Helping to build a business

I’ve been keeping busy here trying to become a fixture in the community, doing small scale business advising with individuals and cooperatives, and constructing the long-term projects I hope to accomplish during my two years.  I’m proud to say, after months of studying and laying ground work, that a week ago I took my first big step forward on my most substantial project. 

Here in Madagascar there are a number of voluntary business associations with varying organizational structures that both the government and development NGO’s (non-governmental organizations) promote with a particular zeal.  There are two primary configurations currently being advocated, a Fikambanana and Koperativa.  A ‘Fikambanana’ translates roughly to ‘Association’ and is a looser merger of interested parties convened to accomplish a common goal, often social in nature as opposed to fiduciary.  In a ‘Koperativa’ or ‘Cooperative’ members are bound together more tightly, production and sales are often a shared venture, and the objective of organization is almost exclusively the promotion business interests. 

I should emphasize that both of these methods of organization are voluntary associations of individual producers with a vested interest in cooperation yet they lack a rigid power hierarchy that you might associate with a traditional business.  For example, while cooperatives have an elected board so that responsibility for administrative tasks are properly delegated, they are essentially democratic institutions, jointly managed, with each member retaining a proportionately equal vote on the proceeding of all cooperative business. 

The promotion of cooperative formation within the field of international development has actually been gaining serious traction in the past few decades and may explain its persistence as a focal point of the development community here in Madagascar.  Another aspect I find intriguing is that even though the law binding the formation of cooperatives was passed in the 1960’s, the organizational structure truly became pervasive when it was adopted by Madagascar’s socialist government in the 1970’s and 80’s during which time is was heralded as a hallmark of production capability achieved through local socialized management.  Madagascar’s socialist era faded, as did the socialist stigma attached to cooperatives, yet remnants of the connotation still linger.  Not long ago I met with the Regional Director of the Economy to discuss business associations. He invoked the nation’s socialist period as a means to explain how, in contrast to a business in the United States where executive compensation might be orders of magnitude above what an average American worker might receive, cooperatives in Madagascar are specifically designed to remove such stratification through shared management and consequent profit sharing. 

The main reason I went to discuss the logistics of cooperative management with the Regional Director of the Economy was because this past week I conducted a business planning and organizational structure training for my most important counterpart, ‘Koperativa TARATRA.’  As I mentioned before, this was my most significant effort thus far on a primary project and by far the most difficult thing I’ve done yet. It took a total of four full days to complete everything we needed to accomplish, and aside from an hour long presentation by a micro-finance employee about work with his organization, I was the sole trainer. 

Our original thought was to hold the training on a Friday and Saturday out in the cooperative’s town, Ambohitrambo.  Now this is the cooperative which I’ve mentioned previously and is based 14 km from my town in a rural village known for producing some of Madagascar’s best pineapples.  There are eight members within the cooperative, all of whom are under the age of 23 and come from farming families.  The reason I’ve become so of invested of late with this group of youngsters is that they are uniquely positioned to make enormous strides that would develop both their business and their community, assuming they get the proper help. A year before I arrived in Arivonimamo my partner association, PROSPERER, organized these young kids and sent them to a technical training on the process of drying fruit.  Over a year later, PROSPERER has now finished the construction of a production facility for the cooperative in their rural village of Ambohitrambo, with a share of the cost and materials provided by the individual members so that they might have some skin in the game.  With the finishing touches just now being put on the production facility, it has almost come time for the cooperative to begin working, however the problem is, they do not know the first thing about managing a business. So that’s where I come in.

Friday, the first morning of the training arrived and Jean Claude, my best friend here and president of the cooperative showed up at my house shortly before 7AM so we could begin the hour long bike ride to his village in time to begin the training at 8AM.  I’d spent the previous few days studying business plans looking over documents on cooperative management, translating material into Malagasy and organizing the information onto a set of twenty five large flip chart sheets which could be taped to the walls of the production house.  True to form the cooperative members respected ‘fotoana-gasy or ‘malagasy time,’ which means we got started an hour late, yet once everyone was settled things began to take off. 

