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

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more recent data are not available (except producer prices, which are the2006/07 actual prices). It has, however, been verified that costs have not dramaticallychanged in recent years in these countries, because domestic andimported inflation (mainly from imported equipment and oil) were more orless balanced by cost reductions. Benin is not included in this sample becauserecent reliable data were not available.COMPANY COST EFFICIENCYThe indicator for company performance is the adjusted cost from farm gateprices to free-on-truck (FOT). This adjusted figure excludes taxes and the costof critical functions, because these costs depend on policy and other factorsunrelated to the efficiency of company operations. The value of seed is notdeducted from the total cost figure because the performance of the seed market(and the value the companies can, therefore, get from seed sales) is alsobeyond the influence of the companies. These factors are brought back into theanalysis when overall competitiveness and macro impacts of the cotton sectorare considered.This chapter focuses first on ginning costs as perhaps the key cost element inthis indicator. Ginning costs in WCA (all national or local monopolies) rangefrom US$0.134 to US$0.234 per kg of lint (table 11.1 and figure 11.1). In ESA,these costs are much lower—ranging from US$0.081 to US$0.123—for countriesoperating at reasonably high capacity utilization rates (Tanzania, Zambia, andZimbabwe). For Mozambique and Uganda, which operate at about 20 percent ofcapacity, costs are comparable to those in WCA, at US$0.20 per kg and US$0.237per kg, respectively. These are the only two countries in the region that do notallow open competition between ginners: Mozambique operates a local monopolysystem, and Uganda operates a hybrid system with purchase quotas. Boththese systems protect ginners from most competitive pressures and thus reduceincentives for cost containment. At 100 percent capacity utilization rates in allcountries, there would be no overlap in ginning costs between the two regions:WCA countries would range from US$0.13 to US$0.20 per kg, while those inESA would range from US$0.07 to US$0.12 per kg.A combination of technical and structural factors likely contributes to thisstark difference in ginning costs between the two regions. First, WCA uses onlysaw gins. Investment costs (and hence depreciation costs) for saw gins are substantiallyhigher than for roller gins. Roller gins are predominant in Uganda andalso widely used in Tanzania. 79 In addition, a number of ginners in Tanzania andUganda import equipment from India, often secondhand. Some Zambian ginnersinstall used saw gins. All this equipment is much less expensive than the U.S.or European equipment purchased by WCA cotton companies. Second, energy ismuch cheaper in Zimbabwe (less than US$0.001 per kg of lint), 80 Zambia(US$0.005 per kg), and Tanzania (US$0.009 per kg) than in WCA countries140 GERGELY
Table 11.1 Comparative Analysis of Ginning Costs (U.S.¢ per kg of lint cotton)Indicator Burkina Faso a Cameroon b Mali c Mozambique d Tanzania e Uganda e Zambia e Zimbabwe gType of system Local monopoly National monopoly National monopoly Local monopoly Competitive Hybrid Concentrated ConcentratedExchange rate to US$ 505 505 505 23.5 1,200 1,800 3,600 VariableTypes of gins saw saw saw saw roller roller saw saw/rollerAverage unit ginningcapacity (tons) 45,000 31,000 40,000 13,500 6,300 5,000 20,000 25,000% capacity utilized 100 100 65 20 80 20 100 64Fixed costs/kg of lint 5.84 4.03 8.00 17.15 1.84 12.29 4.69 3.29Depreciation 3.31 3.06 4.59 7.81 0.65 6.02 2.50 1.90Salaries 1.18 0.77 1.08 9.29 1.19 6.27 2.08 1.35Other 1.35 0.20 2.32 0.05 0 0 0.11 0.05Variable costs/kgof lint 9.99 9.39 15.39 6.51 6.31 7.66 7.61 4.76Energy 2.50 3.07 4.40 2.36 0.94 3.04 0.50 0.04Packaging 3.49 3.49 3.45 3.91 4.17 3.05 3.50 2.17Other (includingmaintenance) 4.00 2.84 7.54 0.24 1.20 1.58 3.61 2.56Total cost/kg of lint 15.83 13.42 23.39 23.66 8.15 19.96 12.30 8.06At 100% capacity 15.83 13.42 20.59 9.94 7.78 10.12 12.30 6.88At mean 1995–2006exchange rate h 13.62 11.55 17.71 n.a. n.a. n.a. n.a. n.a.141Source: Authors.Notes: n.a. = not applicable because no need to adjust for different exchange rate. Both Zambia and Uganda use some secondhand ginning equipment.a. SOFITEX actual accounts for 2003/04.b. SODECOTON actual account for 2004/05.c. CMDT budget for 2006/07.d. Estimate for 2005 calendar year (Boughton 2008).e. Estimates based on 2006/07 costs but 2004/05 capacity utilization (Poulton and Maro 2007).f. Estimates by Gerald Estur (consultant) for 2005/06 (ginners contend they are underestimated).g. Estimates for 2005/06 (Poulton and Hanyani-Mlambo 2007).h. CFA franc 587/US$; costs at actual capacity.CFA = Communauté Française d’Afrique (French community of Africa); CMDT = Compagnie Malienne de Développement des Fibres Textiles; SODECOTON=; SOFITEX=.
