Alternative Prospect for Youth Development: Entrepreneurs’ Cooperative

By

Oluwafemi S. Obayori

1. Introduction: youth, unemployment and poverty

Unemployment remains one of the greatest problems facing most developing countries of the
world today. The sheer number of able-bodied men and women who are ready to work but
cannot find gainful employment is simply appalling. But quite apart from being in itself a
problem, and which impacts on the psychological and material need of the unemployed
individual, it is one of the most important indices of the health of any nation’s economy.
Employment rate is a reflection of dysfunction in the socio-economic substructure and the
superstructure. At a deeper level, it is part of the general crisis of global capitalism. A recent
report by the World Bank states that over 100 million Nigerians live as destitute, on below 1.25
dollar per day; statistics strongly contended by the Nigerian government officials, using indices
that are as complex as they are illogical.

But then it is interesting that the Federal Ministry of Labour and Productivity agreed that 41% of
Nigerian graduates are without employment after the mandatory NYSC engagement, and the
National Bureau of Statistics has it that 50% of Nigerian youth are jobless (the World Bank puts
the figure at 56%), whereas Global youth unemployment rate in 2012 was 12.7%. It is equally
important to note that our government has agreed that about 60 million Nigerians are
unemployed.

We should not allow the point being made here to be lost on us. Joblessness means poverty, it
means increased crime rates, it means youths that have low self-esteem, are not independent and
therefore can hardly be useful to themselves or the society. It means youths that don’t feel “man
enough.” It means loss of potential tax revenue due to government, professional studentship and
family instability (Otto and Ukpere, 2011)

Every society faced with this kind of problem must find solutions to the problems. And, indeed
societies, have always attempted to find solutions. In our clime there are various approaches

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applicable. One common argument in recent time has been that quite apart from government
creating jobs in the public sector and creating opportunities for private enterprises to thrive, there
is the need to impart entrepreneurial skills in the youth.

The argument is that youth are unemployed because they lack entrepreneurial skills and that by
making entrepreneurial studies part of the school curriculum the unemployment regime can be
significantly altered in favour of the unemployed and the society at large.

Sound alluring and logical, you will agree with me. But these are not new postulations. The truth
is entrepreneurship by itself does not solve the people’s problem. The only approach that can
really bring about development is one that is people-centered. I am by no means a professor of
economics, but I am learned enough to know that there are alternative roads to development than
those proffered by main stream capitalists, neoliberals and their neocolonial agents, that there is
much more to be gained by working together as a collective even when at the end of the day the
objective is to grow the individuals’ businesses and to achieve the Good Life.

I equally admit that real development can only come through governments focusing on and
paying due attention to micro, small and medium size enterprises (MSMEs). Furthermore,
socially motivated empowerment for agricultural production and manufacture and wealth
creation through local addition of values are key to time national development irrespective of
what official neoliberal statistics bandied around as indices of growth and development. Thus, I
feel very comfortable and at home with this topic. Let us begin at the beginning.

What is entrepreneurship? What is cooperative? What is the link? And what do we stand to gain
as a people in quest of development if we choose to marry these two instead of following the
other road of individual entrepreneurial approach?

2. Entrepreneurship and youth development

An entrepreneur is one who has the ability to distinguish and valuate business opportunities and
starts the activity by gathering the needed resources for obtaining the maximum profit (Henry et
al., 2003). The entrepreneur, in starting the business, is not only creating employment
opportunity for himself, viz., which he is self-employed, but also creates employment

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opportunities for others. He creates jobs. From the very start the aim of the budding entrepreneur
is not only to make profit, but to grow his business.

Now to be a successful entrepreneur the businessman must be able to imbibe certain qualities
namely:

 Recognition and appropriation of new opportunities

 Ability to evolve his organizational structure in time with growth of his business
 Risk taking
 Sound judgment under uncertain business climate

What these translate to therefore is that the outlook of a successful entrepreneur is that of a self-
motivated, enthusiastic and optimistic individual person. He is a creative thinker, highly
proactive and innovative, and exercises good control over himself and others. In short, the
entrepreneur is a leader, someone with qualities and traits not to be easily found combined in an
ordinary person in the crowd. Without these qualities, venturing into entrepreneurship is like
trying to ride a bicycle without the limbs with which to stand right talkless of push the pedals.

