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

■■■■■competition increases prices paid to farmers, a direct result of intense competitionamong companies. Despite the recent high prices paid by the WCAmonopoly systems, taking a 20-year perspective, WCA sectors have beenlargely outperformed on price by Tanzania and Uganda. However, as expected,competitively structured sectors perform poorly on input credit provision,extension, and quality. This finding stems directly from the great difficulty incoordinating across more than a few companies, whether this coordination isto prevent side-selling or to agree on discounts to be paid for poor-quality seedcotton.Concentrated and monopoly (national or local) sectors can performwell on prices paid to farmers, but such performance depends on thestrategic priorities of dominant companies (which can vary over time), onthe existence of political interference (if any), and on the voice of cottonfarmers in price negotiations. Since 2000, concentrated sectors (Zambiaand Zimbabwe) have performed relatively poorly on prices to farmers,while national monopolies have paid unsustainably high (yet politicallybacked) prices that have been an important contributor to these sectors’fiscal crises.Concentrated sectors do well on quality management and, to a certainextent, delivery of services to farmers. Concentrated sectors perform beston quality. They also provide input credit and extension advice to largeshares of cotton farmers, although farmer coverage is not as complete as innational and local monopolies.National and local monopolies in WCA have been able to provide inputcredit and extension to a large number of farmers and achieve relativelyhigh yields as well as high and fairly stable credit repayment rates. However,there are reasons to believe that the quality of extension assistance in thesemonopoly systems has probably declined over the past 20 years, while farmyields have been stagnant or declining since the mid-1980s.Research efficacy is not clearly linked to sector type. One hypothesis wasthat a small number of large companies should be better placed to influenceresearch performance than multiple small ginners, but in practice this speculationwas not borne out. The main reason for this unexpected finding isthat governments have been slow to allow private ginners to contribute toresearch management, even where they have been allowed to assumeresponsibility for most other aspects of national cotton production andmarketing; most research programs remain firmly within the public sector.Low valorization of cotton seeds can be observed in monopoly systems.In the case of by-product valorization, WCA sectors (especially Mali andBurkina Faso) receive low prices for cottonseed, an outcome related to thehistory of vertical integration within the sector. Otherwise, major determinantsof prices received include whether a country is landlocked and thestrength of local demand for cake for cattle feed. In any case, by-productvalorization has so far received insufficient attention in the study of cottonxxviiiEXECUTIVE SUMMARY