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

all aspects of the chain from input supply to lint marketing before liberalization,the orderly privatization of the parastatals led to effective duopolies. In1995/96, the Cotton Company of Zimbabwe Ltd. (COTTCO), the privatized successorto Cotton Monitoring Board (CMB), was joined in the market by Cargill.Cargill established a 25 percent market share in its first two years of operation,a share that has remained stable ever since. In Zambia, the assets of Lintco weresold in two parts to Lonrho and Clark Cotton. These operations were subsequentlysold to Dunavant and Cargill, respectively, and these companies stilldominate the market.In the first few years after liberalization, the concentrated sectors werefound to perform best (Poulton et al. 2004). Zimbabwe completed its transitionto a smallholder-based system, with COTTCO’s credit scheme (based onthe scheme established by CMB in 1992) an important part of the story. Strictattention to quality by COTTCO and Cargill allowed the sector to maintain itsexcellent reputation for quality on international markets. Meanwhile, Zambiaachieved a strong increase in production because of a gradual increase in yieldsamong established farmers and large increases in the number of farmers. Thisproduction increase was temporarily interrupted by side selling of seed cotton,caused by the entry of a number of new firms in 1998 and 1999. However, severalof these firms exited when world lint prices fell. Meanwhile, Dunavant, whichhad bought out Lonrho during this period, introduced a system of independent“distributors” to handle credit and extension provision to farmers, which contributedto a further expansion of production. Clark’s more traditional systemof extension agents was quite effective—the distributors trained by Dunavantfocus primarily on input distribution and credit recovery, and only to a secondarydegree on extension advice. 37 In addition, both companies spearheadedcampaigns against polypropylene contamination, which laid the foundationfor a sizable increase in the price premium that Zambian lint now receives onworld markets.Meanwhile, Tanzania and Uganda struggled to support farmers in a highlycompetitive output market. Efforts by individual companies to provide inputcredit were quickly abandoned because the credit could not be recovered. TheUganda Cotton Ginners and Exporters Association experimented with aninnovative scheme to provide chemicals to producers on a sectorwide basis, butit had to abandon the effort for various reasons. Eventually, in 2003, the sectormoved to a zoning system that severely restricted competition, as a way to giveginneries the security to invest in extension provision and input supply. 38Starting in 1999, Tanzania began experimenting with an input trust fund toprovide farmers with minimal access to chemical input. This fund was subsequentlyreplaced by a passbook (forced saving) system, which was superior ina number of ways. As in Uganda, a sectorwide solution had to be sought to theinput supply challenge because the private incentives do not exist for individualcompanies to provide input in a highly competitive output market. Anadditional challenge in Tanzania was maintaining the quality of seed cotton42 GERGELY AND POULTON