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

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Significant in Mozambique, the companies making the more aggressiveinvestments are all affiliates of multinational cotton trading firms: Dunavant,Plexus, and Companhia Nacional de Algodão (Mozambique) (affiliated withDéveloppement des Agro-Industries du Sud). These firms have all chosen toinvest outside the traditional cotton growing zone of Nampula.In Burkina Faso, the division of SOFITEX into three companies in 2004changed very little with regard to input credit and extension; the West Africamodel discussed earlier continues to be applied, though it seems likely that thesevere financial difficulties of 2006 and 2007 have prevented companies frommaking much progress on their stated desires to modify input and extensionpackages. A key point to keep in mind as Burkina Faso moves down its reformpath is that, despite the very developed structure and strong coverage of farmergroups within cotton areas, operational capacities remain weak. AlthoughUnion Nationale des Producteurs de Coton du Burkina and its regional unionsdo receive and distribute inputs to members and organize the cotton market,neither is in a position to take over the importation and distribution of inputsto villages. Until this change can happen, seasonal input credit from cottoncompanies will be critical to the sector’s success.COMPETITIVE SECTORS: TANZANIA AND UGANDASTRUGGLE AND TAKE VERY DIFFERENT PATHS TOENSURE INPUT SUPPLY, EXTENSION, AND QUALITYThe prereform, cooperative-based cotton systems in Tanzania and Uganda 49transformed quickly after reform into highly competitive markets with 20 to 30independent buyers vying for farmer production. Price competition was intenseand farm prices improved, but each country witnessed the collapse of its inputsupply and extension system. As a result, the two countries in East and SouthernAfrica (ESA) that most closely approached the competitive ideal in market structuresaw the most direct and persistent government involvement in efforts toensure input provision to farmers.Initial efforts in both countries involved sectorwide coordination of inputprovision—Tanzania’s Cotton Development Fund (CDF) created in 1999, andUganda’s similar collaborative approach between ginners and the country’spublic Cotton Development Organization—so that ginners could concentrateon competition in the output market. Each approach achieved some successbut failed after two years because of management and design problems.Since these initial failed attempts, the two countries have moved in dramaticallydifferent directions. Starting about 2002, first informally and thenthrough formal agreement, Uganda eliminated competition in the outputmarket to facilitate input supply and extension by ginners (see Baffes 2008).Meanwhile, Tanzania maintained a competitive output market and implementedinnovations in its approach to providing some minimal level of inputto farmers (Poulton and Maro 2007). Uganda’s zonal quota system featuredcollaborative production planning among two to three ginners in each of 1176 TSCHIRLEY
zones, prohibited movement of seed cotton across zones, and facilitated saleof inputs at 50 percent of cost, with the subsidy implicitly collected in theprice paid to farmers. Extension was a heavy focus in the system, with 7,000demonstration plots and training days financed two-thirds by ginners andone-third by the U.S. Agency for International Development. The consensusamong ginners and observers was that input supply and extension would bedrastically reduced if the zona system, or some variant of it, was not in place.Despite these major efforts at input supply and extension, production inUganda did not consistently rise above 20,000 to 25,000 tons of lint. In hindsight,it appears clear that a short-lived production boom in 2004 and 2005 wasprimarily due to high prices in the two preceding years (Baffes, backgroundpaper on Uganda, 2007). As a result of the inability to boost production, stakeholdersin 2007 decided to abandon the zonal quota system, though it is notclear at this point what has replaced that system.Under Tanzania’s passbook system introduced in 2003, farmers selling cottonreceive a stamp in their passbooks that entitles them to seed or chemicals 50the next year proportional to the amount of cotton they sold. For most farmers,the entitlement amounts to one or two chemical sprays and some seed (notenough for a full planting) the following year. The system is funded by a levypaid by ginners to CDF, which funds the importation of insecticides by privatecompanies. Field interviews by Poulton and Maro (2007) suggest that the systemhas been “one contributory factor toward the major resurgence in cottonproduction in 2004 and 2005,” but the authors conclude that “the system canmake only a limited contribution to the intensification of cotton production inTanzania,” because it can finance only limited insecticide sprays and no fertilizerapplications, and it does nothing to provide extension assistance.Geographical factors may provide some explanation for why these twocountries, with very similar prereform histories and nearly identical structuresafter reform, chose (for a time) such different approaches to solving the inputcredit and extension problem. As long as the north of Uganda was closed, thescope for expanding cotton production under a low input approach was farlower than in Tanzania. Ginners in Uganda were thus forced to increase productionin relatively small areas already under production. The fact that thesector abandoned the quota system at the same time that the north began toopen up lends some support to this argument.CONCENTRATED, MARKET-BASED SECTORS: ZIMBABWEAND ZAMBIA PERFORM WELL ON INPUT CREDIT ANDEXTENSION, BUT FACE INSTABILITYThe two countries in ESA with single-channel marketing systems before reformmaintained relatively concentrated sectors for several years after reform. Each hasperformed much better on input provision and extension than have Tanzaniaand Uganda. However, each has faced substantial structural instability that hasaffected both services.INPUT CREDIT AND EXTENSION 77
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AGRICULTURE AND RURAL DEVELOPMENTOr
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AGRICULTURE AND RURAL DEVELOPMENTSe
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© 2009 The International Bank for
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Section II. Historical Background a
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BOXES, FIGURES, AND TABLESBoxes2.1
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5.2 Summary of Pricing Mechanisms i
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eference are limited to neighboring
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ACKNOWLEDGMENTSThis study was carri
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ABBREVIATIONS¢ U.S. centACPAgricul
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US$U shWAEMUWCAWTOU.S. dollarUganda
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output markets, improving productiv
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etween these competing needs, provi
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■■■■■competition increase
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monopolies range from 0.98 to 1.15,
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macroeconomics, developments in com
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central body and that the state nee
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CHAPTER ONEIntroductionDavid Tschir
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The debate about how to deal with t
