Co-operatives in Rwanda

I have had the opportunity to hear the stories of people from a number of co-operative enterprises in Rwanda, host this year to the annual conference of the International Co-operative Alliance (ICA).

The country is rebuilding impressively over recent years, after the horrors of the war and genocide of 1994.

Every town has a Genocide Memorial, including one in the capital city Kigali, which I visited with an ICA delegation, to lay a wreath in remembrance.

The cooperative sector before 1994 had been weak, seen as a conduit for donors, but in the last decade, they have started to play a much wider role in the economy. In 2007, legislation was passed for co-operatives, and each sector of farming was organised into primary co-ops, federations and unions, offering a chance to bring cooperation into the entire value chain.

Today, the number of cooperative members is 3,816,591, representing over half of all the Rwanda adult population (55.3% of Rwanda). The number of co-operative enterprise has increased from 919 in 2005 to 8,995 in 2018.

This rebuilding of the co-operative sector has helped the country to reduce levels of poverty and inequality, Monique Nsantabaganwa, Deputy Governor, Rwanda Central Bank told ICA delegates on Thursday. “Taken together, the co-operative sector is now Rwanda’s biggest wealth creator” said the Business and Industry Minister, Soraya Hakuziyaremye.

Following an excellent three day conference, exploring the role of co-operatives in advancing the United Nations Sustainable Development Goals (which you can read more about via the reports of Co-op News) I had the chance to meet two transport co-operatives operating out of the capital city, Kigali.

One, Coctramavk, was formed in 2009 by 88 lorry drivers, each investing ten thousand Rwandan francs (around ten US dollars). One of the founders was Peter Kambanda and he showed me one of the seven trucks today that is jointly owned by the co-op, alongside the trucks (typically imported from Europe after they had been driven for around 300,000 kilometres) owned by the members themselves.

Peter Kambanda, co-founder of the Drivers’ Co-op

They compete for contracts to drive goods between Rwanda and around seven other countries in the region. Today they have ninety eight members, with good profits, shared as a dividend for each in 2018 of six hundred thousand Rwandan francs (around six hundred dollars). The co-op also offers medical insurance too for members and their families.

Medical insurance is also on the to do list for the second co-op I visited. Remera Transport Co-operative was formed by seventy cab drivers in November 2011, each contributing capital of one hundred thousand Rwandan francs. When a competition was run for the provision of public transport in the city, Remera won the contract for twenty one routes.

In 2014, therefore, the co-op borrowed money to finance the purchase of the first seven coasters (29 seater minibuses), with a further eleven in 2015. Today, it has paid off the loans and increased its capacity with 70 seater buses too. In concert with the regulator and other co-ops serving different routes, it has introduced tap and go payment technology, to make public transport cashless. The buses also operate free WiFi.

Remera Transport Co-operative

The co-op has won awards from the Rwanda Utilities Regulatory Authority for its services and has increased its members from 70 to 240.

Eric, member, Remera Transport Co-operative

In a blustering wind, with rains falling outside, Eric, a member of the co-op, described to me the key challenges as ones of access to capital, traffic jams and a lack of public awareness of the importance of co-operatives. “We overcome each of these challenges by working hard and being optimistic.”

The achievements he lists of the venture as: creating employment, reducing poverty and contributing to the national government through taxes.

Eric, for one, was proud of their contribution to taxation. He liked the idea of the Fair Tax Mark, pioneered by co-ops and social enterprise in the UK.

His words chimed for me with an event I saw being organised which was Taxpayers Appreciation Day and the song with which Peter and his fellow lorry drivers had welcomed us with – 🎵Who will build Rwanda? We will build Rwanda and we will do it by ourselves.

Self help? You can’t fake it, and you certainly can’t beat it.

Towards a co-operative SORP – why we need accounting for purpose & not just accounting for profit

How do you tell your story?

I presented a motion today on the need for a new way of telling the story of co-operatives in our financial accounts. This is a proposal developed by a team of us around the world and I’m happy to say was approved unanimously.

It is not my usual blog post, but here below is the presentation I made at the 94-nation strong General Assembly of the International Cooperative Alliance, taking place in Rwanda.