But then entrepreneurial skills alone are not enough for one to be a successful entrepreneur.
There are other factors involved. Key among these factors is the finance to start up the business.
With regard to the youth the militating factors are even more. Basically, the following factors are
cardinal to the development of entrepreneurship in our clime:

 Entrepreneurial education
 Access to finance
 Socio-cultural legitimacy
 Business assistance/support
 Power supply (energy policy)
 Administrative and regulatory framework
 Access to information on appropriate technology and market opportunities.

The advent of the unipolar world and globalization in which the so-called free market and
privatization holds sway everywhere has further put pressure on small businesses. Multinationals
and transnationals now compete with them on terrains hitherto regarded as exclusive grounds.
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The demands of new technologies have not helped matters either. Young businesses are not only
compelled to build new partnerships in order to withstand this onslaught and stay afloat, the
entrepreneur in small business is increasingly compelled under the pain of death to fall back on
strategic use of network and relations with other stakeholders (Hekmat, 2011). Thus cooperation,
which only a couple of decades ago gained so much following in Europe and the Americas for
more than a century, is becoming more and more a matter of necessity. As echoed by an ILO
Report a few years back (von Ravensburg, 2009a) it is indeed the future of enterprise in Africa.
There is no escaping it. But before going into the prospects, I think it important to quickly take a
look at the state of cooperatives in Africa and Nigeria in particular. Are we ready for cooperative
approach to entrepreneurial development?

3. Benefits derivable from focusing on the youth

By way of clarification, let us define youth as the young adults between the age of 18 and 35.
This category has actually been shown to be the most dynamic group in the society.

The importance of promotion of youth entrepreneurship cannot be overemphasized. Apart from

creating employment opportunities, Chigunta (2005) identified a number of psycho-social
benefit: including

 Bringing alienated and marginalized youth back into the economic mainstream
 Helping to address some of the socio-psychological problems and delinquency that
arise from joblessness
 Helping youth develop new skills and experience that can then be applied to other
challenges in life
 Promoting innovation and resilence in youth
 Promoting the revitalization of the local community by providing valuable goods
and services
 Capitalizing on the fact that young entrepreneur may be particularly responsive to
new economic opportunities and trends

4. Cooperative societies as such

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A cooperative can be defined as an autonomous association of persons, united voluntarily to
meet their common economic, social and cultural needs and aspirations through jointly owned
and democratically controlled enterprise. Decision making in the cooperative follows the bottom
up format, unlike the top bottom approach in the individual entrepreneurial administration.

The cooperative society is people-centred rather than profit-driven as such. Today it is easy for
us to take for granted the openness, social responsibility, honesty and spirit of solidarity which
are the ethical values that form the moral pedestal on which the cooperative stand. Whereas a
typical business organisation is driven by the propensity of the owner(s) for profit, the
cooperative seeks to empower its members in a dynamically social way.

Historically, the cooperative society emerged in Scotland in the 19th century as a response of the
working class to the onslaught of capital which deprived them of their jobs and threatened to
edges them completely out of the both the labour and the commodity market. It was a socialistic,
survivalist inventive.

Let me also quickly note that as Karl Marx teaches (Das Kapital, volume one) “cooperation” as
such represented a stage of capitalism before advent of manufacture via machine production.
This is an intellectual discourse I think is beyond the scope of this gathering. There shall be
occasion for that else where.

Most cooperative societies today in Nigeria and Africa in general are agricultural based or
finance based. Agricultural cooperatives constitute 40 to 60% of these while 30 to 50% are of the
financial institution type (Pollet, 2009). Statistics show that there are about 18,000 savings and
credit cooperative agriculture (SACCOS) or what we call credit and thrift cooperative societies
in Africa with membership in the neighbourhood of 20 million (Bwisa, 2010). In Kenya 63% of
the population live directly or indirectly on income earned from cooperatives.

