In the early 20th century, cotton was a common cash-crop grown in the area that is now modern Uganda. As the new British protectorate was becoming increasingly integrated into international commerce and trade, individuals and families also had to adapt and find ways of acquiring currency for the changing economy. In adapting, many starting growing cotton and coffee, which was then bought from individual farmers by merchant middlemen, who then marketed and sold the produce to those who beneficiated the product, such as ginners in the case of cotton, and to industrial centres in Western markets.
Within this value chain, farmers were price-takers, as there were a large number of sellers producing an identical commodity. The middlemen who marketed these products to the international markets made a much larger share of the total profit compared to the farmers, who earned very little from their produce. To gain more of the profits for themselves, farmers started forming co-operatives. The first of these, the Kinakulya Growers Co-Operative Society, was formed in 1913 in the Singo County of Buganda1. The goal was to collectively market their crops in order to have more power in the selling, and ultimately greater profits. These co-operatives were governed and run by the members, for the benefit of the members.
100 years later, and the conditions that resulted in the co-operative movement in East Africa exist in many parts of the world today. There are large platform businesses which have been created, that use the efficiencies of technology to get goods and services from producers, and sell them to consumers. AirBnb, Uber, Amazon, Takealot, etc have all created platforms where they aren’t the primary producer of the goods and services they are offering, but are drawing some of the profits. In the extreme case of Uber, the drivers are price takers with prices set by the company, and increasing commissions are increasingly eating into the little profit they are receiving. In addition to that, the company is continuing to allow the flooding of the market, further eroding the revenue of individual drivers2. The decisions that have a direct impact on a driver’s livelihood are made without the driver or a representative of theirs.
With increasingly high valuations of these companies and exorbitantly rich platform founders, every aspirant now wants to start “The Uber of ” another industry by aggregating and commoditising producers and efficiently delivering an undifferentiated product to consumers, while reaping a large percentage of the profits. The more industries this model permeates, the more acceptable it will be for the producers of goods and services to hand over a large part of their deserved profits to the new merchant class of tech-entrepreneurs.
Another way, like 100 years ago, would be for similar producers to form co-operatives. Collectively, they can then have the power to set prices at a sustainable level for their industry, to regulate new entrants to an acceptable standard, add value to the product, and ultimately have more control of their industry within their geographic region. And the efficient technology? As a larger collective instead of individual smaller farmers, this technology can be licenced from a software-as-a-service business to suite the needs of the co-operative, instead of the co-operative adjusting to suite the needs of the technology provider. If a co-operative becomes large and profitable enough, this technology can even be built in-house, and licenced to other similar co-operatives around the world.
Such a solution would be no easy endeavour. The organisational and administrative burden to form such an organisation will be high, with different motives and interest groups pulling the organisation in different directions. Yet, the potential benefit of local-ownership of a larger portion of the value chain, as well as the increased percentage of profits to individual producers, may prove to be worth it.
- Samwiri Lwanga Lunyigo. (2021). Uganda: An Indian Colony 1897 – 1972
- Toby Shapshak. (2022, July 21 – July 27). Uber’s destructive history in SA. Financial Mail.