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

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etween these competing needs, providing sufficient benefits to all stakeholdersso that the system is able to maintain itself and grow.This hypothesized trade-off is at the center of the organizing feature of thisbook: a typology of cotton sectors in SSA based on the structure of the market forthe purchase of seed cotton and of the regulatory framework in which farms andfirms operate. Market structure can be defined by the nature of players andentities in the sector, together with the distribution of roles and power betweenthem. The regulatory framework is the set of rules, regulations, and other legalinstruments that are imposed on participants in the sector to enable it to operateand limit conflicts. These two pillars of the framework (market structureand regulatory framework) are based on the observation that structure has afundamental influence on the balance that a country is able to strike betweencompetition and coordination, and that regulatory frameworks can modify thecompetition–coordination trade-off but must deal with structure as it exists.Together with basic characteristics common to nearly all SSA economies (suchas the predominance of undercapitalized smallholder farmers, widespread failureof input and credit markets, and weak legal systems), these two factorsestablish the opportunities and constraints that cotton sector stakeholdersoperate within.Figure 1 below shows the five sector types identified in the typology, alongwith each country’s current location and its evolution over the recent past.Solid arrows depict changes that have taken place in sector organization sincethe mid-1990s; dashed arrows suggest changes that may be under way. Thelines showing recent changes in sector organization illustrate the point thatreform is not a one-off event and that most sectors are still seeking an optimalstructure to cope with the challenges of remaining internationally competitive.National monopolies are now found only in WCA and, with the exception ofSenegal, are owned and operated by public or mixed companies. Local monopolieshave more than one firm, but they establish geographical areas withinFigure 0.1 Location of Cotton Sectors within African CottonSector TypologyNational monopolyCameroonMaliChad*Senegal*(private)Local monopoly(“concession”)MozambiqueBurkina FasoCôte d’Ivoire*Ghana*Concentrated,market-based Competitive HybridZambiaZimbabweTanzaniaBeninUgandaNote: * Not included in this studyxxviEXECUTIVE SUMMARY
which each has an exclusive right to purchase all cotton (and, typically, a responsibilityto promote it). Ginning companies compete directly with each other inconcentrated and competitive sectors. The basic difference between these systemslies in the number of ginning firms. Thus, Zambia and Zimbabwe wereboth, until fairly recently, effectively duopsonies in which the top two firmsaccounted for 90 percent or more of seed cotton purchases. By contrast, in Tanzaniathere are about 30 ginners, the top 5 of which have only about a 40 percentmarket share (and these top 5 typically change from year to year).This difference in market concentration is also associated with an importantdifference in the nature of competition across the two sector types. In concentratedsectors, firms compete (on reputation) for the right to transact with producersthrough the coming season. By contrast, in competitive sectors there are fewincentives for preharvest service provision. Instead, they compete for seed cottonon the basis of price at harvest time. Finally, hybrid systems are a potentiallydiverse group, emerging either out of attempts to liberalize a nationalmonopoly (Benin) or to solve the problems unleashed by liberalization in asector with a competitive structure (Uganda).Performance across the different sectors and sector-types was assessedthrough a range of efficiency, effectiveness, and distributional indicators, someat the micro (that is, farm or enterprise) level and others at more sectoral ormacro levels. Some of these indicators are readily quantifiable, while others arebased on qualitative “order of magnitude” judgments. They include processindicators (prices paid to farmers, services delivered to them, quality management,technology creation and dissemination, valorization of by-products),and outcome indicators for stakeholders (revenue and profitability at farmlevel, economic efficiency, value added, macro impacts), as well as an assessmentof the logical links between these. The conceptual framework generatesclear expectations about how different sector types would perform on many,though not all, of these indicators. It also recognizes that structural factors maynot fully determine outcomes, as other factors will also influence competitiveness,incentives, and the acceptability and impacts of reform measures.EMPIRICAL RESULTS: STRONG LINKS BETWEEN SECTORSTRUCTURE AND PERFORMANCEIn large measure, the analysis showed that sector structure has a major and predictableinfluence on performance.This is particularly the case when looking at how a sector performs onprocess indicators.■Competitive, market-based systems deliver relatively high prices to farmers,but are weak on input credit provision, extension, and quality. Evidenceis strong in Tanzania and Uganda that, within market-based systems,EXECUTIVE SUMMARYxxvii
Page 1: AGRICULTURE AND RURAL DEVELOPMENTOr
Page 4 and 5: AGRICULTURE AND RURAL DEVELOPMENTSe
Page 6 and 7: © 2009 The International Bank for
Page 8 and 9: Section II. Historical Background a
Page 11 and 12: BOXES, FIGURES, AND TABLESBoxes2.1
Page 13: 5.2 Summary of Pricing Mechanisms i
Page 16 and 17: eference are limited to neighboring
Page 19 and 20: ACKNOWLEDGMENTSThis study was carri
Page 21 and 22: ABBREVIATIONS¢ U.S. centACPAgricul
Page 23: US$U shWAEMUWCAWTOU.S. dollarUganda
Page 26 and 27: output markets, improving productiv
Page 30 and 31: ■■■■■competition increase
Page 32 and 33: monopolies range from 0.98 to 1.15,
Page 34 and 35: macroeconomics, developments in com
Page 36 and 37: central body and that the state nee
Page 39 and 40: CHAPTER ONEIntroductionDavid Tschir
Page 41 and 42: The debate about how to deal with t
Page 43 and 44: Figure 1.1 Map of Africa Highlighti
Page 45: hypotheses about sector performance
Page 48 and 49: to reach 25 million tons of lint in
Page 50 and 51: cotton production was introduced in
Page 52 and 53: Figure 2.2 Nominal Cotton Prices (U
Page 54 and 55: Box 2.1 (Continued)Togo, 39 percent
Page 56 and 57: Box 2.2 Cotton SubsidiesCotton subs
Page 58 and 59: efers specifically to the presence
Page 60 and 61: picking, storage, handling, or tran
Page 62 and 63: national monopoly (state-owned or p
Page 65: SECTION TWOHistorical Background an
Page 68 and 69: shares belonging to governments, an
Page 70 and 71: Changes Made Since the End of the 1
Page 72 and 73: long-term development strategies, (
Page 74 and 75: possible link between price-setting
Page 76 and 77: production fell further, to lows of
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all aspects of the chain from input
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suggestions (a) of establishing fas
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Figure 4.1 Decision Tree for Cotton
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Figure 4.2 African Cotton Sector Ty
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Box 4.1 Is This Typology Specific t
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52Table 4.1 Trading Off: Strengths
