Located only 800m from the South Ossetian border, the village of Kvemo Nikozi was swept by the invading Russian troops in August 2008. Three years later, it became a subject of an interesting economic experiment: a farmer coop.

Nikozi cooperative is anything but a grassroots initiative. The Ministry of Agriculture and the Agricultural Development Fund (ADF) played a key role in bringing all the stakeholders together, planting the seeds of cooperation, and providing all the essential inputs to keep this exotic flower alive.

Nikozi is also not quite a cooperative. For most intents and purposes, it is managed like a private business by two partners – Pridon Gaprindashvili and Vasil Sadzagvishvili. Together they form a management board responsible for all the day-to-day decisions. While a three-member supervisory council (representing the village community) is supposed to approve key strategic and financial decisions, it is not clear how much real authority this council has.

The idea – promoted by the government – was to create jobs for local villagers, whether they owned land or not, by tying them to the new farmer organization. And the coop was quite successful in this regard. With 140ha of open field vegetables – tomatoes, peppers, beets, and onions – it employs about 50 members on a full-time basis and hundreds of seasonal workers, many of whom are IDPs from nearby settlements.

Of the 143 members, 80 agreed to lease their small plots of land (1.2ha each) to the coop at 200 GEL/year; others joined by making a symbolic contribution of 1 GEL. Members are not obliged to work: those who do draw a salary and a small dividend. Those who don’t, are only entitled to a dividend. Both salaries and dividends are decided by the two directors, though formal approval by the supervisory council is required.

The benefits of cooperation in the case of Nikozi farmers were quite obvious. The local peasants have never had much experience with individual farming. Prior to Soviet collectivization, they used to work the lands of the local lords, Pavlenishvili, heeding to their “mouravi”. After the Bolshevik revolution, the princely estate was transformed into a sovkhoz (“Tavtari”). The sovkhoz lands were privatized in the post-independence period yet little benefit accrued to the peasants due to war and economic collapse. The land they have finally come to own was not usable without irrigation, agricultural machinery, and infrastructure, all of which lay in ruins. The most mobile, including Vasil Sadzagvishvili, migrated to Tbilisi. Those who stayed behind lacked the knowledge and the entrepreneurial skills to function in a market economy.

All of that changed with the 2008 war and the establishment of the Nikozi coop. The government built and rehabilitated, with USAID help, the Tiriponi and Saltvisi irrigation systems on the Greater Liakhvi river. Narrowly sliced pieces of land were consolidated into a single 140ha holding – among the largest in Georgia. A highly concessionary 1.2mln GEL loan from the ADF covered the costs of a pump station and pipes to supply modern drip irrigation to the entire farm. Annual agreements were signed with the ADF-controlled Mechanizatori LTD to provide much-needed agricultural machinery. Seedlings and relevant agricultural know-how were furnished by other ADF daughter companies. On the marketing side, Nikozi is now linked to the new Fruit and Vegetable Refrigeration plant (a public-private partnership) in Natakhtari; other clients include Tbilisi Government’s Food Service LTD, the Georgian military, as well as Azeri tomato processing plants, and Georgia wholesale markets. If all that is not enough, ADF is taking care of legal documentation, financial planning, and reporting.

These days, despite hitting many snags along the way, Nikozi farmers are collecting their first harvest. Yet, there are many financial, organizational, and technological problems to be resolved in a fairly short period of time. The ADF loan is supposed to be repaid within the next three years; the land lease agreements with the individual cooperative members will expire at roughly the same time, setting the timeframe for Pridon and Vasil to learn to stand (and walk) on their own feet. And, indeed, a lot of learning must happen between now and then: what and how to produce (effectively and efficiently), how to market, how to bring additional investment and diversify production so as not to sell into the glut and utilize available human resource all year round, and, finally, how to engage the village community in order to transform nominal farmer cooperation into the real thing.