51715 The Cotton Sector Of Cameroon Africa Region Working Paper Series No. 126 March, 2009 Abstract T his country study is a background paper prepared for the comparative analysis of organization and performance of cotton sectors in Sub-Saharan Africa, a study carried out by the World Bank, with the objective of analyzing to other West and Central African cotton sectors, in terms of cost efficiency, financial management, lint quality and technical performance in general. This success can be partly explained by the strong managerial capacities of the cotton company, the the links between sector structure and observed good co-operation between the cotton company performance outcomes and thus draw lessons from and the farmer organization, and the ability of the reform experience that can provide useful guidance cotton company to avoid political interference, to policy-makers, other local stakeholders, and thanks to the distance of the cotton area from the interested donors agencies.. It describes and capital city, and finally the fact that it integrates reviews the cotton sector situation in Cameroon, a cotton seed processing activities. As for other country where no major structural reform was cotton sectors in the CFA zone, the future of the undertaken during the last decade in the sector; it is sector is however endangered by the declining still dominated by a vertically integrated parastatal trend of cotton prices in local currency, which calls cotton company, Sodecoton, who has a for more cost effective soil management techniques monopoly/monopsony position for input supply than massive fertilizer usage. The privatization of and marketing of seed cotton. the cotton company, currently considered by Government, will have to be carefully managed, in Despite the fact that the cotton sector suffers from order to preserve the efficient support to rural several geographic and climatic challenges, as well development that it has been providing in the as an overpopulated and overworked growing area, cotton growing areas. the sector has performed relatively well, compared Author Affiliation and Sponsorship Nicolas Gergely, Consultant Nicolas.gergely@glg.fr The Africa Region Working Paper Series expedites dissemination of applied research and policy studies with potential for improving economic performance and social conditions in Sub-Saharan Africa. The Series publishes papers at preliminary stages to stimulate timely discussion within the Region and among client countries, donors, and the policy research community. The editorial board for the Series consists of representatives from professional families appointed by the Region's Sector Directors. For additional information, please contact Paula White, managing editor of the series, (81131), Email: pwhite2@worldbank.org or visit the Web site: http://www.worldbank.org/afr/wps/index.htm. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s), they do not necessarily represent the views of the World Bank Group, its Executive Directors, or the countries they represent and should not be attributed to them. COMPARATIVE ANALYSIS OF ORGANIZATION AND PERFORMANCE OF AFRICAN COTTON SECTORS THE COTTON SECTOR OF CAMEROON Paper prepared for the World Bank by Nicolas Gergely March 2009 Contents 1 INTRODUCTION ........................................................................................................................ 1 2 HISTORICAL BACKGROUND AND REFORM PROCESS ................................................. 1 2.1. HISTORICAL BACKGROUND OF THE COTTON SECTOR ............................................................. 1 2.2. PRE-REFORM INSTITUTIONAL SET-UP ...................................................................................... 2 2.3. PAST INSTITUTIONAL AND ORGANIZATIONAL CHANGES......................................................... 2 2.4. STRUCTURAL REFORMS: FAILED ATTEMPTS, RATIONALE, AND AGENDA ............................. 3 3 OVERVIEW OF THE COTTON SECTOR .............................................................................. 4 3.1. KEY MACRO-ECONOMIC FACTORS INFLUENCING THE SECTOR ............................................... 4 3.2. PRODUCTION AND YIELDS TRENDS ......................................................................................... 5 3.2.1 The cotton belt .................................................................................................... 5 3.2.2 Production and area trends ................................................................................ 5 3.2.3 Number and size of cotton farms ........................................................................ 7 3.2.4 Yield trend, yield distribution and explanatory factors ...................................... 9 3.2.5 Proportion of farms growing cotton ................................................................. 11 3.3. THE GINNING INDUSTRY ........................................................................................................ 11 3.4. THE DOMESTIC SPINNING INDUSTRY ..................................................................................... 12 3.5. THE OIL PROCESSING INDUSTRY............................................................................................ 12 4 CURRENT INSTITUTIONAL ARRANGEMENTS AND PERFORMANCES .................. 12 4.1. PRODUCERS ORGANIZATION AND OVERALL SECTOR MANAGEMENT .................................... 12 4.2. PRICING OF SEED COTTON ..................................................................................................... 13 4.3. RESEARCH AND EXTENSION .................................................................................................. 15 4.4. INPUT AND CREDIT PROVISION .............................................................................................. 16 4.5. LINT MARKETING AND QUALITY PERFORMANCES ................................................................ 17 5 COST, RETURNS TO PRODUCERS AND SUSTAINABILITY ......................................... 18 5.1. GINNING OUTTURN RATIO ..................................................................................................... 18 5.2. SODECOTON'S PERFORMANCE ........................................................................................... 19 5.2.1 Processing and marketing costs for cotton ...................................................... 19 5.2.2 Processing cost and margins for oils and cakes .............................................. 20 5.2.3 Financial results of SODECOTON and the cotton sector ............................... 21 5.2.4 Contribution of SODECOTON to the national budget .................................... 