Plexus Cotton: Decision Time for African Smallholder Agriculture
January 21, 2014 As a supplier of inputs to small holder farmers in Sub Saharan Africa, it is easy to articulate the dilemma facing the developing cotton economies of the region. Over the last 12 months, we have witnessed the potential destruction of one of the area’s strongest bulwarks: the Zimbabwe cotton industry.
Over my lifetime in the cotton business Zimbabwe has been a beacon of light on how a developing domestic cotton industry should be run. Government rules and regulations were strong, the infrastructure was correct and the growth of the crop as a result, was huge. Both the Zimbabwean economy and its small holder producers benefited.
In essence a few licensed ginners supplied the full range of inputs (largely on credit terms) to hundreds of thousands of small holder farmers. In return they received a contract with the farmer at a price that guaranteed a reasonable return for both parties. Such a system works when the ginner is confident of receiving the crop he funded and the farmer is confident of receiving a fair price for that crop.
In the past few years, the discipline that emanated from the government has disappeared. Many new players have been allowed to enter the market without providing inputs. With no associated costs, they are free to buy cotton at premium prices from farmers who benefited from inputs supplied and paid for by the established ginners. It has encouraged broken contracts and defaults on crop development obligations, and it has brought the established ginners to their knees.
Of Two Minds
There are two schools of thought as to this situation. One is that by encouraging many people into the marketplace, competition is increased which raises prices for the farmer, whom everybody is seeking to benefit.
The problem with this is that there is no long-term development of the cotton crop, no research, no seed multiplication and distribution, no chemical and fertilizer provision. There is an incentive to invest as little in crop development as possible.
Under this system, the person with the least long-term commitment buys the most crop and the others go out of business. This is the situation in Tanzania, Zimbabwe and Malawi today.
After a few years under such a system, tired 6th-10th generation seed barely germinates, chemicals and fertilizers are rarely used and yields are appalling. Some African yields are amongst the lowest in the world. So while the farmer might be getting a marginally better price for his cotton because of increased ginner competition, the cotton infrastructure of the whole country is destroyed as it moves into the hands of those targeting the quick buck, not long-term development.
The second school of thought promotes something akin to the concession system in Mozambique. Prices are agreed between government, farmers and input providers in line with international levels.
The concessionaire knows that inputs supplied will be repaid through seed-cotton deliveries so he is not afraid to invest in the crop. He provides agricultural training, gender programmes and farmer business schools. He contributes to government seed development plans and village bore-hole projects because he knows that he will benefit from the long-term economic growth that results. Yields increase, the country prospers and all stakeholders benefit.
Cotton systems vary across Africa. Some have direct government control, some have none; most fall somewhere in between. To me, it stands to reason that governments leave it to stakeholders on the ground but within a framework of regulation that promotes crops, livelihoods and long-term economic growth. This is the ideal model, and this is why I value concession or contract farming systems over the short-term competitive model that is destroying cash crops and infrastructure in some countries.
In 1947, America stopped picking cotton. Today there are 23,000 corporate American farmers. As a company, we provide inputs to 110,000 small-holder farmers in Mozambique alone. Creating economies of scale, increasing yields, extending training and education and encouraging value-addition is essential for African economies to accelerate their development.
Nearly every developing economy over time has begun its expansion with the textile industry. My own country, Great Britain, developed rapidly with the industrial revolution generated by the textile industry in Lancashire. This was echoed by textile revolutions in Hong Kong, Japan and Korea, then China, India and Pakistan.
The time for Africa is now, but it requires political will and discipline to see beyond the short-term and to put in place a vision to benefit all facets of industry and nation. I urge the pursuit of this debate in the forums of the ICAC, the World Bank and the IMF. I am certain that plans developed in conjunction with all segments of the industry will bear much greater fruit than some of the methods being adopted today.
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