Legislative limits of cooperatives: a new institutional economics review of the cooperatives’ legislations in Eswatini

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Simelane S.M

Abstract

Cooperatives in Eswatini have largely been intermediaries for government and donors in their rural development agenda. They are also out-growers for agri-commodity value chains. This has made cooperatives drivers of rural economic growth and development. However they usually collapse without the external support because they fail to access finance, efficient management systems and qualified personnel. The new institutional economics (NIE) theory argues that traditional cooperatives (TCs) suffer from ill-defined property rights which diminishes the incentives to invest risk capital into a TC. This has given rise to new generation cooperatives (NGCs), as seen in developed countries. This desktop study analyses the cooperatives’ legislation in Eswatini to identify the extent to which it allows cooperatives into NGCs. It was found that cooperatives built under the current legislations could satisfactory alleviate the decision making efficiency problem while the capital investment efficiency problem could remain a problem. Therefore, cooperatives in Eswatini are more likely to be underinvested and under poor management. It is recommended that a review of the legislation could also study and evaluate the impact of allowing cooperatives to evolve into NGCs alleviates the capital efficiency problems by allowing cooperatives to introduce a tradable (non-redeemable) and
appreciable B-class share.
Key Words: B-class share, Eswatini, ill-defined property rights, institutions, New Generation Cooperatives (NGCs), Traditional cooperatives (TCs)

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