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

Performance on Global Outcomes: The Outcome IndicatorsThe typology generated clear expectations about one intermediate outcome:that company efficiency would be worst in monopolies and best in competitivesectors. This expectation was strongly confirmed. Adjusted farm gate to FOTcosts in Tanzania’s competitive sector (the best performer) are less than halfthose in Mali’s national monopoly (the worst performer). In all national andlocal monopolies, costs are near or above the highest costs in market-based systems;within these market-based systems, concentrated sectors show highercosts than competitive sectors (such as Tanzania).The combination of high farmer prices since the beginning of the centuryand relatively inefficient companies—that is, companies with high operatingcosts—means that the WCA monopolies are, by a substantial margin, currentlythe least internationally competitive sectors in the study. FOT cost to valueratios in WCA range from 0.98 to 1.15, compared with a range of 0.76 to 0.88in all other countries except Uganda. In Uganda, the hybrid regulatory systemhas kept a large number of ginners in the sector without increasing production,leading to a cost to value ratio of 0.93, the worst in East and SouthernAfrica (ESA). Other ESA sectors perform well on this measure, but for differentreasons. Efficient ginning operations are an important part of the story inTanzania’s competitive sector and Zimbabwe’s concentrated sector. The lintquality premiums obtained in Zambia and, to a lesser extent, in Zimbabweboost their performance. However, in both countries and also in Mozambique,the competitive ratios have been achieved in part because of the low prices theypay their farmers. In Mozambique (which scores 0.79 by this measure), theseed cotton price has been 20 percent to 30 percent lower than the prices in allother ESA countries. In Zambia (the most “internationally competitive” sectorin the study, at 0.76), the seed cotton price is substantially higher than it is inMozambique and not far below the price in Tanzania in absolute terms, but theprice reflects little of the substantial quality premium that Zambian companiesreceive on the international market.Returns to farmers have been the best in WCA monopolies, plus Zimbabwe. InWCA, these high returns are, of course, heavily influenced by the high prices paidin recent years, which have been coming down and must come down further ifthese sectors are to become more competitive and sustainable. However, the mainreason for the high returns to farmers in WCA is that, by facilitating access to animaltraction, fertilizer, and training over many years, these countries have beenable to move large shares of farmers into high yielding groups: an average of morethan 70 percent of WCA farmers are medium-high yield performers (see chapter10), compared with a range of 20 percent to 30 percent in all other countriesexcept Zimbabwe. Mozambique, a poorly regulated local monopoly, shows thelowest returns, driven by relatively poor yields and very low farm prices.The picture regarding value added is complex. At farm level, the monopolysystems of WCA perform best on value added per hectare as a result of their162 LABASTE, POULTON, AND TSCHIRLEY