In Nigeria the following forms of cooperative societies are identifiable:

 Multipurpose cooperative societies

 Marketing cooperative societies
 Consumers cooperative societies
 Processing cooperative societies

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  Industrial cooperative societies
 Supply/purchasing cooperative societies
 Credit and thrift cooperative societies (Otto and Ukpere, 2011)

Let me quickly note that the credit and thrift cooperative society which today is commonest
among our people and can be traced in Europe to Delitzsch Germany in 1851 and only became a
legal entity with the enactment of the Cooperative Societies Ordinance No 6 of 1935 actually
predated colonialism in the form of Ajo or Esusu.

5. Entrepreneurs’ Cooperative

Figure 1: “push” and “pull” factors for enterprise network

Push factor

Information Liberalization and Development and Higher demands of

technology internationalization market cycle suppliers trend
towards systems
solution

Cooperation

Transaction cost

Saving on time

Access to markets and

resources Advantages in
specialization and Learning effect
production cost

Pull Factor

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Entrepreneurs’ cooperative is a unique kind of cooperative. It is not an association of individuals
as such but rather membership comprises enterprises (SMSEs), self-employed persons,
professionals, municipalities, trade union and other public institution. Membership is driven
basically by the need to stay afloat and grow the business in the face of all odds. They are
compelled by “push factors” which they are powerless to withstand and are drawn by the allure
and prospects of what scholars refer to as “pull factors.”

5.1. Organizational forms of entrepreneurs’ cooperative

There are basically three organizational forms that the entrepreneur’s cooperative can assume

 Decentralized form in which partners act largely independently and only share
resources for one or two process;
 Leadership form type cooperation in which certain function s are fulfilled by only
one of the cooperating partners;
 Cooperatives outsourcing into joint ventures forming a business entity quite
separate form cooperating partners.

They can operate as non profit organisation (NPOS) or for profit organisation (POS) at a
secondary level they may accommodate other cooperative societies as members.

The basics features and corresponding benefits of entrepreneurs’ cooperatives are outlined in
Table 1 below.

Table 1: Features and benefits of Entrepreneur cooperative

Features Benefits
Supplies of raw materials or commodities Usually at a lower costs than would be
(food and non food produce) available to individual
Plant and machinery supplied Usually at a lower costs than would be
available to individual
Purchase of machinery and equipment shared The investment costs of which would be
among members prohibitive to individual member enterprise
Storage of products Smoothing of prices
Marketing and distribution Economics of scale and scope
Publicity and promotion Reputation and visibility
Creating brands names Increased public recognition and eventually
market share

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Setting and certifying of quality standards Operation in new markets, such as fait trade or
‘slow food’
Information about products, production and the Product design and production planning
sector improved
Education and training Management and production skills enhance
Insurance service Cheaper and more appropriate skills enhance
Accountancy, management services Concentration on key business areas
Legal and tax service Concentration on key business areas
Investment Improved financial management
Advertising members (tax and legal advise Enhance strategic decision making
management advice, among planning
Occasionally access to business and household Bridging bottlenecks in liquidity
finance
Risk cover Innovation becomes easier

5.2. Direct benefits of entrepreneurs’ cooperatives to members

The services offered by entrepreneurs’ cooperative can produce a huge number of direct
economic and socio-economic benefits for their members. These include:

 Diversification of production or increased volumes of production, followed by

improved labour and capital productivity
 Higher incomes and employment effects
 Improved company sizes in the informal and formal MSME sector
 Better access to and mobilization of local resources
 Diffusion of innovation
 Increased knowledge-transfers, resulting in human resources development and
commodities with higher ‘valued-added’ (cost of search for market screening of
contractual partner, negotiation and contract supervision are reduced)
 Increased efficiency and saving on transaction costs can credit worthiness and
therefore introduce new investment possibilities
 Enhanced risk management
 Possibility to invest in infrastructure development and
 Complementary to democratization efforts of local government with regard to
allocation and distribution of resources.

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With respect to their role in creating employment, entrepreneurs’ cooperatives have advantage
over individual businesses because of the opportunities open for

 Use of economics of scale and scope

 Increasing bargaining power of the member enterprises
 Active membership participation
 The production of added membership value deriving from organizational ability,
innovation and legal protection, among others (von Rovensburg, 2009b).
It is beyond doubt that enterprises that work within cooperatives are better placed to absorb the
shocks of market ups and downs. They are bound to be more stable, as they benefit from the risk
sharing and mutual help characteristics of cooperatives.

