An analysis of governance factors influencing performance of selected smallholder dairy cooperatives in Zimbabwe

Cooperatives are organisations owned and operated by individuals or groups that come together for mutual benefit including pooling of resources for the purchase of inputs and marketing of products. Marketing of milk is through dairy cooperatives where the milk collection centres are mandated to help integrating smallholder farmers into competitive markets. The study investigated governance structures of five smallholder dairy schemes purposively selected based on their agroecological regions in Zimbabwe. The aim of the study was to explore how the governing boards conduct their business, particularly marketing milk, and how this affects allocation of resources (milk production and deliveries to milk centres) by smallholder farmers. Qualitative data were collected using focus group discussions with 20 dairy cooperative members from each milk collection centre. Key informant interviews were conducted with chairpersons, management committee members, and dairy value chain stakeholders such as dairy associations and processors. The SWOT analysis technique was employed to identify governance structures highlighting major strengths, weakness, opportunities, and threats as a gateway to isolating strategies for enhancing centre performance. An analysis of implications of the governance structures on resource allocation decision by farmers was also performed. So focus is on how boards are discharging mandate such as marketing on behalf of farmers, price setting and negotiations, trainings, and accountability to members. Such factors if executed well will see farmers increasing milk production and deliveries to MCC yielding positive results in income and profits. The study results show that poor governance mainly caused by incompetent boards and management committees was the major factor affecting performance. Other findings were that if good governance factors were in place, then cooperatives became proficient leading to their growth. Thus, cooperatives must adopt business models based on private sector partnerships to maximise on expertise and technical support. The schemes ought to take advantage of existing opportunities, especially policies that mitigate threats and improve product diversity, value addition, and effective pricing strategies. To achieve these milestones, capacity building roadmaps ought to identify competent and efficient boards.


Introduction
Agricultural cooperatives function under the laws and legislature governing their establishment with specific provisions written in the cooperative constitutional documents (ICA, 2005). Each cooperative has a board and management committee responsible for managing all businesses and devising strategic paths for growth and sustainability. The selection of board members entails "getting the right people for the right job" to improve general management and performance of entity (Ghimire et al. 2017). Dejene (2014) argues that a strong and competent leadership gives strategic direction which is critical to building committed membership that participates in cooperative affairs. This then has spill-over effects of creating financial stability for the cooperative which is an important determinant of cooperative success. Zimbabwe has a dairy sector comprising large-scale and small-scale producers. For small-scale producers, dairy cooperatives are required to register with the Ministry of Small to Medium Enterprises Within this setup; the Zimbabwe Dairy Industrial Trust (ZDIT) plays a regulatory role in dairy cooperative start-up, in addition to monitoring compliance to set standards in terms of type of milking equipment, water availability, and hygiene standards of each MCC. Once operational, cooperatives are mandated to subscribe to the Zimbabwe Association of Dairy Farmers (ZADF), an umbrella body which represents the interests of small-scale dairy farmers.
Cooperatives have the capability to create an enabling environment to improve efficiency of production factors used in farming and help integrate farmers into organised markets (Mojo et al. 2015). Zimbabwean dairy producers seek to collectively market products by establishing collaborative collection systems and milk treatment facilities in the form of Milk Collection Centres (MCCs) to deal with perishability of products and volatility of prices in alternative open markets. The dairy development programme initiative by the Government of Zimbabwe and development partners in 1983 saw the formation of 35 dairy schemes across the country (Chavunduka, 1982). Currently, only 12 are operational due to viability and sustainability bottlenecks. Despite the support, including infrastructure, input grants, and training, the smallholder dairy sector contribution to the national milk supply remains low, supplying 4% of the national requirement of 120 million litres per year (ZADT, 2015). There is need for a comprehensive analysis of cooperative institutions to identify contributory governance factors.
According to the Cadbury Report (1992), governance is "the set of rules that an organization develops and follows in terms of its role in, and impact on, the cooperative". This dimension is critical since it includes the decision-making process and its capacity to implement decisions by cooperatives. These governance considerations are closely linked to success or failure of cooperatives. Leaders give the strategic direction of cooperatives, and efficiencies in MCC operations can be linked directly to leadership capabilities (Dejene, 2014). Good governance results in clearly defined plans, including clear roles and strategic business plans. These lead to the development of a cooperative culture that improves business performance and allows monitoring of organisational performance. Mojo et al. (2015) argues that good governance in dairy schemes places value on personal attributes such as honesty, transparency, and fairness from leaders. These are important attributes if milk centres are to gain the cooperation and commitment of smallholder farmers who are the major suppliers of raw milk. In the Zimbabwean context, these intricate coordination realities seem to be the current missing link in the success of the smallholder dairy sector.
To succeed, cooperatives must have good governance characterised by discipline, transparency, accountability, fairness, agility, and social responsibility (King and Ortmann 2007). The governance philosophy of cooperative leaders ought to have speed, competency, responsiveness, and competency enhancing mechanisms aimed at working to represent the interests of members. These attributes will increase membership, encourage new members to join in, and build cooperative revenue base which improve operational efficiency leading to growth (Anania et al. 2020). In an ideal cooperative, members are fully engaged and can rely on the effective implementation of cooperative principles. It is also postulated that member participation increases when members trust and have confidence in their boards of management and cooperative management staff (Barraud-Didier et al., 2012). Similarly, high member disloyalty is experienced when members are dissatisfied with the management governance models (Osterberg and Nilsson, 2009). This may then isolate cooperative governing principles and bylaws and how they point to institutional strengths or weaknesses, the ability of cooperatives to maximise on opportunities and deal with threats. This study seeks to explore these intertwined relationships as a way of extracting possible intervention points and strategies for the smallholder dairy subsector in Zimbabwe.

