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

Box 7.1 (Continued)newly liberalized market, thus sacrificing quality in the process. The parallelmarket mark-up on the scarce foreign exchange that could be generatedthrough cocoa export exceeded the quality premium obtained from higherquality cocoa. Tollens and Gilbert (2003) argue that the Nigeria cocoa case isa special case. However, the Zimbabwe and Tanzania cotton cases suggest thatthese “special cases” may actually be quite common.Although Uganda has a large number of ginners, as does Tanzania, 60 theUgandan sector is heavily regulated, with a quota system for seed cottonpurchase eliminating the direct competition for cotton that has been sodetrimental to quality in Tanzania. Since the mid-1990s, Uganda’s premiumhas, nevertheless, fallen, although it remains above Tanzania’s. Some of thisdifference is due to the larger share of roller-ginned cotton in Uganda. However,another factor may be the much smaller size of the sector, which allowsUganda’s Cotton Development Organization to monitor grading and otherquality practices in a way that the Tanzania Cotton Board cannot hope todo. In Tanzania, there are in excess of 5,000 registered buying posts spreadover a huge area of the country.Finally, Zimbabwe appears to perform well, according to figures 7.1 and 7.2.However, this is a legacy of the outstanding performance delivered first by thenational monopoly Cotton Marketing Board, then by the concentrated systemthrough 2001. Following the rapid entry of new firms since 2001, system-widequality control has suffered, even though COTTCO and Cargill, firms with anestablished reputation for quality consciousness, still account for 70–80 percentof the market. In 2002/03 one of the new companies in Zimbabwe (fromTanzania) was the first to offer flat rate prices for all its seed cotton purchases(irrespective of grade) and even the established companies felt obliged to followsuit. During 2003/04 and subsequent seasons, the majority of primarymarketing transactions were completed either without grading or with gradingbeing merely a formality from the farmer’s perspective because of the flat-ratepricing. Almost immediately, the average quality of seed cotton delivered byfarmers declined because they no longer felt the need to grade their cotton. 61During fieldwork in Zimbabwe, Cargill reported that, in the mid-1990s,around two-thirds of all seed cotton would have received an A or B grade. Inturn, all grade A and B cotton would have fed through to lint of the top threegrades. In 2006, according to buying slips, 35 percent of Cargill’s seed cottonreceived an A or B grade, but more rigorous grading at the company’s ginneriesreduced this figure to less than 1 percent. As a result, even with the use oflint cleaners, only 3 percent of lint achieved the top grade (compared withQUALITY CONTROL 95