ITC Efforts Help African Cotton in the Marketplace

African countries have traditionally focused on production rather than the market. Market linkages toward Europe were secured by Western (often French) mother companies and, increasingly since 2005, toward Asia by international cotton merchants. A market-oriented culture did not develop as market-related aspects were handled outside of Africa. This is a strategic disadvantage.

The International Trade Center (ITC) helps the African cotton industry: 
• capitalize on training and marketing activities.
• rectify the unfavorable image of African cotton.
• address contamination issues. The African Cotton Association (ACA) has developed a regional fiber-quality standard that will help overcome Africa’s reputation for contaminated cotton. ITC is helping ACA create understanding among its members, provide the market perspective, and engage interested spinning mills from major Asian consuming countries. With reduced contamination levels, future price premiums are possible but the cotton must be clean every time.
• work more closely with interested spinning mills in the market. While most Asian spinners buy on price and quality, an increasing number are interested in developing closer relationships with cotton companies and ginners in Africa to secure long-term supply.
• engage local banks. As a result of the financial and economic crisis, as well as the sudden price hikes in the cotton sector in March 2008, banks have been more cautious about lending. Moreover, traders receive less trade finance from their banks and are not willing to buy forward anymore, posing big problems for African cotton farmers and ginners. ITC has been working with Tanzania’s CRDB Bank to help ginners and farmers understand and locate foreign markets. As a result, Tanzanian ginners were able to achieve their first-ever direct sales to Bangladesh and Thailand.
• develop closer cooperation and more equitable relationships with international merchants.
• provide joint use of bonded warehouse facilities in destination countries (ports). In Southern Africa, four countries–Mozambique, Zambia, Zimbabwe and Malawi–are cooperating along the entire value chain, from seed development to research to joint marketing and promotion of their cotton.
• increase quota-free and duty-free access for African cotton in India and possibly China.
• increase transparency in farm inputs and seed cotton price determinants to create trust among cotton stakeholders. In Zambia, ITC built this transparency among cotton farmers who, as a consequence, were able to negotiate better seed cotton prices from international ginning companies inside the country.

However, improved cotton marketing and promotion is not a panacea. Overall, production needs to be stabilized, yields increased, contamination reduced, and premiums for clean cotton captured. In order to achieve this, and to improve African competitiveness, a more strategic orientation needs to be adopted and farmers and ginning companies need to be empowered.