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Figure 1.1 Map of Africa Highlighti
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hypotheses about sector performance
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to reach 25 million tons of lint in
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cotton production was introduced in
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Figure 2.2 Nominal Cotton Prices (U
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Box 2.1 (Continued)Togo, 39 percent
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Box 2.2 Cotton SubsidiesCotton subs
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efers specifically to the presence
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picking, storage, handling, or tran
Page 62 and 63: national monopoly (state-owned or p
Page 65: SECTION TWOHistorical Background an
Page 68 and 69: shares belonging to governments, an
Page 70 and 71: Changes Made Since the End of the 1
Page 72 and 73: long-term development strategies, (
Page 74 and 75: possible link between price-setting
Page 76 and 77: production fell further, to lows of
Page 78 and 79: all aspects of the chain from input
Page 80 and 81: suggestions (a) of establishing fas
Page 82 and 83: Figure 4.1 Decision Tree for Cotton
Page 84 and 85: Figure 4.2 African Cotton Sector Ty
Page 86 and 87: Box 4.1 Is This Typology Specific t
Page 88 and 89: 52Table 4.1 Trading Off: Strengths
Page 90 and 91: CONCEPTUALIZATION OF THE LINKS BETW
Page 92 and 93: chosen in this book and the impact
Page 94 and 95: Table 4.3 Expected Performance alon
Page 96 and 97: Box 4.2 (Continued)Second, farmers
Page 99: SECTION THREEComparative Analysis:C
Page 102 and 103: PRICING MECHANISMS IN WCAPricing me
Page 104 and 105: efore planting, price risk in the s
Page 106 and 107: Table 5.3 Summary of Producer Share
Page 108 and 109: Finally, FOT price shares in WCA ro
Page 110 and 111: MALI AND CAMEROON: GOVERNMENT MONOP
Page 114 and 115: Zimbabwe transitioned during the 19
Page 116 and 117: Box 6.1 (Continued)A move from a co
Page 118 and 119: 82Table 6.1 Summary of Input Supply
Page 120 and 121: 84Table 6.1 (Continued)IndicatorsCo
Page 123 and 124: CHAPTER SEVENQuality ControlGérald
Page 125 and 126: Tanzania Competitive 1 2 Very lax n
Page 127 and 128: Figure 7.1 Estimated Premium for To
Page 129 and 130: all fiber coming from Africa—are
Page 131 and 132: Box 7.1 (Continued)newly liberalize
Page 133 and 134: CHAPTER EIGHTValorization of SeedCo
Page 135 and 136: competitive market in some of the o
Page 137 and 138: a few years, it indicates that some
Page 139 and 140: should eventually make a difference
Page 141 and 142: CHAPTER NINECotton ResearchDuncan B
Page 143 and 144: With regard to human and financial
Page 145 and 146: ■■■Be involved in setting res
Page 147 and 148: made royalty payments to CRI. When
Page 149: and to identify complementary inves
Page 153 and 154: CHAPTER TENYields and Returns toFar
Page 155 and 156: fact that 55 percent of cotton is p
Page 157 and 158: Yields by Farmer TypeTo assess perf
Page 159 and 160: Factors beyond company services als
Page 161 and 162: Table 10.1 Summary Crop Budgets by
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According to the focus group inform
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Figure 10.6 Net Margins after All C
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All other variables in the budgets
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Table 10.2Summary of Average Yield
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■■■■impression is given tha
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were based on a 2005 cotton farmer
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more recent data are not available
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Figure 11.1 Estimated Average Ginni
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to buy seed cotton immediately afte
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146Table 11.3 Overall Competitivene
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148Table 11.4 Total Value Added per
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Figure 11.3 Total Value Added per c
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CHAPTER TWELVEConclusionsPatrick La
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Table 12.1 Summary of Expected and
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Valorization ofby-productsValue of
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Macro impact■ Total value addedpe
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across concession zones, with newer
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high yields. However, a mixed pictu
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governance and regulatory structure
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against price and exchange rate ris
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Improvements in the Delivery of Ext
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esistant, “stacked” genes), and
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Just as improved sector management
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More-competitive systems are perhap
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■■■■Interprofessional commi
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were to occur, it would most likely
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APPENDIX AStatistical Tables181
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1989/90 43 111 383 40.7 95 0.491990
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1989/90 62 150 416 41.0 95 0.671990
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1989/90 43 89 482 41.3 95 0.651990/
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1989/90 99 189 521 42.8 85 0.541990
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1997/98 31 327 95 33 to 35 2,950 83
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1994/95 82 344 238 33 207.0 40.0119
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Table A8 ZambiaSeasonLint productio
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Table A9 ZimbabweSeasonLint product
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Table A10 Ginning and FOB-to-CIF Co
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1997/98 1.64 598 210 75 49 74 7.619
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1987/88 17,609 31,238 564 414 911 4
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206 NOTES11. Important cotton secto
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208 NOTES47. Benin is not included
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210 NOTES79. In Zimbabwe and Zambia
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BIBLIOGRAPHYBadiane, Ousmane, Dhane
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and Instability, ed. A. Sarris and
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World Bank. 2007. Strategies for Co
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CFA exchange rate, 17-18b, 19fcompa
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input credit and extension in, 77-8
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firm types, 211n93fixed prices, for
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productivity, 119, 121f, 205n8,209n
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key indicators, 56-58, 57-58t,155-5
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focus group discussions by farmerty
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technology transfer, 170-71by typol
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ECO-AUDITEnvironmental Benefits Sta
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