This paper presents the principles of cooperation and briefly describes the history and development of agricultural cooperatives in developed and less-developed countries, with particular emphasis on South Africa. A new Cooperatives Act, based on international principles of cooperation, was promulgated in South Africa in August 2005. The theory of cooperatives, and new institutional economics theory (NIE) (including transaction cost economics, agency theory and property rights theory) and its applicability to the cooperative organizational form, are also presented, as are the inherent problems of conventional cooperatives, namely free-rider, horizon, portfolio, control and influence cost problems caused by vaguely defined property rights. An analysis of the future of cooperatives in general, based on a NIE approach, suggests a life cycle for cooperatives (formation, growth, reorganization or exit) as they adapt to a changing economic environment characterized by technological change, industrialization of agriculture and growing individualism.
Bibliographical noteFunding Information:
The senior author gratefully acknowledges funding from the National Research Foundation (NRF) in South Africa and the Center for International Food and Agricultural Policy (CIFAP) in the Department of Applied Economics at the University of Minnesota. Opinions expressed and conclusions arrived at in this document are those of the authors and do not necessarily reflect those of the NRF or CIFAP.