How Co-operatives Aid Development in African Economies, Total E&P Co-op as a case study
By Edward Israel-Ayide
The rapid advancement of mechanisation from the mid-1700s to the early 1800s which is now considered as the Industrial Revolution, resulted in job losses for many skilled workers across Europe.
The knock-on effect of this development was a significant rise in poverty. With a reduction of earnings and often disappearance of spending power, it became difficult for the broader population to contend with middle-men and traders who sought to profit from the situation by institutionalizing unreasonable prices and labor practices.
In 1844 a group of 28 weavers and skilled workers got together in Rochdale, England with the aim of establishing a society to counter the injustice of price fixing and low wage setting, and by launching their own shop they made it possible for the local community to buy staple goods which had become out of reach.
They derived valuable lessons from previous botched attempts to form co-operatives and ostensibly designed the now-famous Rochdale Principles which have become the standard for Co-operative societies globally and which were officially adopted by the International Co-operative Alliance (ICA) in 1937 as the model for Co-operative societies.
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This pioneering group, inspired by a genuine concern for the economic wellbeing of their members and community, are now known as the Rochdale Pioneers and are the founders of the modern Co-operative Society which today, reportedly comprises of around 2.6 Million co-operatives with over 1 Billion members and clients.
Since the time of the Rochdale Pioneers, Co-operative societies have progressively become a meaningful part of economic development; not only for society members but also for the wider communities within which they operate.
Across Africa, Co-operative societies have performed a critical role in the fight against poverty by providing opportunities to create wealth through trade and the development of agriculture.
According to a World Bank report, co-operatives possess the potential to provide affordable credit to small-scale farmers because they can reduce transaction costs and lower the risk of default. This is possible because successful co-operative societies provide incentives for members, encouraging a loyalty which also delivers the added benefit of maintaining a competitive position.
In providing services to their members, cooperatives generate income through a variety of commercial ventures. Sustainable, or in other words successful Co-operative societies are those which can balance the concerns of the society with the benefit of aiding the economic growth of the area which it serves.
The perfect illustration of this is the Total E&P Nigeria Staff Multipurpose Co-operative Society Limited (Total E&P Co-op); a Co-operative Society comprising the staff of Total E&P Nigeria Ltd, (a local subsidiary of Total S.A. the French multinational integrated oil and gas company).
Founded in 1984, in the humble surroundings of the mailroom at the Nigerian Oil Company, the staff at Total E&P seized the opportunity that economic downturn presented, to establish a communal economic system, where active members could unite to make bulk purchases of essential commodities at reasonable prices, for distribution amongst its members.
The Total E&P Co-op was born and soon blossomed to incorporate a more sizeable number of staff coming together to establish the forebear of Total E&P Co-op; Total E & P (Nigeria) Thrift and Credit Society Limited which was a savings and loans society.
By 1994, the Co-operative Society had shifted focus to matters of basic human requirement and pooled member funds together towards the purchase of real estate through the collaboration with commercial banks.
Today, Total E&P Cooperative’s asset base has grown over a thousand fold from inception. Thanks to an increasing and constantly motivated workforce contributing their quota to its core areas of interaction between members, together they boast assets in Real Estate, Treasury & Financial Services, and Business Development.
The success and growth of the Co-operative Society has been due to several contributing factors but three factors stand out in providing valuable lessons for other co-operatives (or even governments) across Africa who intend to adopt the Co-operative model to reduce poverty, increase financial inclusion and create wealth.
Combating Poverty and Creating Wealth Through Corporate Social Responsibility
The founders of the global co-operative movement-the Rochdale Pioneers-were striking weavers who opened a grocery co-op to extricate themselves and others from poverty. Their aim was to provide answers to questions about whether the economy should serve the people or vice versa; this belief in economic fairness led to the development of co-operatives as we identify them today.
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Since then, co-operatives have carried out a fundamental role in combating poverty and creating wealth, especially at the grassroots level. As stated by Joseph Ventura, an expert on the impact of co-operatives; “In transforming poverty-ridden communities into vibrant economies, co-operatives also contribute to skill-development and education as they bolster gender equality and improve the health and living standards of an entire community. Co-operatives have been instrumental in meeting the Millenium Development Goals, as nations are more likely to stay peaceful by escaping the poverty trap.”
For the Total E&P Co-op, these efforts have been at the core of plans for sustainability and the growth of the collective’s commonwealth. It has led to the creation of products and services tailored to the needs of members/cooperators in the real estate, insurance and financial services sectors.
Equally investment in Corporate Social Responsibility (especially through STEM education and in providing quality education to the disadvantaged members of society), help equip young Nigerians with the skills necessary to become more productive members of society.
In a country like Nigeria where over 50% of the population faces extreme poverty, these empowering initiatives help bridge the poverty gap where governments have failed and provide opportunities for the young through job creation.
