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

efficiency and costs of coordination in hybrid systems depend on the detailsof institutional design, and no firm expectations can be formed. In practice,with regard to firm conduct, we expect that Uganda and Benin both nowresemble a local monopoly system.DYNAMIC CONSIDERATIONSAs illustrated, sectors may at times move from one type to another. Becausecompetitive systems have difficulty providing input credit to farmers, andbecause some level of external input use is typically required for a sector to becompetitive in the world market, there may be pressure for competitive systemsto move toward more coordinated systems. However, because cotton ginningdoes not have large economies of scale (especially where roller gins areused), a move from a well-established competitive structure toward a marketbased,concentrated system is unlikely. Therefore, if competitive systems change,it is likely to be toward one of the regulated types. Because it is impractical toimpose a national monopoly on a system with many private firms, this movementis more likely to be to a local monopoly or hybrid system.In the study’s sample of countries, Tanzania and Uganda both have competitivestructures that undermined input credit after reform. Yet they have followedvery different paths in dealing with this challenge. Tanzania has maintained itscommitment to a competitive system while experimenting with innovativeapproaches to partially address the input credit problem. Uganda moved to ahybrid system that keeps all ginners operating but that attempts to eliminate alldirect competition among them for seed cotton, while investing heavily in trainingof farmers. Box 4.1 suggests possible explanations for these radically differentchoices in two countries with very similar prereform histories and nearlyidentical postreform competitive structures.Management theory suggests that national monopolies are likely to showgrowing inefficiency over time. 39 This inefficiency can eventually undermineperformance on input credit, extension, and cost competitiveness of the enterprise.If these systems change, the direction of change depends on policychoice. In principle, a single-channel system can move quickly to a competitivesystem if free entry is allowed and if competition is not regulated. In practice,the cultural norms that resulted in the single-channel system will often(though not always) lead to a more deliberate reform, either toward a localmonopoly system (Burkina Faso and Mali) or to a concentrated, market-basedsystem (Zambia and Zimbabwe).Figure 4.2 maps the study sectors (and a few additional examples) ontothe typology, along with indicating of how sectoral structures have changed,if at all, since the onset of sector reform on the continent in 1994. Solid linesdepict definitive changes, while dashed lines suggest changes that may beunder way.A TYPOLOGY OF AFRICAN COTTON SECTORS 49