Robert Owen-Wahl, Pixabay

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It is hard to compare apples and oranges. That’s what I was told at school.

In French, you say it differently: don’t mix up cabbages and carrots. In Italian: don’t compare cabbages and potatoes

In Denmark, Susanne from Kooperationen who is seconding this motion tells me, it is apples and pears. In my home town of London, that means stairs.

In Russia, the saying is more subtle – that we should not confuse what is warm and what is soft

You may have a phrase in your own first language.

Well, co-operatives are apples, but financial accounting is designed for oranges… or potatoes.

Let me explain.

There has been a race towards global accounting standards in recent years, but with a single minded focus on shareholder firms and the needs of their investors. 

The International Accounting Standards Committee (IASC) was established in 1973 to oversee the project of harmonising financial reporting globally. The project was, from the outset, concerned with companies whose shares are traded publically through stock exchanges, i.e. listed companies.

In 2001 the IASC was replaced by the International Accounting Standards Board (IASB). The IASB adopted the International Accounting Standards which had been issued by the IASC and developed them into International Financial Reporting Standards.

The IASB also started a project to develop a conceptual framework to underpin and give coherence to the work on issuing accounting standards. This conceptual framework explicitly states that the primary purpose of financial reporting is to give information to current and potential financial investors. The IASB sees the main users of financial reports as:

present and potential investors, lenders and other creditors, who use that information to make decisions about buying, selling or holding equity or debt instruments and providing or settling loans or other forms of credit.

The co-op sector, notably the European Association of Co-operative Banks and the UK Co-operative Performance Committee, has responded by looking to influence this agenda.

The resolution, which calls for appropriate accounting guidelines for cooperatives, recognises the work of two outstanding people and teams working on this.

First the Audit and Risk Committee of the International Cooperative Alliance and the work of Isabelle Ferrand.

Second, the Centre of Excellence in Accounting and Reporting for Co-operatives, at the University of St Mary’s in Canada, led by Professor Daphne Rixon.

One of the main problems co-operatives face when accounting under the for-profit format in the International Financial Reporting Standards is the classification of members’ equity.

Two challenges co-operatives face in the International Financial Reporting Standards, now or in future are around accounting for member capital and co-op dividend.

The first risks making co-ops appear far more fragile than they are, as member equity may be treated as a liability.

The second treats member dividends as an expense, i.e. a reduction in sales rather than a distribution of profit. 

In many countries, co-ops are losing what tax advantages they might have, because their accounts don’t distinguish their cooperative difference.

While this is a technical and complex field, the resolution is a permission slip to explore the case for appropriate guidelines and a new framework for co-operatives (a Statement of Recommended Practice, or SORP) at the international level.

Others are doing the same. In July, a five year project was launched by the Ford Foundation and Open Society Foundation for a global Statement of Recommended Practice for non-profits. But that is more. about philanthropy and typically not right for us.

We need to be thinking five to ten years ahead.

It will take time and consultation to explore this further and any work will need to take into account the needs of co-operatives and mutuals across countries and in all their diversity.

It is helpful that an international working group of researcher and academics has been formed on cooperative accounting, following an international roundtable in London last year, hosted by St Mary’s so we can call on expert input.

Can I stress that most financial accounting, such as the valuation of assets, is perfectly appropriate. It is not wrong.

We need to focus on the specific areas of accounting where it is wrong for the member-owned model, where the co-operative model needs a different interpretation. It could be that we have common cause with a wider swathe of ‘for purpose’ business and social enterprise.

We need a financial vocabulary that allows us to express our performance as co-operatives. Otherwise it is like being asked to write poetry in a language that you do not speak.

We can’t progress if we are judged by shareholder value.

We can’t build a cooperative economy, if we don’t have a system of economics and accounting.

What we can do is what we have always been best at, which is to organise; and with ambition and organisation, we can over time win the battle of ideas.

Justice and gentrification in Washington DC

Anita Bonds has spent her entire adult life as a grassroots organizer, activist and campaigner for social justice and it is down to the work of her and colleagues, and a particular form of housing co-operative, that the capital of the USA is becoming less divided and divisive than it has been over time.