Study area
The study investigated the governance structures of five selected small-scale dairy systems, which are coded according to agroecological location as A, B, E (Region II), C (Region IV), and D (Region III). The location is critical as it determines the social-cultural beliefs of the farming community serving the MCC and determines the availability of natural pastures and crop residues for supplementary feeding, mainly due to the high rainfall received in these areas. MCC A and B are located in a natural region that receives rainfall of between 700 and 1000 ml. They have high milk production due to the availability of pastures. MCC C is in a resettled area in natural region IV, which historically supported beef production, instead of dairy due to the high feed requirement for dairy production and nonavailability of pastures. The region receives 400-600 ml rainfall. Climate change has resulted in erratic rainfall patterns, making crop production difficult; hence the pastures fail to thrive. MCC E is in a rural area in natural region II which receives between 400 and 600 ml of rainfall. Most farmers have indigenous low milk-yielding cows (5-10 l of milk per day). Such low milk volumes would require a broad membership base to justify collection by processors. MCC D is located in natural region III, in a peri-urban area with landholdings of less than one hectare. Thus, feed supply for dairying is a challenge.
The dairy schemes that were selected for the study were purposively elected based on their membership to the Zimbabwe Association of Dairy Farmers (ZADF) and their marketing model (whether it was formal or informal). Milk Collection Centres (MCC) A, B, and E sell directly to processors or semi-formal channels; MCC C and D process raw milk into products for local sales. The households from each scheme were purposively selected based on their engagement and membership status in the dairy cooperative during the research period from February 2020 to October 2020. Only active members who had the three desirable characteristics: (1) delivered milk to the MCC, (2) were up to date with subscriptions, and (3) owned dairy cows of different breeds were selected. Most cooperatives in Zimbabwe have helped their members acquire pure dairy breeds such as Holstein Friesian or Red Dane for higher milk production. The list of farmers who delivered milk to MCCs was obtained from MCC administrative staff, with permission from Management Committees, and was used to select MCCs.

Data collection
Data was collected over 9 months, from February 2020 to October 2020 with each MCC being allocated a month of indepth study. The research used a qualitative research method to get an in-depth analysis of governance issues from people involved in the dairy value chain. The study was interpretative with the views of the producers and key industrial informants helping to shape good governance for the dairy industry. To this end, the study therefore used qualitative in-depth interviews with cooperative members to explore views on engagement and governance. Primary and secondary sources of information were tapped into using Focus Group Discussions (FGDs) involving about 20 members of each cooperative and five producers from each MCC. Key Informant Interviews (KII) were done with the 5 chairpersons of each MCC and management committee members. Interviews were done using questionnaires. Secondary data was obtained from published sources such as association records, journals, reviews and publications.

SWOT analysis
The study utilised the SWOT analysis tool to assess each dairy scheme's strengths, weaknesses, opportunities, and threats. The study utilised the analysis by Kenton, W (2021) that looked into the internal and external factors affecting the cooperatives institutional performance and success. The study looked at the areas of MCC structure (governance, which are the boards of management), board conduct (that is how are they discharging mandate in the areas of marketing and pricing of products), and performance (how MCCs meet the interests of members). Through the qualitative data obtained from both focused group discussions and key informant interviews, it was possible to draw a SWOT analysis table for each MCC.

