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

CHAPTER FOURA Typology of AfricanCotton SectorsColin Poulton and David TschirleyFor the purpose of this analysis, five types of African cotton sectors aredelineated, based on the structure of the market for seed cotton purchaseand the regulatory framework in which firms operate. Both ofthese factors influence firm conduct, which influences sector performance. Thetypes are set out in figure 4.1 in a decision tree framework. The first distinctionis between “market-based” and “regulated” sectors. Because all markets functionwithin some type of regulatory framework, regulated in this contextmeans a sector in which competition for the purchase of seed cotton is notallowed. This type of regulation was standard throughout African cotton sectorsbefore the early 1990s, and has continued in most of Western and CentralAfrica (WCA) to the present.Regulated sectors include national monopolies and local monopolies. Inthese systems, cotton ginning company(ies) have an exclusive right—and aimplicit obligation to buy all cotton seed offered by farmers either over thewhole territory of the country (national monopoly) or over a delimited geographicarea (local monopoly). They feature, in general, a single-channelmarketing system for both inputs and outputs. Monopsony would be the righteconomic denomination, but, because there is generally a mirror image amongthe structure of the seed cotton market, lint sales, and input supply, the termmonopoly is, in effect, commonly used as a shorthand. Local monopolies couldalternatively be designated as zonal or subnational monopolies. However, theterm local monopoly will be used throughout the rest of this study.45