In Washington for the first time myself, as a guest of the US co-op sector, I had the chance to hear of her work as a champion for housing co-ops.

As a student at the University of California at Berkeley, she became involved in the Free Speech Movement and returned home to support the struggle for underserved communities in Washington DC, a city long divided by economic and race injustice.

Since 2012, Anita Bonds has served as an At-Large Council Member on the Council of the District of Columbia and she chairs the Committee on Housing and Neighbourhood Revitalization.

“I have always had a concern about poverty in the District of Colombia. I remember being shocked hearing elderly people talking about how they couldn’t afford their prescriptions and they had to choose between food and medicine.”

The District of Colombia has a unique and important longstanding law, the Tenant Opportunity to Purchase Act, which gives tenants the right to purchase their residential building before any other buyer. As many are condominiums of apartments, tenants form ‘limited equity’ housing cooperatives.

Today, she explains in a talk at the Co-op Impact Conference in Washington, organised by the National Co-operative Business Association, that the district has around 4,400 units of co-operative housing in 99 properties. What they have been successful at is keeping low and moderate income residents in their communities, because rents are affordable, even where neighbourhoods are rapidly gentrifying.

Last year, she championed new legislation to promote housing co-ops, with recommendations to increase the number of limited equity co-op units by 40% by 2025.

“We should pay attention to the least of us. This is an expensive community and with different incomes and walks of life, as we like to call it. One part of the city has four percent of affordable units, but cross the river and it is ninety three per cent. Housing co-ops are a way of addressing this because they allow for a mix of people right across the city and they are a powerful way of keeping communities inclusive.”

The next challenge she sees are the rocketing rents faced by small businesses as neighbourhoods gentrify. Her tool for addressing that? As she sees it, this would be small business co-ops, to keep rents in the control of local people.

The legend of co-operative forests… 🌳 🌳 🌳 🌳

Many of our early folk stories and legends have the forest as a setting. Perhaps as a result, forests have always been at the heart of national identity.

One hundred years ago this month, the first UK Forestry Act created the Forestry Commission, with a mandate to boost forest cover in a nation that had slipped to around five per cent of its land with tree cover.

Finland has done it differently, perhaps because its own national story is bound up with co-operative enterprise. The country is the most forested in Europe, with 75% of the land area covered by trees. In contrast with the British tradition of large landowners, ownership is dispersed. Over half the forests are owned by families with ownership of over three hectares.

Following a Board meeting of Coops Europe, I had a chance to visit Metsä Co-operative at one of its woodland centres outside of Helsinki.

Metsä was formed in 1934, focused on sawmills and industrial uses for wood. Today, its members are 103,000 forest owners, covering half of the private forest land in the country. The members draw on the services of the co-op to manage and harvest wood in a sustainable way. The co-op has a turnover of €5.7bn and employs 9,300 staff.

The co-op can calculate the benefits for members by comparing what they would have received on the open market. Last year, members gained 7.3 euros extra for every cubic metre of timber sold.

As with any co-op, they have a voice in the running of the business too, electing a representative council of 52 members every four years and a supervisory board of 30 members.

And members can invest as well in the business. The interest on €74m of regular participation shares in 2018 was 7.5%, while for a second class of participation shares, open to wider investors, the interest rate was fixed at 2.5%.

The co-op is enjoying strong growth now, but only because of its response to a crisis earlier in the decade. From 2005 to 2012, there was a depression in the sector, with excess capacity in terms of paper mills. The business was indebted and an incoming CEO, Kari Jordan, was able to see how to turn the crisis into an opportunity. The co-op sold all of its production facilities in wood products that Jordan categorised as ‘sunset’ industries rather than ‘sunrise’ sectors.

Key to the future was to be sustainability. The co-op has always encouraged good forestry management, but now the emphasis was on this as a source of commercial advantage. The purpose of the business was agreed as “advancing a bioeconomy and circular economy by efficiently processing northern wood into first-class products.

The idea of a bioeconomy as they see it is to replace a fossil fuel economy. So one of the major innovations they are investing in at present, is a €1.2bn pilot factory to produce textiles out of wood pulp. That is a new market opportunity, but it is also a replacement for cotton, which is notoriously water thirsty and fossil fuel hungry.