5.3. Socio-economic benefits to society

Quite apart from the direct benefits to the member entrepreneurs and creation of employment
opportunities, which means rolling back the frontiers of poverty, entrepreneurs’ cooperatives
have the potential to provide additional socio-economic benefits to the society at large. The
following are some of such benefits as outlined by the ILO:

 Provision of services previously offered by the state

 Pooling of expertise and collaboration, training and education
 Capacity building
 Improved use and control of local resources
 Opening of markets, including export markets
 Access to information
 Protection of natural resources
 Social recognition and new social relations /networking
 Defence against the flight of capital in the case of financial downturns
 Prevention of rural-urban migration and support of rural diversification and
 The creation of alternative or increased incomes can contribute to the abolition of
child labour and bonded labour.

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 6. Areas of focus: opportunities for entrepreneur’s cooperatives in Nigeria
There are areas in our society that can be considered as fertile grounds waiting for investment
and development by cooperative entrepreneurs. They lend themselves to MSMEs initiatives and
I think any people-oriented government needs to take a look at these. In Europe, Latin, America,
Australia and even African countries such as South Africa, Kenya and Rwanda successes have
been recorded.

 Hair care business

 Waste recycling
 Motel and guest house
 Transport business – taxi, tricycle etc
 Food processing cottage industry
 Agriculture-vegetable and orchard; animal husbandry
As growth is recorded it may then be expanded to include
 Artisans-Masons, mechanics, welders, machine tools
 Professionals – Doctor, Engineering Technologist, Technical

These are some of the veritable sectors for entrepreneurs’ cooperative to plough and sow in.

7. Challenges to entrepreneurs’ cooperatives

Beautiful as the prospects for entrepreneurs’ cooperatives are, there are those huddles which
everybody interested in fostering their development, particularly in the developing countries has
to contend with. Scholars, from both purely theoretical and economic perspectives have tried to
narrow all these huddles to the eight underlisted (von Rosenburg, 2011)

 The historical institution building process

 General constitutional, political and economic framework
 Regional and sector policy systems
 Promotional programmes for small and medium scale enterprises
 Certain civil laws
 Cooperative policy and law
 Activities for the promotion of cooperatives and entrepreneurs’ cooperatives

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Now let us try to break this down vis-a-vis the situation in the Nigerian environment.

1. Most institutions that flourish in our system today have their direct link to our colonial
legacies and indirect link to our pre-colonial histories. So in trying to solve problems
there is a way in which the average Nigerian look back at “the good old days” with
nostalgia. But Entrepreneurs’ cooperative wasn’t part of the good old days. It is a
neophyte!
2. General constitutional, political and economic framework. The cooperatives are
voluntary organisations. Guarantee of freedom of association is a condition for their
establishment. For us, there is no better time than now when we have a “democracy” in
place.
3. Economic development strategy - The development strategies in our environment are
neoliberal, while governments often pay clip services to pro-people policies. But then
even though we operate a lopsided federal structure, state governments have some room
to maneuver.
4. Regional and sector policy system: This is very important, because whereas in principle
any field of endeavour may be open to entrepreneurship there may be specific restrictions
say in Education, Health or Energy that counter their establishment.
5. Where small and medium scale businesses do not have sound programmes for
development or where governments’ focus is on big businesses, it is difficult for
Entrepreneurs’ cooperatives to grow.
6. Certain civil laws (access to resources and credit witness). In Nigeria we have in place
financial laws which place a lot of constrain on sourcing of fund, particularly for small
businesses and the youth. The collateral could be so overwhelming for upstarts.
7. Cooperative policy and law. This is one major huddle to be crossed. The Nigerian
Cooperative Societies Acts for instance only recognizes the natural person as members of
cooperative. There is no legal backing for entrepreneurs’ cooperatives. But one good
thing which I think favours the youth is the fact that even in existing laws “minors” right
to associate on equal footing as adult is protected. The law provides that anybody of 16
years can become a member of cooperative society in Nigeria. The same law also
protects the rights of minors. Section 57, subsection 4 clearly states:

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 The fact that a person duly admitted as a member of any registered society is a minor
shall not-

    (a)              prevent that person from executing any instrument or giving any
acquaintance necessary to be executed or given under this Act or the regulations made,
under it; or

(b)              be a ground for invalidating or avoiding any contract entered into by that
person with the society, whether as principal or as surety, and any such contract shall be
enforceable by or against such person notwithstanding his minority or non-age.

