Impact Of Agricultural Market Reforms On Smallholder Farmers In ...

Fertilizer can be imported outside the SONAPRA cotton system by “unapproved” private firms, but
the tax system makes this unprofitable. Approved importers pay only an entry tax of 0.14 percent,
while non-approved importers pay the equivalent of 23.9 percent import duty. As a result, very
little is imported outside the SONAPRA system.
This system, in which private importer-distributors are managed by a state enterprise, has several
limitations.
The insecurity of the approved firms, regarding whether they will be approved in the
coming years, discourages long-term investment in facilities and capacity.
Real competition among the private firms does not exist since the bid price is not the price
at which they must deliver the fertilizer. This greatly reduces their incentive to cut costs.
There is little government oversight of the process by which SONAPRA selects and
manages its approved firms.
The policy of unform prices across types of inputs discourages farmers from selecting those
which offer the greatest effectiveness for the least cost.
The policy of uniform prices across the country distorts the incentives of farmers by
subsidizing cotton growers in remote locations at the expense of those in more central
locations.
On the other hand, proponents of the system point to its success in expanding the use of fertilizer
and agricultural chemicals on cotton in Benin. They argue that private firms do not have the
logistical and administrative capacity to supply inputs to scattered producers.
Agricultural finance Following the collapse of the Caisse Nationale de Crédit Agricole
(CNCA) in 1988, various attempts were made to relaunch the Caisses de Crédit Agricole Mutuels
(CCAM). Following a successful pilot project and with assistance from donor organizations, the
Caisse were restructure to provide greater independence at the local level and renamed Caisse
Locale de Crédit Agricole Mutuel (CLCAM). Under the new structure, the number of depositors
grew from 21 thousand in 1989 to 214 thousand in 1997. As of 1998, there were 82 CLCAMs with
deposits of 17 billion FCFA and outstanding credits of 21 billion FCFA.
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