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

CONCEPTUALIZATION OF THE LINKS BETWEEN COTTONSECTOR ORGANIZATION AND PERFORMANCEThe previous section set out a number of expected strengths and weaknessesassociated with different forms of cotton sector organization. In this section,the key links between cotton sector organization and various dimensions ofperformance are discussed more systematically. The section culminates in discussionof a series of indicators by which cotton sector performance will beassessed within this book. Figure 4.3 presents the conceptual framework thatunderlies much of the subsequent analysis in the book.Given the various links in the chain, one can think of cotton sector performanceat various levels. First, there are the processes and services that are underthe direct control of cotton companies and other stakeholders within the cottonsector. These processes and services include the public goods generation withinthe sector, the services delivered to cotton farmers, the seed cotton pricing decisions,and the mechanisms that companies and other stakeholders put in placefor controlling and enhancing cotton quality. These areas are shown in the rectangularboxes near the top of figure 4.3. Performance at this level focuses primarilyon the quality of services provided to farmers and the prices paid. Theprocess indicators for assessing performance at this level are analyzed in sectionIII of the book.At the company level, the extent and efficiency of these processes and servicesinfluence the overall cost of operations. More extensive preharvest servicesraise company costs, but so too does paying a higher price for seed cotton. Costof operations is also heavily influenced by the efficiency of ginning, which, theorysuggests, is likely to be closely linked to cotton sector organization. Cost ofoperations may be thought of as an intermediate performance indicator, butone that has a major influence over both company profitability and the competitivenessof the sector in final markets.Meanwhile, at the farm level, the public goods generated and the services deliveredby cotton companies are major determinants of seed cotton yields (althoughexogenous factors such as soil fertility also come into play—portrayed with dottedovals in figure 4.3). 41 As with cost of company operations, seed cotton yieldsmay be thought of as an intermediate performance indicator. Along with seed cottonprices, yields are a major determinant of farm-level profitability of cotton production.At this point, an important feedback loop comes into play, whereby highprofits and cash incomes from cotton can facilitate the acquisition of capitalassets, such as draft power and related equipment, that can further enhance thescale and efficiency of cotton production and of the whole farm enterprise.Section IV of this book analyzes performance at both company and farmlevels, focusing on outcome indicators. At the farm level, yields and returns tofarmers are examined. At the company level, the focus is on cost efficiency andthen on overall competitiveness in the lint market, which is a function of thecosts of production and the price that a sector realizes for its lint.54 POULTON AND TSCHIRLEY