Kazakhstan: Cooperation is a way to not only survive, but also to earn …To whom and how?

Not only Kazagro is confident in this, our President talked about it as well: “We need to change the structure of agriculture, and strong cooperatives should become its core. This, in turn, represents a wide field for business.” Once again, from the top was sent the message for farmers: please, grow your business. So, cooperation from KazAgro has become a progress characteristic for such kind of.

– The essence of innovative solution of “KazAgro” under creation of agricultural cooperatives was to solve the problem of farmers with collateral when lending, – says the spokesman of Kazagro Rinat Tasbulatov. – Farmers, having united, could get money for the sowing season in the bank, not looking at non-liquid machinery, buildings, land. Responsibility of members of a cooperative to each other became a guarantee of repayment of funds. Therefore, associations were initially formed by participants taking into account experience in the agricultural sphere, positive credit history of farms.

How farmers sued him that giveth

Last year three pilot projects-cooperatives in the northern regions of Kazakhstan have been launched: in North Kazakhstan, Akmola and Kostanay regions. And if in the first two projects were successful, farmers were satisfied with the preferences obtained, in the last – Kostanay – participants of the agricultural cooperative pursued in court with him that giveth …

Here is what the chief of the farm household from Altynsarinsky District Andrei Mikhailichenko told the correspondent of the “KazakhZerno.kz” about the problems in Kostanay cooperative. He became one of those thirty-four (this figure came from officials of the region) chiefs of farm households included in the SCR, and intended to get money for spring sowing campaign:

– We have calculated in detail, how much money we need for the preparation and carrying out sowing campaign. We made an application for 7 million tenge. Representatives of the bank have approved our documents, but have started to give the money partially. We have bought spare parts for repairs and fuel on received 2 million tenge, all payments were made. The rest of money was promised to us later, after we would conclude contracts for the purchase of seeds and bring documents. Everything was done in due time, but I spent the whole day in the office waiting for a bank employee, who did not appear. Promises were lasting from May 12 to early June, and then the amount available on the account of SCR disappeared at all. As a result, I have not received the remaining 5 million tenge, therefore, I have not carried out sowing. And now we need to return credit money taken in the past year, to raise funds for the sowing campaign this year. There are more than 10 farm households like mine, and we do not understand why we were left without money, and without any income in the past year, if the bank has approved our application …

Here it should be noted that the idea of a cooperative, and even with such apre-action title as the “Association of Grain Growers “Kostanay-Export” will be liked by the government very much. The neighbors’ cooperatives had less loud names: Regional grain holding in Akmola and Regional grain holding on NKR. That is why the authorities of Kostanay region were not shy when include in their reports at all levels SCR “Kostanay-Export” as another opportunity that arose for farmers to adjust their faltering business. Indeed, the program of a cooperative creation promised very favorable terms:

Новость на Казах-зерно:1. The principle of cooperation is implemented through self-administration, collaboration and equality of all its members (“one member – one vote”, regardless of whether you sow 30 thousand hectares, or 3 thousand).

2. “Food Corporation” JSC concludes a contract with the Association for purchase of a certain amount of wheat at a fixed price to pay after delivery. This amount will be distributed among the participants of the Association as part of their obligations to return funding for carrying out sowing and harvesting campaigns received from the Association.

3. The Association as an independent legal entity attracts an unsecured loan in the STB against security of wheat sale of “Food Corporation” JSC. Loan funds are distributed among the members of the Association for spring sowing and harvesting campaigns, mainly in the form of finished inventory items, centrally-paid by the Association. Centralized whole sale procurement of goods and materials allows you to get discounts for members of the Association.

4. If the market price of wheat exceeds the one fixed in the contract, the Association has the right to sell wheat in the market to get more income. If the market price falls below the fixed in the contract, the Association sells wheat to “Food Corporation” JSC.

And this business blueprint of cooperatives, among other things, has been supported by the Ministry of Agriculture, “Atameken” NCE, Farmers Union of Kazakhstan.

And as a result of the work during only one year: “Regional grain holding” LLP in Akmola region due to new entrants expands acreage from the current 360 thousand hectares to 1 million hectares. Members of the cooperative in the North-Kazakhstan region admit honestly that the thanks to consolidation they could buy in bulk petroleum products at a lower price than before, and the one that was in the market. On top of that they have found a good buyer for their crops – again due to the fact that we were able to offer a large consignment of goods “from one source”.

