leader of the ALCP programme.
Since spring fifty-three students have been learning agri journalism as a selective module for two hours/week, during the whole semester at the state university.
‘We see more and more reports about agriculture but it is not enough. Reporting about rural life, people and agriculture is very important and it is our and your responsibility to think about it and be more enthusiastic as you are future journalists or media managers.’ - Natia Kuprashvili, Head of the Journalism Resource Center.
Fourteen universities in Georgia, four in Armenia and one in Azerbaijan established or are establishing agri journalism module in their courses. 369 students have already studied the course.
