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

210 NOTES79. In Zimbabwe and Zambia, a number of new roller gins are being installed. However,the majority of ginning capacity in these countries is still made up of saw gins.80. This figure reflects uneconomic pricing (based on official exchange rates) by astate-owned enterprise within a highly distorted economy.81. This claim is based on the higher level of research in WCA countries than inMozambique and the history of substantial investment by WCA cotton companiesin both infrastructure and research. Mozambican companies did have substantialroad maintenance costs during the first several years of the privatization phase.82. One study did look at cross-country experience in WCA (Benin, Burkina Faso, andCôte d’Ivoire; also Ghana) and ESA (Zimbabwe and, with less detail, Tanzania) andexplicitly considered the pros and cons of different institutional structures (Goreuxand Macrae 2002). The report spotlighted some findings similar to those in thispresent book (for example, the collapse of input supply and quality control in Tanzania).Compared with that study, the present work is more comprehensive, hassubstantially more coverage of ESA, and has the benefit of an additional five yearsof postreform experience in the study countries.83. By “path dependency,” we mean that current structure is heavily influenced by paststructure—the past structural path that the country has traveled.84. Unfortunately, this calculation could be performed only for one year, which happenedto be a bumper harvest year in Tanzania. It would be useful to extend thesecalculations to additional years, as has been done, for example, for seed cotton pricingand quality premiums.85. As shown in chapter 7, in Zambia the efforts of the two dominant ginning companiesresulted in an increase in the premium for the top type of Zambian lint relativeto the Cotlook A Index by US$0.05 per lb over a period of five years. The twocompanies used different approaches, but with equal success in largely eliminatingcontamination: Dunavant relies primarily on the manual removal of contaminationat the gin, while Cargill has succeeded in changing farmer behavior to avoidcontamination. In both cases, the limited alternative outlets through which farmerscan sell their seed cotton means that they have to respond to the quality initiativesof the dominant companies.86. As noted in this chapter, the competitive structure of the cotton sector in Tanzaniamay prevent it from ever achieving a high-quality reputation. Instead, its combinationof competitive structure and abundant area for production expansion makesit better placed to compete primarily on the basis of cost. Nevertheless, even as alow-cost producer Tanzania has to take urgent action to reduce the contaminationof its lint. Its challenge is to find institutional arrangements appropriate to a competitivesector that can enhance the quality incentives facing both producers andginners. A proposed village auction system for the purchase of seed cotton may beone such arrangement (Poulton and Maro 2007).87. COTTCO markets some of its lint directly to spinners, bypassing internationalmerchants altogether. However, its lint marketing activities have been badly hit byboth the national economic crisis (leading to cash shortages) and the changes insector structure, which make it less able to predict what quantities of lint of a particularquality it is going to be able to produce. Hence, there has been a shift awayfrom forward and cost, insurance, and freight sales toward spot market sales on afree-on-board or free-on-truck basis.88. According to figure 10.1, there has been little improvement across ESA as a wholesince liberalization, although individual countries, such as Zambia, have postednoteworthy improvements.