Results
The study used qualitative data obtained through focused group discussions and interviews with key informants to analysed data on structure (governance structure), conduct (the activities the board is performing on behalf of farmers), and performance (what has been the impact of board conduct on milk production and volumes delivered to milk centre by producers). Tables 1 and 2 give a summary of MCC's demographics and MCC description (characterisation).

SWOT analysis
The SWOT analysis characterised governance issues of the selected MCCs. The SWOT analysis identified organisational strengths, weaknesses, opportunities, and threats linked to cooperative board selection and board overall performance. It also identified major factors affecting MCC performance, mainly cooperative internal systems. Table 3 shows the Institutional Analysis for each MCC. The table includes qualitative data obtained from focused group discussions and key informant interviews. The analysis used the structure, conduct, and performance of milk centres as variables to draw up a SWOT Analysis table as shown in Annex Table 4. All the MCCs' strengths are based on them being constituted according to the Zimbabwean laws making them legal entities. MCC B had an interim board pending elections, and this has affected MCC efficiency since the board cannot enforce regulations. All the MCCs have experienced producers who have had trainings in various aspects of dairy farming and are producing raw milk a product that is in demand. The dairy sector in Zimbabwe is only supplying 70% of the national requirement with the gap being met by imports from neighbouring countries, so there will always be a market for raw milk.
The price of raw milk is a marketing variable. The price paid to farmers depend on whether the Board decides to sell the milk in formal or informal markets. Milk payments to producers were based on both the quantity and quality of raw milk delivered to MCC. The final prices of milk and milk products depend on the milk producer price, milk collection, cooling costs, product distribution, and marketing costs (Mbogoh, 1995). Processors determined the price paid for raw milk from MCCs A, B, and E. In October 2020, a formal processor (I) paid US$0.43/l of milk to MCC B, and MCC B then paid the farmers US$0.39/l. The $0.04/l difference paid for MCC operational costs. This price was lower than US$0.58/l paid in alternative marketing channels. Another processor (II) paid $0.43/l directly to farmers. However, the farmers indicated that they obtained prices of up to $0.50 elsewhere. Thus, farmers sold raw milk to alternative markets or middlemen, thereby reducing milk supply to MCCs.
Effective leadership is needed because these cooperatives ought to negotiate favourable prices for farmers. The current pricing system, where prices are determined by the processor and payments are made every 2 weeks, has discouraged the premise of collective action within the MCCs. Studies show that for success, cooperatives ought to advocate on behalf of members including negotiating prices. One farmer in MCC A sells up to 3000 litres of raw milk a month to informal markets. If channelled through the MCC, such volumes would enhance MCC performance. MCC A is run by a young chairperson (45 years old) who, based on the interviews, can articulate issues and engage with the aggregator to improve farmers' marketing intensity; MCC B had an acting chairperson without a properly elected committee. This makes it difficult to harness cooperation from members. In addition, annual general meetings had not been held for over 2 years. One committee member of this MCC said: Farmers here engage in side marketing due to lack of elected leaders to enforce bylaws MCC C had a constitutionally elected board, rules, and bylaws and functioning and properly constituted committees. Despite this, the board and management failed to build trust and commitment from member. The MCC experienced viability challenges because of low volume milk deliveries, inactive membership, and less profits. The MCC offered  The board failed to discharge its mandate of serving its members effectively, resulting in uncommitted and nonparticipating members The cooperative chairman acknowledged failure of the board to execute duties when he said: I moved the MCC processing equipment from the centre to my house and used it from there The MCC was not operational at the time of study. The MCC chairperson was using the cooperative equipment to sell his own produce of cultured milk. This was a sign of governance break down in the cooperative.
MCC E was also not operational because of poor prices, uncoordinated marketing, and inefficient board.
The results here highlight the issue of cooperative governing principles and bylaws and how board functions reflect institutional strengths or weaknesses. Except for MCC A whose major weakness is that of being price takers, the other four MCCs (B to E) have weaknesses emanating directly from ineffective boards.

