Organization and Performance of Cotton Sectors in Africa ... - infoDev
Organization and Performance of Cotton Sectors in Africa ... - infoDev
Organization and Performance of Cotton Sectors in Africa ... - infoDev
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The report concludes that problems <strong>of</strong> cost <strong>in</strong>efficiency <strong>and</strong> managerial dysfunction<strong>in</strong> national monopolies are serious enough, <strong>and</strong> the politics <strong>of</strong> improv<strong>in</strong>gperformance under such monopolies is complicated enough, that most <strong>of</strong>them need to move toward a different sectoral structure. But this conclusionshould not be applied dogmatically. Cameroon, with relatively good performanceto date, may be able to ma<strong>in</strong>ta<strong>in</strong> its national monopoly to good effect, as long asit reforms its price-sett<strong>in</strong>g process <strong>and</strong> cont<strong>in</strong>ues to promote productivity.If national monopolies do choose to change, the direction <strong>of</strong> change is likelyto be toward local monopolies or concentrated, market-based systems. Thereport concludes that mov<strong>in</strong>g <strong>in</strong> WCA to fully privatized markets allow<strong>in</strong>g competitionamong companies, even if the market is <strong>in</strong>itially very concentrated, isrisky because <strong>of</strong> the possible <strong>in</strong>stability <strong>of</strong> concentrated sectors. If, <strong>in</strong>stead, thesesectors can use the local monopoly approach to develop sound regulatorymechanisms <strong>and</strong> build the operational capacity <strong>of</strong> farmer organizations, concentrated<strong>and</strong> eventually competitive systems could perform well. Dur<strong>in</strong>g thelocal monopoly phase, care must be taken to ensure that private companies playa greater role <strong>in</strong> price sett<strong>in</strong>g <strong>and</strong> other decision mak<strong>in</strong>g than they have so farplayed <strong>in</strong> Burk<strong>in</strong>a Faso; price sett<strong>in</strong>g must also be done <strong>in</strong> a way that providesreasonable assurance to companies that, if they operate efficiently accord<strong>in</strong>g to<strong>in</strong>ternational st<strong>and</strong>ards, they will be able to earn a reasonable return on their<strong>in</strong>vestment. Clear rules for evaluat<strong>in</strong>g <strong>and</strong> retender<strong>in</strong>g concession areas are alsoneeded, as this approach has been a clear failure <strong>in</strong> Mozambique.The key challenge <strong>in</strong> Mozambique’s local monopoly sector is how to create<strong>in</strong>centives for good company performance. In the absence <strong>of</strong> strong farmerassociations, these <strong>in</strong>centives have to come from improved rules govern<strong>in</strong>g tender<strong>in</strong>g<strong>and</strong> retender<strong>in</strong>g <strong>of</strong> concessions, procedures for monitor<strong>in</strong>g performance<strong>of</strong> concessionaires, <strong>and</strong> careful selection <strong>of</strong> companies.The key challenge for concentrated sectors is to develop a regulatoryapproach with three characteristics:■■■Clear <strong>and</strong> transparent licens<strong>in</strong>g rules must be developed to strictly specifythe capabilities <strong>and</strong> conduct <strong>of</strong> firms wish<strong>in</strong>g to participate <strong>in</strong> the sector,<strong>and</strong> to defend the ability <strong>of</strong> firms to coord<strong>in</strong>ate on <strong>in</strong>put supply, extension,<strong>and</strong> quality control.These rules must be strictly enforced, but they must allow enough prospect<strong>of</strong> entry that <strong>in</strong>cumbents have an <strong>in</strong>centive to ma<strong>in</strong>ta<strong>in</strong> attractive seed cottonprices.Given the problems <strong>of</strong> rely<strong>in</strong>g entirely on the threat <strong>of</strong> entry to discipl<strong>in</strong>e<strong>in</strong>cumbent firms, it may also be desirable to develop price-sett<strong>in</strong>g mechanismsthat are more formalized than the price leadership that has prevailed<strong>in</strong> concentrated systems so far.Competitive sectors perform poorly on coord<strong>in</strong>ation for service provision.The book concludes that such coord<strong>in</strong>ation as does occur must come from aEXECUTIVE SUMMARYxxxiii