The beginning was a bit bumpy. I’d never run a training before but I’d participated in umpteen ‘info sessions’ ‘camps’ ‘classes’ and the what-not so I thought, as is often the case at the beginning of these types of things, we should start with a game.  I had two prepared.  The first was a copy of a game done during my Peace Corps training in which each individual has a numbered piece of paper on their back and are asked to organize themselves in order without talking.  The hope was that we could deconstruct the skills used and it would subsequently illuminate the benefits of working together.  The second activity wasn’t so much a game as a short lecture on the ‘Prisoner’s Dilemma.’  For those who don’t know the Prisoner’s Dilemma, it’s a principle in game theory that illustrates the mutual benefits of cooperation yet also the impediments posed by a dearth of trust and the human proclivity for self-interested action. 

For the most part the games went well and only took up a half an hour or so.  The members also thought it was hilarious during the Prisoner’s Dilemma scenario when one member wouldn’t trust the other and they’d both end up in jail.  Normally I find classroom games pedantic and borderline condescending.  As if the student lacked the mental faculties to grasp a concept were it not repackaged so that the student could act his way to an obvious conclusion.  I’ve realized, having now been on the other side of the teaching table that games say more about the teachers fear that the material presented might bore the pants of his or her students. 

After the game we had a short discussion on financial management, specifically record keeping, directed by our visiting micro-finance representative. Following this we launched into a spirited debate about how to acquire the funds necessary to buy tools required for production.  Is it possible that the cooperative members could individually come across the money (15 USD each, which is a hefty sum here) or would we have to borrow money from the micro-finance.

Member #1: ‘But what if we borrow the money and not everyone helps pay it back?’

Member #2: ‘If we can’t trust each other then the micro-finance will come and throw us in jail, just like the game!’

They all laugh.

Ok. So that was not my point exactly with the Prisoner’s Dilemma thing, but they have the gist of it, so maybe it wasn’t such a waste of time.  In the end we tabled that discussion, deciding to see what the members could find and to revisit it the following week. 

From that point forward things really began to take off.  We sailed through discussions of marketing, clients, supply of raw materials, production cycles, sales projections and fixed versus variable costs.  I even had them working out discounting their assets in order to assure there would be appropriate capital to replace tools once they have lived out their lifespan.  It was remarkable to see actually, the way an idea would take hold within one member and you could watch as the understanding slowly rippled out to the other kids.  Before you knew it, they’d all be jumping out of their seats, grabbing pens and writing on the flip charts, working out figures in their notebooks and checking them against each other.  The grasp of fixed costs versus variable costs was probably the most intriguing to watch take hold.  I saw a flicker of recognition take seed first in Mamy, one of the oldest of the group and the most highly educated, having finished part of high school. 

Mamy: ‘What about packaging? That depends on the amount of product, right?’

Me: ‘Exactly!’

Bingo.

Jean Claude: ‘How about electricity?’

Mamy: ‘No, that’s a flat fee every month’

Nailed it. (apparently the cooperative has a flat rate from the electricity company. Quite different from the US)

Then they were off to the races , with every member throwing out ideas to be batted around by the others until a consensus was reached and the member who was taking their turn being cooperative’s scribe on my flip charts would place the cost under the appropriate column. 

Unfortunately we didn’t finish the entire training in the two days I spent out in Ambohitrambo so the next weekend all the members made their way to Arivonimamo and I spent another Friday and Saturday with them utilizing our newly acquired knowledge and lists of costs to construct a budget and overall business plan for the upcoming year. 

Ambohitrambo stands to reap substantial benefits if the work of these kids can truly take off.  At this point I don’t even know if they’re aware of the hope they embody and the potential they possess to carry their community forward.  Being almost exclusively an agricultural community every individual farmer represents a potential source of raw materials for the cooperative.  By extension, if the cooperative grows such that they must expand their sourcing of raw materials, each family in Ambohitrambo with the capacity to provide those materials will find themselves with a new market for their goods. Ambohitrambo is already regionally famous for having the finest quality pineapples, and value-added production, such as fruit drying, holds the potential to make this small farming community a national name.

I was already told by Peace Corps that word is spreading.  A month or so ago my Program Director mentioned a meeting between Peace Corps and some Malagasy NGO’s in the far south of the island.  The Peace Corps staff member was approached by one of the NGO workers who inquired about a Peace Corps volunteer he’d heard of in Arivonimamo who was working with a fruit drying business. What could Peace Corps tell him about this whole fruit drying thing he asked?    

Until next time, Veloma.