Discussion
Findings show that governance challenges caused by board ineffective performance and poor management have led to suboptimal internal processes. Key among these include improper audits, no strategic plans, poor pricing, and marketing. These pose significant threats to MCC performances and revenue. Members become uncommitted to the core business of the cooperative such as not paying subscriptions or selling milk to alternative markets. Similar patterns of behaviour were reported by White (2017) who argued that noncompliance to rules and bylaws was the major source of MCC failure. However, Dejene (2014) reported conflicting findings and noted that it is the experience and managerial expertise of cooperative leaders which is the core determinant of cooperative competitiveness in the small holder sector. This is supported by Gunton (2021), who posits that the purpose of a cooperative is to realise the economic, cultural, and social needs of the members and the surrounding community. This can be achieved by observing proper governance practices such as appointing competent board members who foster loyalty and trust. Anania et al. (2020) also supports the view that good governance increase member participation and motivates new members to join. However, Osterberg and Nilson (2009) reported that high member disloyalty occurred where members are dissatisfied with management and therefore cause dysfunction within the cooperative. Dejene (2014) argues that leaders give the strategic direction to cooperatives; hence, efficiencies in MCC operations can be linked directly to leadership capabilities. A typical example of a successful cooperative is Land O Lakes (n.d.) dairy cooperative in the USA (https:// www. lando lakes. com/ our-compa ny/). This cooperative has become one of the world's largest dairy cooperatives, with over 950 centralised cooperatives serving over 300 000 farmers. This success is attributed in part to management capabilities. This is supported by Rantlo et al. (2020) which posits that with good governance, cooperatives have the potential to generate high and fair rates of growth.
Similar to previous reports of studies done by ILRI, (2015) on cooperatives governance there are also managerial challenges in the schemes except MCC A. In MCC B, elected management boards and committees were not performing efficiently due to a lack of skills and training in basic management principles. This resulted in poor execution of duties causing discontent among members. In turn the members sold off milk to alternative markets, while others became passive. This is consistent with other studies (Ordofa et al. 2021), where farmer cooperatives used different outlets and price strategies to market dairy products. Mojo et al. (2015) showed that feed availability, breed, price of milk, and high transaction costs were major bottlenecks faced by smallholder dairy producers. Thus, cooperatives may have a role to play in alleviating such constraints. As alluded to by FAO (2016), the boards in selected dairy schemes lacked basic management competencies to provide service support which would help create a committed and active membership. MCC strategic business plans are meant to give and provide a roadmap for economic growth and sustainability. All the MCCs except for MCC A and MCC C did not have such strategic business plans, a sign of weakness on the part of the board who are supposed to develop and use such plans. This should facilitate their mandate of improving MCC revenue base and farmer's incomes through integration into competitive markets. White (2006) suggests that successful cooperatives are those whose leadership is capable of making plans and strategic decisions that improve business performance.
Flaws in the institutional and governance arrangements, in particular weak performing boards of the selected dairy schemes in Zimbabwe, have resulted in inefficient service provision to members in terms of both access to input and services and competitive markets which has resulted in low production and low deliveries. This points to board formation regarding the set bylaws, experience, and management capacities of those selected into leadership. This supports the report by Chibanda et al. (2009) that good institutions and good governance will promote an organisation's worth and Dejene (2014) position that strong, responsible, and committed leaders are critical for effective running of cooperatives.
Getting governance factors right calls for turnaround strategies for board formation, adherence to bylaws, and executing duties is key. Such strategies will make it possible for dairy cooperatives to fulfil their mandate of integrating small-scale dairy farmers into competitive markets. Based on these conclusions, the study makes the following recommendations. Because most cooperatives are rural-based, members have low levels of education. There is a need to equip elected leaders through training in cooperative management. MCC's can create organised marketing arrangements through partnerships with processors who prefer to work with legal entities and trained members. This calls for agile strong and capable leaders who can negotiate and mobilise members. MCCs can also work on identified weaknesses especially board performance and pricing strategies by evoking constitutional provisions in the case of weak performing boards. Leadership should also take advantage of favourable government policies, including support through targeted loans and the ban on raw milk imports to improve farmer performance. Threats in product offering can be addressed by improving product research and development to keep abreast with changes in the broader economy in terms of pricing and change in consumer tastes. MCC management play an important role in technological adoption processes. Despite flaws in MCC governance, it can be argued that with the right policies, supporting regulatory framework, and the right people in leadership, there is room to rehabilitate the dairy cooperatives in Zimbabwe.
In conclusion, MCCs play a key role in the economic transformation of rural communities by integrating producers into competitive markets. These findings here bridge the knowledge gap on why cooperatives in Zimbabwe have failed to discharge their mandate. This study highlights the institutional factors affecting farmer participation in MCCs. MCC governance affects the performance of smallholder dairy producers. To achieve these milestones, capacity building roadmaps ought to identify competent and efficient boards.
Annex Table 4 Annex