Africa Region Working Paper Series No. 47

Reforming the Cotton Sector
in Sub-Saharan Africa (SSA)

Abstract

Many countries of Sub-Saharan-Africa (SSA) have a strong comparative advantage in cotton production. The share of SSA in world cotton production increased from 3% to 5% during the last decade. During the same period, its share in world exports of cotton lint rose to 15% in 2001/02 and the potential for further growth is substantial, particularly in West and Central Africa. Reforms have been undertaken in several SSA countries to improve the competitive position of the cotton sectors and strengthen private sector involvement. Some of the reforms programs have been successful while some other have encountered difficulties. This study was undertaken to review the progress achieved in six SSA countries at different stages of their reform agenda. The objective was to assess the status and outcome of the reforms in the selected countries and draw lessons that could be used by other countries where cotton sector reforms are being planned, as well as by countries that are engaged in the process of liberalization of their cotton industry and are reflecting on the way forward.

Measuring the impact of the cotton sector reforms on poverty is not easy for three reasons. First, reforms in the three Francophone countries under review are still in progress or at an early stage and the process followed by the three Anglophone countries in liberalizing their cotton sector does not provide a model that the former could readily copy. Second, institutional reforms need to be adapted to the socio-political context of the country concerned. Third, the nature of the reforms and their sequencing have to be designed taking into account the initial conditions of the sector and the outcome may be affected by the quality of management, as much as by the merits of the theoretical models. For these reasons, the study does conclude with the choice of a model. Four other main conclusions emerge from the review. (i) An efficient credit system allowing small farmers to acquire quality inputs in a timely manner is a prerequisite for developing the cotton sector and reducing poverty; for this purpose, a direct link between the payment of seed cotton and the recovery of input credits has to be guaranteed. (ii) Performances can be improved by giving more power to cotton growers in the management of the sector and encouraging a greater participation of the private sector. (iii) Research and extension services cannot be left under the sole responsibility of the public sector. (iv) Seed cotton marketing activities are best performed in a regulated framework agreed upon by the inter-profession.

The economics of world cotton production and trade have been in recent years strongly distorted by the heavy subsidies paid by OECD countries (USA and EU) to their cotton farmers. These subsidies have pernicious economic effects, since they promote production in countries with high production costs at the expense of countries with lower production costs and, in particular, at the expense of African countries. The negative impact of these subsidies in the fight against poverty is quite dramatic. By increasing artificially production and exports and depressing world prices, the subsidies reduce the export earnings of African countries, thus curtailing the revenues of several millions of Africans living under one dollar a day.

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