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

Zimbabwe transitioned during the 1980s from a sector dominated by whitecommercial farmers to one with almost no such farmers, while building systemsfor effective input credit supply and extension assistance to a substantialminority of the new smallholder farmers. The cotton company of Zimbabwe(COTTCO), the private company that emerged out of the government-ownedCotton Marketing Board with a market share of around 70 percent, continuedthis effective performance into at least the early 2000s and enjoyed creditrepayment of 95 percent or higher in most years. Cargill, its main competitor,did not develop a credit system until 2002/03 but invested in extension supportthat encouraged loyalty from beneficiary farmers.Between 2001 and 2006, the number of seed cotton buyers in Zimbabwe rosefrom 5 to 17, spurred by a fall in the real prices paid to farmers by the majorplayers. 51 Credit default increased, and COTTCO dramatically reduced inputcredit in 2004/05. Though the company has since expanded its system again,credit default remains a major problem. Draft regulations to deal with the situationwere developed in 2004 but were never enacted. During the 2006/07season, the sector introduced a requirement that cotton companies must providesome input to producers to receive an export permit in future years.An unusual result of Zimbabwe’s move to a less concentrated system is thata substantially larger share of farmers received some form of input credit in2006 than in the early 2000s. Whereas about 40 percent of growers receivedcredit from COTTCO or another company in 2002, nearly 95 percent receivedsome type of support in 2006. However, regulation was a key driver of thisresult, and newer companies tend to provide seed of uncertain quality, little orno insecticide, and no extension advice. As noted earlier, the entry of these newcompanies was also accompanied by large increases in credit default amongfarmers. In an echo of patterns seen in Zambia and especially in Mozambique,widespread provision of very inadequate input packages (and no extensionadvice) has often been used as pretext to buy indiscriminately during the harvest.To the extent that this practice is happening in Zimbabwe, the apparentincrease in credit provision may undermine such input credit and extensionprovision in the longer term.Zambia’s cotton sector built relatively effective input credit and extensionsystems in the years following reform in 1994, consistently providing farmerswith high-quality treated seed, four to six annual insecticide treatments,and (for the 20 percent or 30 percent of farmers that the main companiesconsider their best and most reliable) foliar feed fertilizers on 100 percentcredit terms. Both major firms also stressed fundamentally sound agronomicpractices with farmers, and Dunavant has attracted outside funding to supportextension. Typical credit repayment was above 95 percent for Clark andabove 85 percent for Dunavant. As a result, the sector has seen slow butsteady increases in the yields of established farmers and a near tripling of thetotal number of farmers growing cotton since 2000 (Tschirley, Zulu, andShaffer 2004).78 TSCHIRLEY