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

Box 4.2 Factors in Addition to Structure That InfluenceBehavior and PerformanceThe sectoral typology developed in this book focuses heavily on the structureof the market for seed cotton. This structure is seen as a key determinant (a)of the types of challenges that a sector will have most difficulty meeting andthus (b) of the types of regulatory structures that are needed to safeguardgood performance and to improve poor performance. For example, thetypology suggests that highly competitive sectors will be unable to provideinput credit and extension or to safeguard quality, but they will be likely topay attractive prices. Concentrated sectors are predicted to perform well oninput credit, extension, and quality but to pay less attractive prices. ComparingUganda with Tanzania and Zimbabwe with Zambia highlights the usefulnessof the typology while making plain that structure is not the only factorthat influences behavior and performance. In each case, the structure thatemerged out of reform—highly competitive in Uganda and Tanzania, veryconcentrated in Zambia and Zimbabwe—did determine which challenges(input credit, extension, productivity growth, seed cotton pricing, lint quality,ginning efficiency) countries had most difficulty in meeting. Yet in eachcase, variations in history, management, or geography have led to importantdifferences in behavior and performance.These differences are most stark in Uganda and Tanzania, despite remarkablysimilar structures and histories before and immediately after reform. Inboth countries, the prereform cooperative-based systems led quickly afterreform to markets with 20 to 30 buyers competing intensively on price forfarmer production. Farm prices improved, but input supply and extensioncollapsed. Initial efforts to solve the problem in both countries involved movinginput supply to the public sector to allow competition among companiesin the output market. In both cases these initial efforts ultimately failedbecause of management and design problems.Since the failure of these initial attempts, the two countries have moved indramatically different directions (chapter 6). Uganda reversed its previouscourse, using a zonal quota system to eliminate competition in the outputmarket in an effort to facilitate coordination by ginners on input supply andextension. Tanzania meanwhile maintained its competitive output market,but used an innovative approach, the so-called passbook system, thatrequired close cooperation between public and private sectors to provide seedand some minimal level of insecticides to farmers.Several factors help explain why Tanzania and Uganda have chosen suchdifferent paths. First, the geographical scope for expanding cotton productionunder a low-input approach is greater in Tanzania than in Uganda, at least aslong as the far north of Uganda remains insecure. For now, ginners in Ugandamust try to increase production in relatively small areas already under production.If this line of reasoning is correct, once the northern region becomessecure, incentives for ginners to operate the quota system may decrease. a(continued)A TYPOLOGY OF AFRICAN COTTON SECTORS 59