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

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Box 6.1 (Continued)A move from a concentrated system toward a competitive one involves aqualitative change in the nature of competition within the sector: from competitionfor producers at the start of the season (with those producers thenreceiving a range of preharvest services to assist their production) to pricecompetition for seed cotton at harvest time (with incentives for providing preharvestsupport undermined by side selling). In both Zimbabwe and Zambia,increased competition has undermined input credit provision; in Zimbabwe,it also undermined the country’s previous reputation for high-quality lint(chapter 7). Worse, competition may undermine input credit or lint quality—with long-term consequences for the industry—before it has any positiveeffect on prices paid to farmers. For example, there is little evidence thatincreased competition in Zimbabwe has yet improved the seed cotton pricesreceived by the majority of farmers. Finally, while movement from a concentratedto a more competitive system can happen quickly in the absence ofappropriate regulation (see next section of this box), reversing that changemay be more difficult (see text of this chapter). If, as this study suggests,highly competitive sectors are likely to perform poorly in most of SSA, thensuch structural change may impose long-term losses on these countries.Inadequate regulatory structures are a key reason for instability. A keyinsight from the typology in this book is that the appropriate roles of ginners,farmers, and the government differ markedly across sector types. In concentratedsystems, governments need to provide an environment in which thesmall number of buyers can coordinate input credit provision and qualityenhancement, while ensuring that farmers receive remunerative prices. Thissituation could suggest that limited barriers to entry be established in theform of conditional buying licenses so that only companies with a demonstratedcommitment to productivity and quality should be allowed in. Suchbarriers would avoid many of the damaging consequences of uncontrollednew entry into concentrated sectors, but barriers could also further reducethe effectiveness of new entry in raising seed cotton prices. For this reason, itis also suggested that more formalized approaches to price setting may beneeded to ensure remunerative prices to farmers. In the latter, strengthenedfarmer associations would be much preferred to direct government involvementin price setting. In all cases, a government needs to carry out its rolecollaboratively with private investors and farmers.Though governments in ESA have a limited history of working in thisway, positive signs are emerging in both Zambia and Zimbabwe. In the former,the government worked closely with ginners and farmers to proposerevisions to the Cotton Act, which is now awaiting submission to Parliament.If enacted, the act would establish a reasonably balanced public–privateapproach to sector management. In Zimbabwe, actors are considering a codeof good conduct that cotton companies must adhere to if they are to receivean export permit.(continued)80 TSCHIRLEY
Box 6.1 (Continued)This analysis suggests that lower prices (as a share of free-on-truck lintvalue) paid by existing firms have been the major factor encouraging newentry in Zimbabwe and Zambia. Because economies of scale in cotton processingare relatively modest (especially where Indian roller ginning technologyis used), new investors can enter the sector quickly, even if they have nocapacity or background in promoting input use and farm-level productivity.In addition, government policy sometimes promotes new investment in ginningwithout understanding the negative consequences this policy can bring.This issue is an emerging are in Zambia, where the government has welcomedsubstantial new investment. The type of regulatory structure suggested earlierwould establish standards other than the theoretical competitive ideal forevaluating whether such investment will be healthy for the sector.for input supply and extension (and quality control; see chapter 7). As thenumber of players rises, extension and input credit are the first services to suffer,certainly in quality (in Zimbabwe) and also in the number of farmersserved (in Zambia). A key question that emerges is whether these systems willbe successful in their efforts to establish enforceable rules of the game thatallow enough competition to ensure good pricing performance (see chapter 5)while safeguarding credit repayment.CONCLUSIONSTable 6.1 summarizes the assessment of input credit and extension performanceacross sector types. Realized performance matches expected performance mostclosely for competitive sectors and national monopolies. Uganda, which defiedexpectations for competitively structured systems, did so only by eliminatingcompetition among firms, at least until 2007. Concentrated, market-based systemsand local monopolies show the greatest diversity in performance. The formercan perform quite well on input credit and relatively well on extension, butthat performance can suddenly decline as a result of the instability referred toabove. The sample of countries includes only one (Mozambique) where localmonopolies had existed for a sufficiently long time to allow reasonable assessment.Highly variable performance across concession companies in Mozambiquesuggests that policy makers must carefully select new investors with an eyetoward productivity and quality; affiliates of multinational cotton trading firmshave performed best in this regard in Mozambique.A key question that cuts across local monopolies and concentrated systemsconcerns the factors that favor or hinder the emergence of an effectiveregulatory approach featuring active collaboration among ginners andINPUT CREDIT AND EXTENSION 81
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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
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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
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Page 78 and 79: all aspects of the chain from input
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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
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Page 106 and 107: Table 5.3 Summary of Producer Share
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Page 110 and 111: MALI AND CAMEROON: GOVERNMENT MONOP
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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
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Page 141 and 142: CHAPTER NINECotton ResearchDuncan B
Page 143 and 144: With regard to human and financial
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Page 147 and 148: made royalty payments to CRI. When
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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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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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