The circular economy takes a systematic view of the resources that they use, with careful management of carbon through forestry management and locking carbon storage in to high quality wood products, such as engineered wood for construction. 100% of the wood is traceable back to where it came from. 88% of the wood that the co-op uses is now certified by one of the major schemes, PEFC or FSC, compared to 10% of forests worldwide.

This include a focus on the use of every part of a tree, from wood left on the ground to encourage biodiversity through to timber and then the top most branches used for renewable energy. The co-op produces 15% of renewable energy in Finland, but their preference over time is to find new products and uses to store carbon rather than see it released as energy. At present 94% of all wood materials are used. By 2030, the aim is to get this to 100%.

The forest that I visited was mixed, with spruce and birch and pine, rich with life. Where trees has been felled, new seedlings were planted (some of the thirty million planted annually) as the eighty year cycle of forest regeneration started again. Tree cover in Finland is stable and grown for the long term and it is land that remains wild for those who need it, such as the vulnerable white-backed woodpecker, the numbers of whom are on the rise.

This is on a scale and with a focus on sustainability that the UK can’t match, but it is Woodland Social Enterprise Day on October 8th, supported by Plunkett Foundation, itself part of Grown in Britain Week. It is encouraging to see the spread here of community owned woodlands and the same spirit of cooperation and sustainability.

As it is member owned, Metsä co-operative can balance the competing demands that come with a commitment to sustainable forestry. In the process, it is helping to build a path to a low-carbon economy.

This is a story of our forests, a new legend, to which we do well to listen.

Crazy, co-operative and fighting back: the success story of Liverpool’s housing activists

Carole Rich was given her first garden gnome when the housing co-op that she formed with her neighbours opened, thirty six years ago. “They thought I was crazy so it was a gift for crazy woman” she says.

At the time, the street was being demolished and it had taken four long years to get home, this time in new houses formed as Hesketh Street Housing Co-op. Those years had taken every ounce of determination and charm that Carole possessed, visiting slate factories, brick makers, furniture stalls, to keep people together, to keep their belief and to get the new development going.

Today, Carole is on the board not just of the co-op but also of North West Housing Services, which is a vibrant secondary co-op, registered in recent years with input from and now a member of Co-operatives UK.

North West support thirty four housing co-ops across Merseyside. On my visit today to the team, in the run up to Communities Week 2019, I met Carole and visited Lodge Lane East, a second co-op which is taking on a new property to create space for people with disabilities.

Ian, the Treasurer of the co-op, told me the story of the new building they were putting up on derelict ground. The land had been fenced off, with rubbish thrown over and when local people, members of the co-op, looked at the ownership, they found that it had been taken off a convicted criminal via a compulsory purchase order. The city authority owned it, but they didn’t know it.

The co-op, with over two hundred homes and clean finances, having paid off the last of its debts to NatWest Bank, offered to buy it at a discount to put up flats that would be an affordable alternative to the rogue landlords and high rents of the area, itself a short distance from where the controversial £1 Houses: Britain’s cheapest street was filmed.

“As a co-op, we are trying to raise the area, while others are trying to bring it down. We have houses with soiled nappies in the entrance, the remnants of a pig slaughtered in the yards, a brothel now closed down. Private landlords operate with immunity, one responding to damp by ripping out the skirting board and leaving a hole. The authorities should be cracking down on all this, but as a community, we have to fight back ourselves.”

Finance for the development came in part from loans from the other housing co-ops through North West Housing (North West has also invested money in recent community shares issues by other co-ops, including Leeds Community Homes and renewable energy co-ops in Liverpool and Drumlin, Northern Ireland).

With the new building weeks from being completed, the Lodge Lane East co-op members have gained confidence. The works manager told me that they have had no trouble, no threats while they have been there.

“We get a lot of respect. And we have a taste for it now” says Ian.

For Carole, her local area has already begun to come up in the world. A working class area with housing for servants has gone up market, with bohemian cafes and shops on nearby Lark Lane.