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CONCEPTUALIZATION OF THE LINKS BETW
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chosen in this book and the impact
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Table 4.3 Expected Performance alon
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Box 4.2 (Continued)Second, farmers
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SECTION THREEComparative Analysis:C
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PRICING MECHANISMS IN WCAPricing me
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efore planting, price risk in the s
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Table 5.3 Summary of Producer Share
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Finally, FOT price shares in WCA ro
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MALI AND CAMEROON: GOVERNMENT MONOP
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Significant in Mozambique, the comp
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Zimbabwe transitioned during the 19
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Box 6.1 (Continued)A move from a co
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82Table 6.1 Summary of Input Supply
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84Table 6.1 (Continued)IndicatorsCo
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CHAPTER SEVENQuality ControlGérald
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Tanzania Competitive 1 2 Very lax n
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Figure 7.1 Estimated Premium for To
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all fiber coming from Africa—are
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Box 7.1 (Continued)newly liberalize
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CHAPTER EIGHTValorization of SeedCo
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competitive market in some of the o
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a few years, it indicates that some
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should eventually make a difference
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CHAPTER NINECotton ResearchDuncan B
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With regard to human and financial
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■■■Be involved in setting res
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made royalty payments to CRI. When
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and to identify complementary inves
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CHAPTER TENYields and Returns toFar
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fact that 55 percent of cotton is p
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Yields by Farmer TypeTo assess perf
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Factors beyond company services als
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Table 10.1 Summary Crop Budgets by
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According to the focus group inform
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Figure 10.6 Net Margins after All C
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All other variables in the budgets
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Table 10.2Summary of Average Yield
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■■■■impression is given tha
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were based on a 2005 cotton farmer
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more recent data are not available
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Figure 11.1 Estimated Average Ginni
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to buy seed cotton immediately afte
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146Table 11.3 Overall Competitivene
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148Table 11.4 Total Value Added per
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Figure 11.3 Total Value Added per c
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CHAPTER TWELVEConclusionsPatrick La
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Table 12.1 Summary of Expected and
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Valorization ofby-productsValue of
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Macro impact■ Total value addedpe
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across concession zones, with newer
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high yields. However, a mixed pictu
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governance and regulatory structure
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against price and exchange rate ris
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Improvements in the Delivery of Ext
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esistant, “stacked” genes), and
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Just as improved sector management
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More-competitive systems are perhap
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■■■■Interprofessional commi
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were to occur, it would most likely
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APPENDIX AStatistical Tables181
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1989/90 43 111 383 40.7 95 0.491990
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1989/90 62 150 416 41.0 95 0.671990
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1989/90 43 89 482 41.3 95 0.651990/
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1989/90 99 189 521 42.8 85 0.541990
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1997/98 31 327 95 33 to 35 2,950 83
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1994/95 82 344 238 33 207.0 40.0119
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Table A8 ZambiaSeasonLint productio
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Table A9 ZimbabweSeasonLint product
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Table A10 Ginning and FOB-to-CIF Co
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1997/98 1.64 598 210 75 49 74 7.619
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1987/88 17,609 31,238 564 414 911 4
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206 NOTES11. Important cotton secto
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208 NOTES47. Benin is not included
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210 NOTES79. In Zimbabwe and Zambia
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BIBLIOGRAPHYBadiane, Ousmane, Dhane
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and Instability, ed. A. Sarris and
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World Bank. 2007. Strategies for Co
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CFA exchange rate, 17-18b, 19fcompa
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input credit and extension in, 77-8
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firm types, 211n93fixed prices, for
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productivity, 119, 121f, 205n8,209n
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key indicators, 56-58, 57-58t,155-5
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focus group discussions by farmerty
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technology transfer, 170-71by typol
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ECO-AUDITEnvironmental Benefits Sta
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