Cooperatives decry return of middlemen, seek govt intervention

The Tanzania Federation of Cooperatives (TFC) has raised concerns over the re-emergence of middlemen in agricultural marketing, accusing commodity boards of licensing these intermediaries in areas where cooperative societies are legally mandated to market members' produce. This practice, according to the TFC, undermines the cooperative movement, reduces farmers' earnings, and contradicts government efforts to strengthen cooperatives. The federation is urging government intervention to review the operations of these commodity boards and ensure adherence to the principles of cooperative marketing, which aim to empower farmers and eliminate exploitative practices. This development highlights a critical tension between the liberalized market approach and the foundational role of cooperatives in Tanzania's agricultural sector.

The agricultural sector in Tanzania, a cornerstone of its economy and rural livelihoods, is once again grappling with the persistent challenge of middlemen, a development that threatens the viability of cooperative societies and the earnings of smallholder farmers. The Tanzania Federation of Cooperatives (TFC), the national umbrella body for cooperative societies, has recently voiced strong objections to the practices of certain commodity boards, which it accuses of licensing private intermediaries in regions traditionally served by cooperatives. This move, according to the TFC, directly contravenes the established legal mandate of cooperative societies to market their members' produce, thereby weakening these vital farmer-led institutions and diminishing the returns to producers.

This situation brings to the fore a critical legal and policy dilemma within Tanzania's agricultural marketing framework. While the government has historically championed the cooperative model as a means to empower farmers and streamline agricultural value chains, the alleged actions of commodity boards introduce a layer of competition that cooperatives argue is unfair and detrimental. The TFC's call for government intervention underscores the urgent need to reconcile conflicting regulatory practices and reinforce the legal protections intended to safeguard the interests of cooperative members against exploitative market forces.

This article will delve into the legal and regulatory landscape governing cooperative societies and agricultural marketing in Tanzania, examining the statutory basis for cooperatives' roles and the powers of commodity boards. It will analyze the implications of licensing middlemen on the cooperative movement and farmer welfare, drawing on relevant legislation and policy documents. Ultimately, the article aims to highlight the legal ambiguities and policy inconsistencies that necessitate a clear and decisive response from the government to uphold the integrity and effectiveness of cooperative marketing.

The legal framework for cooperative societies in Tanzania has evolved significantly since its inception in 1932, culminating in the enactment of the Cooperative Societies Act No. 6 of 2013 (Cap 112 R.E. 2023). This Act provides for the establishment of the Tanzania Cooperative Development Commission (TCDC), an independent institution mandated with the regulation and promotion of cooperative sector development. The TCDC is responsible for registering and overseeing cooperative societies, ensuring their compliance with cooperative principles, and fostering an environment conducive to their growth and prosperity.

Historically, agricultural marketing in Tanzania has undergone various policy regimes, shifting from unregulated markets to centrally controlled systems and, since the mid-1980s, towards a liberalized marketing structure. Cooperatives have played a pivotal role in these systems, particularly in the post-independence era, serving as a collective vehicle for farmers to aggregate, process, and market their produce, thereby enhancing their bargaining power and eliminating exploitative intermediaries. The Agricultural Marketing Policy, formulated by the Ministry of Industry, Trade and Marketing in collaboration with other stakeholders, aims to facilitate strategic marketing of agricultural products, ensuring fair returns to all stakeholders based on a competitive, efficient, and equitable marketing system. A key objective of this policy is to encourage producers to directly enter markets instead of relying on middlemen.

Commodity boards, on the other hand, are established under various specific statutes, such as the Commodity Exchange Act 2015 and its accompanying Commodity Exchanges Regulations 2016, which regulate the trading of agricultural, livestock, fishery, forestry, mining, or energy goods. These boards are typically tasked with regulating and supervising commodity exchanges, promoting market stability, and ensuring price transparency. However, the TFC's recent complaint highlights a perceived deviation from their intended purpose, arguing that some boards are now licensing middlemen in areas where cooperative societies are legally mandated to market members' produce, thereby undermining the very essence of cooperative marketing and the government's stated policy objectives.

The core of the TFC's grievance lies in the alleged conflict between the statutory mandate of cooperative societies and the licensing practices of certain commodity boards. The Cooperative Societies Act No. 6 of 2013 (Cap 112 R.E. 2023) empowers cooperative societies to engage in various activities, including the marketing of members' produce, with the aim of improving their economic welfare. Section 60 of the Act, for instance, provides for the disposal of produce to or through a registered society, underscoring the intended role of cooperatives in the marketing chain. This framework is designed to protect farmers from price exploitation and ensure better returns by collectivizing their marketing efforts.

However, the TFC contends that some commodity boards, such as the Cereals and Other Produce Regulatory Authority (COPRA), are licensing private brokers to perform functions traditionally handled by cooperatives, even imposing levies on produce marketed through cooperative societies without providing commensurate services. This practice not only introduces unnecessary competition but also directly impacts farmers' incomes by adding layers of cost and potentially reducing their bargaining power. The Agricultural Marketing Policy explicitly encourages producers to bypass middlemen, yet the actions of these boards appear to contradict this policy directive.

The legal ambiguity arises in the interpretation of the powers granted to commodity boards under their respective statutes, such as the Commodity Exchange Act 2015, versus the specific provisions of the Cooperative Societies Act. While commodity boards are tasked with regulating and promoting efficient markets, their authority to license intermediaries in a manner that directly undermines established cooperative marketing channels requires scrutiny. There is a need to clarify whether such licensing powers implicitly or explicitly override the mandate of cooperative societies in designated areas, or if there are regulatory gaps that allow for these conflicting practices. The Tanzania Cooperative Development Commission (TCDC), as the primary regulator and promoter of cooperatives, has a crucial role in addressing these inconsistencies and ensuring that the legal and regulatory environment supports, rather than hinders, cooperative development.

Furthermore, the re-emergence of middlemen, as highlighted by the TFC, has significant economic implications. Studies have shown that the dominance of middlemen can lead to low prices for farmers and substantial post-harvest losses due to inefficient supply chains and lack of market access. The government's efforts to formalize agricultural trading, including the use of warehouse receipt systems implemented through Agricultural Marketing Cooperative Societies (AMCOS), were specifically designed to protect farmers from exploitation by middlemen and ensure fair payments. The current situation suggests a potential regression from these reforms, necessitating a re-evaluation of how commodity boards' operations align with broader national agricultural marketing strategies and poverty reduction goals.

The concerns raised by the Tanzania Federation of Cooperatives regarding the licensing of middlemen by commodity boards represent a significant challenge to the cooperative movement and the economic empowerment of farmers in Tanzania. This issue underscores a fundamental tension between the objectives of a liberalized market and the protective, developmental role envisioned for cooperative societies under the Cooperative Societies Act No. 6 of 2013. Without clear government intervention, the continued proliferation of middlemen risks eroding the gains made in strengthening cooperative marketing channels, ultimately leading to reduced farmer earnings and undermining national agricultural development goals.

For legal practitioners, this situation highlights the importance of understanding the interplay between various sectoral laws, particularly the Cooperative Societies Act and the legislation governing commodity boards. Advising cooperative societies will require a thorough analysis of their legal mandates and rights, as well as strategies for engaging with regulatory bodies like the Tanzania Cooperative Development Commission (TCDC) and relevant ministries to advocate for policy coherence. Practitioners should monitor any legislative reviews or policy directives aimed at clarifying the roles of commodity boards and reinforcing the position of cooperatives in agricultural marketing. The government's response to the TFC's plea will be a critical indicator of its commitment to fostering an equitable and efficient agricultural sector that truly benefits its primary producers.