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AGRICULTURE AND RURAL DEVELOPMENTOr
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AGRICULTURE AND RURAL DEVELOPMENTSe
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© 2009 The International Bank for
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Section II. Historical Background a
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BOXES, FIGURES, AND TABLESBoxes2.1
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5.2 Summary of Pricing Mechanisms i
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eference are limited to neighboring
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ACKNOWLEDGMENTSThis study was carri
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ABBREVIATIONS¢ U.S. centACPAgricul
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US$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
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SECTION TWOHistorical Background an
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shares belonging to governments, an
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Changes Made Since the End of the 1
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long-term development strategies, (
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possible link between price-setting
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production fell further, to lows of
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all aspects of the chain from input
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suggestions (a) of establishing fas
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Figure 4.1 Decision Tree for Cotton
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Figure 4.2 African Cotton Sector Ty
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Box 4.1 Is This Typology Specific t
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52Table 4.1 Trading Off: Strengths
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CONCEPTUALIZATION OF THE LINKS BETW
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chosen in this book and the impact
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Table 4.3 Expected Performance alon
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Box 4.2 (Continued)Second, farmers
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SECTION THREEComparative Analysis:C
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PRICING MECHANISMS IN WCAPricing me
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efore planting, price risk in the s
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Table 5.3 Summary of Producer Share
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Finally, FOT price shares in WCA ro
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MALI AND CAMEROON: GOVERNMENT MONOP
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Significant in Mozambique, the comp
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Zimbabwe transitioned during the 19
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Box 6.1 (Continued)A move from a co
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82Table 6.1 Summary of Input Supply
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84Table 6.1 (Continued)IndicatorsCo
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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
Page 163 and 164: According to the focus group inform
Page 165 and 166: Figure 10.6 Net Margins after All C
Page 167 and 168: All other variables in the budgets
Page 169 and 170: Table 10.2Summary of Average Yield
Page 171 and 172: ■■■■impression is given tha
Page 173: were based on a 2005 cotton farmer
Page 178 and 179: Figure 11.1 Estimated Average Ginni
Page 180 and 181: to buy seed cotton immediately afte
Page 182 and 183: 146Table 11.3 Overall Competitivene
Page 184 and 185: 148Table 11.4 Total Value Added per
Page 186 and 187: Figure 11.3 Total Value Added per c
Page 189 and 190: CHAPTER TWELVEConclusionsPatrick La
Page 191 and 192: Table 12.1 Summary of Expected and
Page 193 and 194: Valorization ofby-productsValue of
Page 195 and 196: Macro impact■ Total value addedpe
Page 197 and 198: across concession zones, with newer
Page 199 and 200: high yields. However, a mixed pictu
Page 201 and 202: governance and regulatory structure
Page 203 and 204: against price and exchange rate ris
Page 205 and 206: Improvements in the Delivery of Ext
Page 207 and 208: esistant, “stacked” genes), and
Page 209 and 210: Just as improved sector management
Page 211 and 212: More-competitive systems are perhap
Page 213 and 214: ■■■■Interprofessional commi
Page 215 and 216: were to occur, it would most likely
Page 217 and 218: APPENDIX AStatistical Tables181
Page 219 and 220: 1989/90 43 111 383 40.7 95 0.491990
Page 221 and 222: 1989/90 62 150 416 41.0 95 0.671990
Page 223 and 224: 1989/90 43 89 482 41.3 95 0.651990/
Page 225 and 226: 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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