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

Figure 11.1 Estimated Average Ginning Costs at 2006 Capacity UtilizationRates in Study Countries25.00U.S. cents/kg lint cotton20.0015.0010.005.000.00Burkina FasoMaliCameroonZambiaZimbabweTanzaniaUgandaMozambiquevariable costs/kg of lintfixed costs/kg of lintSource: Authors.(around US$0.025 per kg). Finally, maintenance and other variable costs are, asa general rule, substantially lower in ESA, thus reflecting higher cost efficiency atthe processing stage.The gap between ginning costs in WCA and ESA countries would be reducedbut not eliminated, if the Communauté Française d’Afrique (French communityof Africa) franc/US$ exchange rate returned to its 1995–2006 mean, whichcorresponds to the period since the 1994 devaluation (see final line of table 11.1):costs in Cameroon would be at the upper end of those in ESA, but costs in BurkinaFaso and especially in Mali would remain much higher. This projection suggeststhat, while the current CFA franc/US$ exchange rate does contribute to thecurrent financial crisis in the region, a more fundamental cause for the financialcrisis, at least in Burkina Faso and Mali, is very high costs of operation in cottonginning. This conclusion becomes even stronger when one realizes that figuresfor the highest cost ginner in ESA—Zambia—are heavily affected by the sharpappreciation of the kwacha during 2005/06. Zambia’s ginning cost in U.S. dollarswould be below US$0.10/kg of lint if the kwacha were at its 2005 level.Table 11.2 builds in additional costs from farm gate to FOT to develop theoverall indicator of company cost efficiency: total farm gate to FOT costsexcluding taxes and critical functions. The main discriminating factor for collectioncosts appears to be the size of ginning units; transport costs are lowerin countries with smaller ginning units (particularly Uganda) because thepurchasing area for each unit is smaller and are higher in countries with largescaleginning units (Zambia and WCA).Short-term financial costs are higher in monopolistic systems (exceptCameroon) for managerial reasons. In such systems, cotton companies tend142 GERGELY