Organization and Performance of Cotton Sectors in Africa ... - infoDev

CHAPTER FIVEPricing Systems and PricesPaid to GrowersJohn Baffes, David Tschirleyand Nicolas GergelyUntil recently, most cotton sectors in West and Central Africa (WCA)were national monopolies, requiring an administered approach tofarmer price setting. Although details vary across countries, eachcountry in WCA followed broadly similar approaches to this issue. Since theonset of reform in East and Southern Africa (ESA), cotton sectors have includedall sector types described in chapter 4 except national monopolies: localmonopolies (Mozambique), concentrated systems (Zambia and Zimbabwe),competitive (Tanzania, Uganda until the early 2000s), and hybrid (Uganda since2003). Predictably, approaches to price setting in ESA have been as diverse as thecountries’ sectoral and regulatory structures.The summary indicator for pricing performance is the percentage of thefree-on-truck (FOT; ex ginnery) lint price paid to farmers for their seed cotton.The typology laid out in the previous chapter generates clear expectationsof performance on this measure for market-based systems: competitivesystems should pay the highest FOT share, while concentrated systems arelikely to pay the lowest. Performance in national and local monopolies is notfully predictable from the typology because political factors and the strengthof farmer associations weigh more heavily in these sectors. The rest of thischapter explains the price mechanisms in the two regions and comparestheir performance at the farmer level.65