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The many paths of cotton sector reform in Eastern and Southern Africa
November 2006
David Tschirley, Colin Poulton and Duncan Boughton
MSU Department of Agricultural Economics

Acknowledgements: FANRPAN acknowledges the DEC website as the source of this report: www.dec.org


Key Policy Messages

  • While African cotton sectors face common technical challenges, the structure of the market for seed cotton strongly influences which of these challenges are most difficult to meet and which types of institutions need to emerge if the system is to be sustainable.
  • Institutional innovation is the key to improving performance in cash crop sectors; large injections of public capital are not needed.
  • Direct state management of funds from industry levies is problematical. Vesting regulatory and coordination functions within multi-stakeholder bodies – where government is one actor among many -- may be the most promising approach for many sectors.
  • Regular “deliberative fora” are invaluable for building trust between stakeholders and seeking innovative solutions to tackling sector-wide problems.
Background

Cotton is a rare economic success story in Sub-Saharan Africa (SSA), generating cash incomes for millions of smallholder households and allowing the continent to capture a rising share of world trade in the crop. Characteristics of the crop, especially its need for purchased inputs and the typical inability of smallholders to access these on a cash basis, have fueled concern that the economic reforms sweeping the continent since the early 1990s, by under-cutting the basis for effective “interlocking” of transactions and also complicating collective decisions on longterm investment, may derail this remarkable success story. At the same time, technology has driven sharp declines in real prices since the late 1990s, putting pressure on inefficient systems; the massive subsidies provided to cotton farmers in developed economies have added to the difficulties for African producers.

Objectives

With cotton sector reform in much of SSA at least a decade old, it is now possible to begin learning from experience.

This brief summarizes a larger assessment of the record of five countries in southern and eastern Africa: Tanzania, Uganda, Zimbabwe, Zambia, and Mozambique1. The focus is on the course of reform in each and on lessons for policy makers, donors, and researchers.

Approach

Our conceptual approach suggests a trade-off between competition and coordination in cotton systems. More precisely, it suggests that the structure of the market for seed cotton may strongly influence which challenges are most difficult to meet and which types of institutions need to emerge if the system is to be sustainable.

Footnotes:
  1. The full report is downloadable at http://www.aec.msu.edu/agecon/fs2/papers/idwp88.pdf

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