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

sectors and is an area where value could be added and redistributed tofarmers through greater opening of the sector and competition.Performance on outcome indicators is less clearly tied to sector type,because many outcomes are a function of more than one process, and a givensector type might perform well on some processes but poorly on others.Returns to farmers are a clear example:■■■Competitively structured sectors pay high prices to farmers but are unableto provide input credit or extension; as a result, they tend to generate lowyields. They also score poorly on lint quality, which limits the price advantagethey can pass to farmers.Concentrated sectors do better on input credit and extension (and thus onyields), and they also do well on quality. But they may pass little if any of thequality premium on to farmers, and they may have a tendency to chargehigher than market rates for the inputs they provide. As a result, returns tofarmers are similar in Zambia’s concentrated system and Tanzania’s competitivelystructured one.Sectors performing best on returns to farmers are those that have benefitedfrom many years of sustained investment in research and extension, andthat, therefore, have been able to raise the productivity of large numbers offarmers; most WCA countries and Zimbabwe in ESA fall into this category.However, in WCA, this performance has declined during the past twodecades, as have the returns for a majority of farmers.During the present decade, national monopolies have performed very wellon one macro indicator (valued added per capita) but very poorly on anotherone (net budgetary contribution per capita). However, the positive performanceon per capita value added in Burkina Faso and Mali has come at a steep cost tothe rest of the economy, especially to the state budget, particularly in recent years.Tanzania’s competitively structured sector performs very well on value addedper capita during some years, but poorly during others, as a result of highly variableproduction. A key insight from the work is that this variable production isa direct result of Tanzania’s sectoral structure. Because farmers do not have theincentive of in-kind input credit to produce cotton, they move in and out of thecrop according to expected price, much as they would with any other cash crop.Company efficiency is one outcome indicator clearly tied to sector structure.Companies in market-based sectors are most efficient, with competitively structuredsectors more efficient than concentrated sectors, but with both greatlyoutperforming companies in local and national monopolies. The combinationof high farmer prices during the past six to seven years plus relatively inefficientcompanies—that is, those with high operating costs—means that the WCAmonopolies are, by a substantial margin, currently the least internationallycompetitive sectors in the study. Free-on-truck cost to value ratios in WCAEXECUTIVE SUMMARYxxix