14 CHAPTER 2
intensify staple production with modern inputs, especially seed and fertilizer. The resulting reforms have liberalized many aspects of the economy: lower- ing tariffs and relaxing import quotas, simplifying licensing procedures and privatizing state enterprises, establishing private banks and easing foreign exchange controls, discontinuing compulsory grain delivery and forced mem- bership in cooperatives by smallholders, and developing input-supply programs to intensify cereal output and efficiency.
Although these reforms increased market integration, market competi- tion, and private trading in local grain markets, wider systemic and structural constraints may have limited the impact of reforms. A fundamental problem facing the country is the persistently high transaction costs associated with trading agricultural commodities (Dercon 1995; Negassa and Jayne 1997; Gabre- Madhin 2001). Inadequate market information systems that do not provide smallholders and traders with price information, when coupled with poor infrastructure and weak private-sector capacity, significantly impede com- mercialization of the country’s largely subsistence-oriented smallholder population (Gabre-Madhin et al. 2003; Alemu, Gabre-Madhin, and Dejene 2006). Indeed, these factors are believed to have contributed to a farming crisis in 2002–03 when, following a good harvest and sizable grain surpluses, grain prices dropped dramatically by 60–80 percent (Gabre-Madhin et al. 2003). These factors may have also played a significant role in the 2007–08 food crisis when, despite good harvests in previous years, grain consumer prices increased by up to 50 percent.
This chapter describes the historical development of agricultural coopera- tives in Ethiopia until their recent redeployment. We assess their relevance for the challenge of smallholder commercialization, their organizational features, and their prevalence. Finally, we present a series of statistics along with case studies, to describe “typical” agricultural cooperatives in Ethiopia today.
Public Support for Cooperative Development in Ethiopia In spite of the challenges mentioned above, the GoE has placed coop- eratives at the forefront of its efforts to boost agricultural productivity and smallholder commercialization. The GoE’s current strategy aims to extend cooperative services throughout the country to supply production inputs to smallholders and to market surplus output from them.
Historical Legacy of Cooperatives in Ethiopia
RPOs have a long history in Ethiopia, particularly in the form of traditional collective action organizations, such as work groups (jiges, wonfels, debos), rotating savings and credit associations (iquobs), and burial societies (idirs), which are still very much present (Table 2.1). It was not until the early 1950s
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