The housing co-op means that local people keep a stake in the area, forming a backbone of the community that helps to give it its colour and life. A one up, one down house next to the co-op area sells for £190,000; crazy prices for the city.

For Carole, her collection of gnomes has grown along with her family, smiling out in front of her house and under the awning in her garden. Her grandchildren give her more as gifts.

Carole’s co-op craziness has been passed on.

Mass co-operation

It has been a few days of criss-crossing the country for me, as we launch Co-op Fortnight 2019.

On Friday night, we reported the results of our annual Co-op Awards. Over thirty thousand people voted for UK co-ops they love across a range of categories. The Leading Co-operative went to The Co-op Group, a worthy winner no doubt for the extraordinary progress made over the last four years.

A new initiative is the Lifetime Achievement Award, which, following open nominations, went to the wonderful Roger Sawtell, a pioneer of worker co-ops and a celebrated man of faith.

Bristol Wood Recycling, Breakthrough Co-op of the Year

On Friday and Saturday, our Co-op Congress turned a spotlight onto the many areas of promise and progress for new co-operation, with a keynote address from the Greater Manchester Mayor, Andy Burnham.

Sunday I was down to Kent, for a licensing event for my brother, starting work as a prison chaplain working with young offenders.

This morning, I was across to Cardiff, as one of the speakers for a gathering of inspiring coop businesses coordinated by the Wales Coop Centre. My ride in town was with a growing new taxi co-op, formed by drivers to keep more of the earnings in an age of lift sharing and apps.

Deputy Economy Minister, Lee Waters AM

Today has also seen the re-signing of a new partnership agreement by the ILO, the International Labour Organisation, and the ICA, the International Cooperative Alliance.

This evening I will be in Leicester to give the annual lecture for the Society for Cooperative Studies.

All this at the start of Coop Fortnight, which will run up to Saturday July 6th – celebrated around the world as the United Nations International Cooperatives Day.

I am talking in Leicester about twelve early historic examples of cooperation. They range, among others, from ancient China and India to the Roman Empire and mediaeval Turkey.

They are extraordinary stories. They are also a recognition that today’s co-ops are not the exception, but instead are expressive of a deep and recurrent pattern of mutuality over time in the way that people choose to organise.

We are perhaps at our most human when we are engaged in mass cooperation.

The UK’s first Chief Values Officer

The field of values in business has been growing in importance for some time and it is a genuine milestone that we can now welcome the UK’s first dedicated Chief Values Officer for a major business.

Pete Westall will take this executive team role at the independent co-operative Midcounties, a diversified retail business that employs 8,500 staff and is co-owned by 700,000 members.

Culture and values have long been seen as the soft side of business, but are now widely recognised as key to commercial success over time. The UK Corporate Governance Code for listed companies last year set out expectations that every Board should take action to set and monitor goals around organisational culture and values.

But who should lead on this? If it is HR, then how do you ensure that supply chains and external relations are covered? If it is risk and compliance, then how do values make their way into product and service innovation? If it is the CEO, then how do you avoid this being swamped by other demands on their time?

The idea of a Chief Values Officer was something we explored in a 2017 workshop of the UK Values Alliance, the member network that pioneered World Values Day – now held every October on the third Thursday of the month. I wrote this workshop up as a post – Introducing the Chief Values Officer – and one of those reading it was Pete himself.

Midcounties has a long track record of firsts. It was the first business, alongside a handful of other co-ops, to publish the details of their tax, under the Fair Tax Mark. It was first to offer consumers full traceability on their local food sales, through QR codes and a new app, Happerley. With member backing, plastics are on their way down and Midcounties is one of only a few businesses to be rated five star by Business in the Community. Through Co-operatives UK, Midcounties was named Leading Co-op of the Year in 2018.

Out of the global set of co-operative and ethical values, Midcounties under the leadership of CEO Phil Ponsonby and its elected Board, places a priority on four throughout its work – Democracy, Openness, Equality and Social Responsibility (DOES).

It is easy to see values as a constraint, as an attempt to keep institutions in train. It is a different approach to see values as a source of opportunity.

It’s coming. In today’s world of empowered consumers, concerned employees and instant social media, values and culture is the next frontier for business.