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

should eventually make a difference to the seed price, but currently they donot appear to account for enough of the market (or have enough workingcapital) to push the price up significantly.Overall, a limited, but variable, degree of development of domestic oil andcake markets is observed. From the perspective of cotton ginners, the main problemis the monopsony power exercised by oil processors in Burkina Faso andMali, as well as a lack of transparency and contestability on the transfer price ofcotton seeds established through long-standing arrangements between the cottoncompany and the oil processor—the latter often a subsidiary of the former—officially justified by the need to protect domestic industries. Nevertheless, oilconsumers may gain at the expense of seed cotton producers in Burkina Faso.Given the often tight margins obtainable from lint production, moreresearch would be worthwhile on measures to improve the efficiency of themarkets for oil and cake. According to crude estimates of oil processing costs,there are reasons to believe that many of the observed seed prices could beraised by additional competition. On the consumer side, this belief does raisea quality issue: oils from newer, smaller processing units are typically lessrefined than oils from larger, established companies. However, as long as basicfood safety requirements are met, it may well be that a significant proportionof poor consumers would willingly accept lower quality oil if its price was alsolower. In this regard, there would appear to be parallels with the liberalizationof maize markets in ESA in the 1980s, leading to rapid new entry of smallscalehammer mills in competition with established, large-scale roller mills(Jayne et al. 1995).The other major challenge for the regulation of liberalized oil markets is theenforcement of tariffs and other taxes on imported oils. Cottonseed oil producedlocally suffers in a number of African countries from unfair competitionfrom massive imports of vegetable oils originating from Southeast Asia that areoften imported fraudulently or without paying the full amount of legally duetariffs and taxes.CONCLUSIONThe analysis reveals that there are significant differences in the valorizationof cotton seeds across the study countries. Burkina Faso and Mali are landlocked,have a deficit in edible oil, and have strong demand for cake fromtheir livestock sector, yet prices paid to cotton companies for seed are thelowest of the nine countries because of monopsony power in the oil sectors,whether public or private. In contrast, Uganda’s competitive oil sector makesa significant contribution to ginning company profitability as a result of thehigh prices paid for cotton seed. Small-scale investment in Tanzania has alsoled to more attractive prices for cotton seed. Similar investment is starting totake place in Mali and should not be discouraged.VALORIZATION OF SEED COTTON BY-PRODUCTS 103