8. Activities for promotion of cooperatives and entrepreneurs’ cooperatives societies. In this

regard both government and cooperative federations have not been doing enough in terms
of expanding beyond the scope of financial and agricultural cooperatives.

8. What is to be done?

There is need for concerted effort on the part of stakeholders in providing the enabling
environment for entrepreneurs’ cooperatives to flourish. Government youth empowerment
programmes need to be rechanneled to cooperation among budding entrepreneurs rather than
isolated individuals.

The current finance regime does not favour small businesses. If government could spend
billions to bail out big corporations, which in any case are no longer viable as sustainable
employers of labour, nothing stops government from making substantial outlay on seed
moneys or grants for youth to start their collective business.

Project such as the Youth Micro Credit Initiative (YMCI) which partner with Nigeria Youth
Entrepreneurship Development Programme (NYEDP) are bound to go the way of their
predecessors if we fail to take advantage of the opportunities inherent in entrepreneurs’
cooperatives. Risk sharing and mutual help are key to sustenance of such empowerment
programmes.

The legal regime is another area to look into. There is need for amendment of cooperative
society laws to specifically address the needs of entrepreneurs’ cooperatives. Currently our
law does not recognize entrepreneurs as cooperatives.

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 At the state government level there is need to set the machinery in nation for a holistic,
pragmatic intervention. What are the areas of opportunity? What are the groups? There is
need for appropriate data collection and necessary projections. There is need to link up with
global organisations that have done extensive work in this area particularly the ILO.

The government, in conjunction with other cooperative stakeholders, need to develop

technology incubation centers for the development of appropriate technologies, including
entrepreneurial skills acquisition, vocational training and e-cooperative.

Equally, on the part of government, there is need to depoliticize empowerment programmes.

When government in a democracy becomes too partisan in the dispensation of the “goodies”
of “people’s government” there is tendency for alienation of some sections of society. It also
makes for lack of continuity. Development is a dynamic movement. The flow is no respecter
of parties or tendencies.

Furthermore, there is need for cooperative societies and their federations to expand their
scope beyond the traditional boundaries. Administration of financial or agricultural
cooperatives is not suited to the entrepreneurs’ cooperatives. The unique elements have to be
learnt.

Finally, for the youth, I have this to say: it is not enough to lament their condition or wait
endlessly on a generation whose interests do not approximate your interests. The youth owe
the responsibility to get organized. The youth owe the responsibility to network and to force
the hands of “the powers” to do what is right, by their action, not by silence.

The future of youth empowerment is in entrepreneurs’ cooperatives not entrepreneurial whiz

kid magic. God created man as a social (communal) man, looking after the collective interest.
Cooperation is the essence of human development. Individualism is an aberration. It created
unemployment; it can not be the source of its solution. The time to act is now.

References

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Chigunta, F., Schnurr, J., James-Wilson, D., Torres, V. (2005). Being “Real” about Youth
Entrepreneurship in Eastern and Southern Africa, Implications for Adults, Institutions
and Sector Structures, SEED Working Paper No. 72, ILO, Geneva.

Hekmat, M. (2011) Entrepreneurship Approaches in Agricultural Cooperatives. International

Journal of Agricultural Science, Research and Technology.1:39-45

Henry, C., Hill, F and Leitch. C. (2003). Entrepreneurship Education and Training. Agriculture
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Otto, G. and Ukpere W. (2011). Credit and Thrift Cooperatives in Nigeria: a potential source of
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start-ups by young people. International Labour Organization, Geneva.

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specific form of enterprise cluster. International Labour Office, Geneva.
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