In his paper “The Role Of Cooperatives In Poverty Alleviation” Christopher Imoisili, Senior Specialist Entrepreneurship & Management Development of the International Labour Organisation (ILO) drew attention to how cooperatives help both members and employees to escape from poverty, by offering an umbrella of shelter to those who may be facing the risk of poverty. He added that.
“By promoting student and youth programmes and cooperative entrepreneurship…cooperatives can play a major role in bridging the [poverty] gap. They can also influence political processes and legislation in favour of the socially deprived.”
Corporate Governance
While co-operatives are typically run democratically, relying heavily on member engagement; it is important that they balance this with the strategic management of their business in a way that ensures the continued survival of the Co-operative and its viability as a business concern. It has been reported that most co-operatives in Africa and other emerging economies collapse because of weaknesses in their corporate governance or the total absence thereof.
According to a 2014 paper written by Marilyn Scholl, a consultant with CDS Consulting Co-op and Art Sherwood, an Indiana State University Associate Professor of Management; there are four critical pillars upon which corporate governance should be built in any Co-operative organization and strict adherence to this has sustained Total E&P Co-op as a viable business concern.
These four pillars; Teaming, Accountable Empowerment, Strategic Leadership, and Democracy have been at the heart of the various changes that Total E&P Nigeria Staff Multipurpose Co-operative Society has made in its team structure over the years.
For example, it has applied these principles when filling critical leadership roles within the organization with those who not only have the qualifications, but are also experienced in their field of practice and can therefore be held accountable for strategic decisions taken on behalf of the Co-operative.
The co-operative also remains the first and only Co-operative Society in Nigeria to appoint an External Auditor (PricewaterhouseCoopers) to review financial records and determine its compliance with internal and regulatory policies guiding the affairs of the organization. This system of checks and balances, peer-review and external regulation is a major turning point for public and private institutions looking to remain viable in the face of global economic trends such as price fluctuations in global oil and other commodities.
Strategic Planning
For institutions looking to achieve viability and sustainable growth, planning for the future is a critical requirement. For many societies across Africa, failure to plan for the future and align with trends has been at the heart of the majority of socioeconomic failures. This undoubtedly has had an impact on broader African economies.
As Total E&P Co-op grew its membership and revenue, they created an organizational structure which would allow it to develop a sustainable strategic plan and guide operations for the years to come. Beginning in 1997, the linear business model of the Co-operative had outlived its usefulness and the growing membership base of the co-operative society now had increasingly diverse needs.
To meet these needs, Total E&P Co-op changed their model to one of a multipurpose Co-operative business and made massive investments in human capital, placing a priority to the recruitment of a full-time technical team which ensures they maximise the investments of their strategic business units and profit centers.
The strategic business units identified were those that would enable the business to create long-term profitability and position it as the Co-operative of the future. In line with this, the Banking and Investment desk of the Co-operative was set up as the ‘Treasury and Investment Hub’ whilst it migrate the financial services into a Co-operative Bank to support future ventures.
The real estate development, management, and marketing operations were restructured so that the Co-operative could partner with established property developers and build, operate and transfer investments in the real estate business. This futuristic strategic planning has enabled Total E&P Co-op to become the fastest growing Co-operative Society in Nigeria as reflected by its growth in relation to Nigeria’s GDP.
Total Living, is the culmination of plans to improve the success and sustainability of its cooperative model. They have embarked on the first real estate development project to be certified under EDGE sustainability in West Africa (a Green building standard and rating system for over 150 countries introduced by the IFC/World Bank).
La Definition, as the project is called, is a smart, innovative mixed-use development that sits on 22,000sqm of land located between the Kuramo Lagoon and Lagos beachfront. The project is set to steeply increase revenue for members of the cooperative whilst improving the amenities available to the diverse population of Victoria Island, Lagos’ center of business and commerce.
La Definition will feature some unique solutions to tackle the limited availability of grid infrastructure in Lagos including a water recycling system that will reduce demand for borehole water by up to 80% through the use of rainwater and greywater. An energy center is also planned based on the gasification of sustainable waste streams to produce very clean synthesis gas that will generate electricity and heat for the development with zero CO2 emissions.
For emerging African economies keen on implementing policies and projects geared at economic growth, job creation etc., there are important learning points to be gleaned from cooperatives The successes of Total Co-op provides an insight into how the larger Nigerian society, and indeed Africa, can progress where there is commitment to strategic planning, governance and investment in human capital.
The co-operative model may just hold the key to reversing the poverty rate on the continent with the benefit of strengthening communities and fostering sustainable development.
Edward Israel-Ayide (@wildeyeq) lives in Lagos, Nigeria and comments on socio-political events across Africa.
