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

Figure 4.2 African Cotton Sector TypologyNational monopolyCameroonMaliChad*Senegal*(private)Local monopoly(“Concession”)MozambiqueBurkina FasoCôte d’Ivoire*Ghana*Concentrated,market-based Competitive HybridZambiaZimbabweTanzaniaBeninUgandaSource: Authors.Note: Dashed arrows mean planned or still in progress. Solid arrows mean the evolution has beencompleted.* Not included in this study.essentially a continuum, so the dividing line between the two systems is notentirely clear cut.However, as noted above, there are also important differences in the natureof competition within competitive and concentrated systems. This differencecame into sharp focus in Zimbabwe after 2001, where, as new firms enteredthe sector, the clash of competitive cultures arguably caused more problems forestablished firms than the fall in the concentration ratio. During this period,the share of seed cotton purchases accounted for by the top two firms has fallento between 70 and 80 percent, which is at least 10 percentage points less thanbefore 2001 but is still heavily concentrated. However, the conduct of many ofthe new firms has resembled that of firms in the competitive Tanzanian sector(offering few preharvest services and willing to compete on price at harvesttime, thereby encouraging side selling by farmers who have received creditfrom established companies) rather than that of the two established firmswithin the sector. The Zimbabwe experience shows that it is difficult for thetwo competitive cultures (and the visions for the cotton sector that underliethem) to coexist within a single sector.Finally, hybrid systems are a potentially diverse group, emerging either outof attempts to liberalize a national monopoly (Benin) or to solve the problemsunleashed by liberalization in a sector with a competitive structure(Uganda). Thus, Benin has fewer than 10 ginners, each with a purchasingquota but no fixed geographical zone in which to make those purchases. Thesector also has a complex clearinghouse approach to the provision of inputsand purchase of seed cotton. Uganda has about 30 ginning firms that initiallycompeted against each other after reform. From about 2002 through 2007, inresponse to input credit problems created by that competition, each ginneroperated against a purchase quota in a defined geographical zone that itshared with at least one other ginner. In theory, therefore, incentives for48 POULTON AND TSCHIRLEY