According to Erbol Tashenov, director of the cooperative in the Akmola region – “Regional Grain Holding” JSC, a project which, thanks to national holding “KazAgro” began from the preparation for planting season this year, and completed by the sale of the harvest and the repayment obligations to the bank, was fully fulfilled. According to the head of thе head of the Association, today the cooperative consists of 52 participants, who plant 360 thousand hectares of land. However, in 2016 the Regional Grain Holding plans to expand to 100 participants with an increase in cultivated land up to 1 mln. ha. This is about 20% of the total sown area of Akmola region.

According to the heads of households, which became a part of cooperatives, participation in the Associations offers a number of advantages for the farmers, the main of which are the availability of unsecured financing of spring sowing and the opportunity to get seeds, fertilizer, spare parts, fuel and lubricants at a cheaper cost due to bulk purchase. In addition, the reality of receiving access to future services that associations can provide is getting closer. It is a corporate machine and tractor stations, grain silos (about those have already thought in the NKR), etc. It is equally important that earlier each year the assets put up as collateral for loans for spring sowing can be used by farmers to attract funding from other sources for other development goals (improving storage infrastructure, upgrading of agricultural machinery and equipment, etc.).

Funding of pilot regional grain cooperatives in 2015

Name

Number of participants

Funded area, th. ha

Funded, mln. tenge

1

“Regional Grain Holding” LLP, (Akm. reg)

40

125

1500

2

“Regional Grain Holding for NKR” LLP, (NKR)

52

81

967

3

“Association of Grain Growers “Kostanay-Export” LLP, (Kost. reg)

16

18

157

Total:

108

224

2624

Whom do we work for?

Well, let’s return back to the Kostanay region. Here’s how the executive director of the SCR Zhetes Amantayev commented on legal proceedings.

– The representatives of “KazAgro” give a task to us to promptly collect farmers, explain the essence of the project and create the LLP with solidarity, through which its members will have the opportunity to obtain credits. Everything was done. Households stated that they need 688 million tenge, and reinforced it with the documents. The representatives of the bank and the holding told us to make a credit application for 1 billion tenge. In short, 857 million tenge was sent to our account. A difference of nearly 150 million tenge the bank used at its own discretion. Then we received a request to hire two bank employees for the SCR. We agreed for these conditions and set their salary at the general meeting of, then – two more people who live in Almaty. To resolve this issue on March 30 was hold the BOS. The participants proposed to transfer this decision to June to the general meeting session. Having heard our answer, bankers said that in this case the region will not receive money, and reduced loan term from 18 to 12 months, and the rate was increased from 7 to 7.6%.

In addition, there was one more requirement – the payment of bonuses to employees of the bank from the sale of grain in the amount of 10% of the total. The whole project began to work in the interests of the bank. On April 26, I was called to Astana and was told that I had to hire these people and to conclude contracts with them with the date of April 1, only after that the money will be received on the account. After consulting with the main founders, we have agreed to these terms and conditions: time was running out, farmers have had to start field work. After our agreement funds were transferred to the account on April 29. After reviewing employment contracts with new employees, we found the paragraph, according to which in the case of dismissal of some of them on our initiative, we owe to pay them 35 mln. Tenge as an offset. After such conversations 18 farm households left the SCR, they did not want to agree to such onerous conditions, as they had to return not only their loans, but also the amount of wages of these employees that are paid from the loan funds sent to the SCR.
If these conditions were set out to us by the bank, when giving the money to us, it is one thing, but when they are the only operators of the budget funds –it is quite another thing. Of the hired employees only Zhenis Zhusupov came to work, payments of the bank were processed through him. He came to work only on May 4. Until May 8, we managed to give 157 million tenge. Then the holidays came, and Zhusupov appeared in the office, only on May 12. After departure of 18 households the claimed amount was reduced to 340 mln. tenge. We had to find borrowers for the remaining money, but Zhusupov replied that he did not report to me and left, and we did not see him anymore. Farmers came with documents, bills, there were money on the account, but we could not pay anything without a digital signature of Zhusupov. We filed a request for his replacement by another person, and got the answer: to fire Zhusupov. We knew that in this case we have to pay him 35 million tenge as an offset. Together with the attending farmers we took a formal note of the fact that Zhusupov was not present at the workplace without cause the whole day. Today, litigations are going on in the court …

And here is an extract from the letter to the head of the regional Department of Agriculture B. Murzin from members of SCR “Kostanay-Export”:

“Questions of the project participants to KazAgro:

– Why were benefits of the public project by the presidential address received not by the farmers, but by employees of the operator bank of public money?

