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

More-competitive systems are perhaps the long-term future. However, thereis a need for stronger farmer associations to take over some critical functions(for example, extension) and for improvements in rural input and financialmarkets before competitive systems can support genuinely high-performingcotton sectors in most countries. For the foreseeable future, competitive systemswill have a hard time increasing productivity and quality to such anextent that they make a major contribution to reducing poverty. Therefore,stakeholders, policy makers, and donors cannot avoid dealing with the detailsof institutional design to cope with input and credit market failures. Thisdesign needs to be tailored to the current market structure and historical patternsof the country in question.Overall, one may expect some degree of convergence in the forms of cottonsector organization seen in SSA over the next decade, with emphasis on adegree of private sector competition, an important role for farmer associations,and a multistakeholder approach to sector regulation. This convergenceshould be accompanied by policies and programs aiming, across sector types,at (a) improving the quality and marketing of cotton lint, (b) reforming andimproving research and research-extension linkages to close the productivitygap, and (c) strengthening institutional capacity at all levels. Effective strategiesfor African cotton sectors should, therefore, combine the necessary institutionalreforms—given that this book has demonstrated a generally positiveresponse to reforms so far—with a set of other coordinated actions (withdonor support) to “raise the game” on some critical issues that are to be handledat national and regional levels, such as technology, soil conservation, ortechnical support to farmers and farmer organizations.National and Local MonopoliesAs suggested in the typology, change in national monopolies depends on policychoice. Cameroon, with relatively good performance to date, is an example of acountry that may be able to maintain its national monopoly to good effect, aslong as it reforms its price-setting process. The creeping inefficiencies identifiedin this book, however, seem likely to force change even in Cameroon at somepoint. History and accumulated experience in WCA (path dependency) suggestthat initial change in the region will predominantly be toward local monopolies,and recent policy decisions in Burkina Faso and Mali support this conclusion. Inthe context of a possible continued high dollar–euro exchange rate, the biggestchallenges in these sectors include (a) improving cost effectiveness of the cottoncompanies, tackling stagnant productivity at farm level, (b) raising quality, (c)developing pricing formulas that make price setting more connected andresponsive to world market prices, and (d) identifying ways for cotton companiesto improve management of the intraseasonal price risk that they incurbecause of the panterritorial, panseasonal, price-setting mechanism. What, then,must these countries do to tackle such problems in a local monopoly setting?CONCLUSIONS 175