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

in its operations. One example is that it imports generic bulk insecticides thatfarmers mix in the field. SODECOTON claims that these products arecheaper and that it is able to use them because of the relatively dense networkof field agents, who are able to disseminate pesticide preparation techniquesto farmers.LOCAL MONOPOLIES: VASTLY DIFFERING HISTORIESCOMPLICATE COMPARATIVE ASSESSMENT INMOZAMBIQUE AND BURKINA FASOBurkina Faso moved to a local monopoly system with three firms in 2004, inthe midst of a huge boom in cotton production made possible by many yearsof investment in research, input credit, and extension, as well as by relativelyhigh prices paid to farmers since 2000. 48 In sharp contrast, Mozambique createdits local monopoly system in the late 1980s, as civil war still raged and afternational production had fallen below 10,000 tons of seed cotton. Even beforethe civil war and the economy’s collapse, cotton production in Mozambiqueused far fewer external inputs than did the sector in Burkina Faso. One area inwhich the countries show similar performance is in the share of all farmersgrowing cotton in the cotton zones: 85 percent across Burkina Faso’s wholecotton zone, and as high as 80 percent in Mozambique’s cotton belt.In reforming its cotton sector, Mozambique returned to the concession (orlocal monopoly) model prevalent during the colonial era. Key themes duringthe postreform era have been the absence of any systematic approach to evaluatingand reawarding concession areas, extremely weak farmer organizationsunable to negotiate with ginners or provide services themselves, widely divergentperformance between early investors and new entrants (most of the latteraffiliated with international cotton trading firms), recurrent credit defaultcrises, and the government’s openness to new investment, albeit always withinthe concession model. Until recently, the country clearly lagged behind itsneighbors in productivity, though new entrants since the early 2000s havebegun to change this in some areas of the country.Key lessons from Mozambique’s experience are, first, that a local monopolysystem does not eliminate the possibility of credit default crises. If investmentopportunities and regulatory capacity in a country are limited, the cotton sectoris likely to attract new entrants, leading to side selling and increased credit default.Eventual decline in seasonal input credit and extension services is usually theresult; in fact, both services are weakest, with extension almost nonexistent, in theareas most affected by credit default. Second, policy makers in local monopolysystems must select investors carefully. All companies in Mozambique face thesame, very weak, government regulatory capacity. Yet some companies have chosento invest in improved input supply and some extension, while others haveoperated for many years much like the new entrants in Zimbabwe, thus providingminimal quantities of poor quality input and little or no extension advice.INPUT CREDIT AND EXTENSION 75