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

to buy seed cotton immediately after harvest, and to sell them throughout theyear, thus holding high average stocks. Ginners in competitive systems tend tominimize their stocks by selling immediately after processing. Cameroon isunique for monopolistic systems: most of its stock, at least through the end ofthe 2006 season, was financed by cash reserves of the company and the farmerorganization.Overhead costs are consistently higher in the WCA monopoly systems, wherecotton companies are larger, combine a broader scope of functions, and lackincentives to minimize costs. Overhead costs are lower in competitive and concentratedsystems, where companies have more incentives to minimize costsand also to focus on a narrower set of functions.Focusing now on the final indicator of company performance—total adjustedcosts (final line of table 11.2, plus figure 11.2)—companies in concentrated andcompetitive systems show clear evidence of greater efficiency, especially in themore competitive sectors. Burkina Faso, Mali, and Mozambique, all monopolysectors, show the highest adjusted farm gate to FOT costs, with costs in Malibeing especially high. Costs in Tanzania’s competitive sector and Zimbabwe’sincreasingly competitive sector are substantially below all other countries,although the Zimbabwe figure is heavily influenced by the dramatic depreciationin the real exchange rate since the onset of economic crisis in 2001. According tothe high share of roller gins in Uganda, its costs should be at least as low as thosein Tanzania, but instead Uganda’s costs are comparable to those in Zambia(which uses saw gins) and Cameroon. Very low capacity utilization, perpetuatedFigure 11.2 Company Performance Indicator: Adjusted Total Cost, FarmGate to FOT, 2006/070.500.450.400.35US$/kg lint0.300.250.200.150.100.050.00Burkina FasoMaliCame roonMozambiqueZambiaZimbabweTanzaniaUgandaSource: Authors.Note: FOT = free on truck.144 GERGELY