-Why did KazAgro demand an application for 1 billion tenge at the actually claimed amount of 688 million tenge and gave 850 million tenge to “Bank of Astana” JSC, which is 162 million tenge more than the actual amount claimed and 691 million tenge more from the actually obtained. (Maybe, in order to buy dollars for pending money and after inflation to exchange them back into tenge).

– How legal is recruitment of employees of the operator bank in the holdings and their compensation bonuses at the expense of farmers’ income (as bankers say, it is nonsense when one person receives a salary from the counterparty).

By the decision of the general meeting the executive board

Новость на Казах-зерно:At the general meeting of Executive Body decision filed a request to the National Chamber of Entrepreneurs “Atameken” to protect the rights of entrepreneurs in the agricultural sector in the implementation of KazAgro project and to create inter-departmental commission, and to check the chronology of floating (the actual receipt of the Bank, operator of JSC “NMH” KazAgro “and timeliness return it unused funds regions) of public money aimed at the implementation of the pilot project through  “Bank of Astana” JSC.

Farmers are also surprised at the powerlessness of the state agencies to stop squandering of budget funds allocated for the development of the national economy.

It is not difficult to check how well the project has worked in favour of farmers, for whom it was intended. Make analysis for each farm household: claimed amount, actually received amount, for what period according to the contract and, in fact, when, and at what price did the farmer pass wheat to the holding. When and at what price did the holding sell the grain transferred by farmers? Economic indicators of benefits of the farmer from the project. What is the size of salaries and compensation bonuses of the bankers inholdings? “

Kostanay cooperators also wonder why, as they claim, contrary to the existing contracts of bank loan up to April 29, 2016 “Bank Astana” JSC with the support of KazAgro forced participants of the project of two neighboring regions to pass the grain until December 1, 2015 for its further sale by the executive body in order to buy wheat at a minimum price, and sell it at the peak price. With such difference in prices as happened this year, 10% bonuses to reward employees is a fabulous sum.

KazAgro has its own point of view

KazAgro has the following point of view to the situation with the cooperative movement in the Kostanay region:

– To summarize, we can say that the project took place, – says Rinat Tasbulatov. – After all, insufficiency and sometimes complete lack of collateral base from farms is one of the main reasons due to which many agricultural producers are experiencing difficulties in obtaining funding. The lack of credit resources is a prerequisite to the other problems of small and medium-sized businesses in rural areas – poor technological infrastructure and small-scale production. In fact, after careful consideration “KazAgro” approbated global experience of cooperation in the agricultural sector on Kazakhstan’s land.

Many households and not only grain producing follow the course of the project. For example, today rice growers of southern regions of the country discuss the integrability on the principles of co-operation. And then we must understand that we only offer a way to solve the financial problems, we cannot force anyone to come in cooperatives – the initiative should come from the farmers themselves. Therefore, it is wrong to nod towards the officials whether these are local executive bodies or our Holding. What happened to the cooperative movement in the Kostanay region is likely to be the result of the inability of the cooperative management to agree with the bank. After all, cooperatives of the NKR and Akmola region somehow found a common language with the financial institution.

What can be done about it? .. Who is right and who is wrong, of course, will be decided by the court, but there will remain dregs. And officials will have it, and landowners, and bankers.

Such kind of “Export” with cooperatives took place in Kostanay. With the courts, lawsuits, accusations, idle fields and new debts.  The fact that KazAgro Holding does on not operate under the principle of “one region – one cooperative” eases anxiety. And perhaps, experience of SCR “Kostanay-Export” will not scare other farmers.

Sowing is close hand, but a solid part of the peasants still does not have money for it, and they will try to unite again, but now with a positive result. So, in early February, representatives of the holding again presented their program of funding through cooperative associations to Kostanay farmers. The latter scratched their heads …


Timur Turkestanov

“KazahZerno.kz” newspaper


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