22 5.3. COST COMPETITIVENESS AT FARM LEVEL ............................................................................. 22 5.3.1 Input consumption and agricultural practices ................................................. 22 5.3.2 Input prices ....................................................................................................... 23 5.3.3 Production cost per farm type .......................................................................... 23 5.4. RETURN TO FARMERS AND IMPACT ON POVERTY.................................................................. 25 5.4.1 Return per day of work ..................................................................................... 25 5.4.2 Margin after payment of inputs ........................................................................ 25 5.4.3 Importance of cotton in the farming system and income comparison between cotton and non-cotton farms......................................................................................... 25 5.4.4 Impact of cotton on poverty .............................................................................. 26 5.4.5 Spillover effect of cotton on other crops .......................................................... 27 5.5. SECTOR SUSTAINABILITY ...................................................................................................... 27 6 LESSONS LEARNED ................................................................................................................ 27 i List of Tables Table 1: Cotton Production Area and Yields, 1994-2007 ...................................................................... 7 Table 2: Characteristics of cotton farms according to M/E surveys ....................................................... 8 Table 3: Socio-economic characteristics of farm types (based on 2002/03 SODECOTON survey) ..... 8 Table 4: Yield differentiation per type of farms (2002/03 survey) ...................................................... 11 Table 5: Yields and size of farms ......................................................................................................... 11 Table 6: Comparing characteristics of cotton and non-cotton farms (2002/03 M/E survey) ............... 11 Table 7: Evolution of producer prices and share of Cotlook index ...................................................... 14 Table 8: Evolution of Labor Productivity............................................................................................. 19 Table 9: Evolution of intermediary costs ............................................................................................. 19 Table 10: Net result on cotton activities (FCFA/kg of lint cotton)........................................................ 19 Table 11: Detailed analysis of the intermediary cost (2004/05) and comparison with standard ........... 20 Table 12: Breakeven value of seeds ...................................................................................................... 21 Table 13: Price of inputs........................................................................................................................ 23 Table 14: Estimated production cost depending on farming practices and type of farms (in 2006/07) 24 Table 15 above shows that at the price of seed cotton paid in 2006/07 (175 FCFA/kg), the return per day of work is, in all cases, above the average agricultural wage. .............................................. 25 List of Figures Figure 1: Evolution of world prices in USD and FCFA ......................................................................... 4 Figure 2: Nominal and real exchange rate in Cameroon ........................................................................ 4 Figure 3: Evolution of production and areas .......................................................................................... 6 Figure 4: Producer price and areas cultivated with cotton ..................................................................... 6 Figure 5: Evolution of areas cultivated with cotton per grower ............................................................. 7 Figure 6: Evolution of areas, production and yields ............................................................................... 9 Figure 7: Evolution of fertilizer applications and yields ...................................................................... 10 Figure 8: Comparison of yields in Northern and Southern Cameroon ................................................. 10 Figure 9: Evolution of producer prices and share of Cotlook Index .................................................... 14 Figure 10: Evolution of the ginning ratio .............................................................................................. 18 Figure 12: Evolution of the gross margin after payment of inputs ........................................................ 25 ii Acknowledgements T his paper is a background paper, based on a field visit done in October, 2006. It was prepared in the context of the comparative analysis of cotton sector reform in Sub- Saharan Africa, a study carried out by a World Bank team led by Patrick Labaste (Lead Agricultural Economist, SD Department, Africa Region, World Bank) and including David Tschirley (MSU), Colin Poulton (SOAS, University of London), Nicolas Gergely (consultant), John Baffes (DEC, World Bank), Duncan Boughton (MSU), and Gérald Estur (marketing and quality consultant). The study was funded by the World Bank and by contributions from bilateral trust funds particularly from Belgium (BPRP), the Netherlands (BNPP/CRMG), and the Swiss Secretariat for Economic Affairs (CRMG), as well as by the All-ACP Agricultural Commodities Programme (AAACP) of the European Union. The author would like to extend special thanks to the management of SODECOTON: Mssrs Hervé Gruson (General Manager), Michel Thézé (Production Manager), Adoum Yaoula (Monitoring and Evaluation Manager), Karagame Mahamat (Marketing Manager), and also to Mr Nourhou Amadou, Technical Manager of OPCC. iii Abbreviations AFD Agence Française de Développement CFDT Compagnie Française de Développement des Fibres Textiles CICAM Cotonnière Industrielle du Cameroun CMDT Compagnie Malienne pour le Développement des Fibres Textiles COPACO Compagnie cotonnière (subsidiary of DAGRIS) DAGRIS Développement des Agro-industries du Sud FCFA Franc de la Communauté Financière Africaine FOB Free On Board GoC Government of Cameroon IRAD Institut de Recherche Agronomique et du Développement ONCPB Office National Camerounais des Produits de Base OPCC Organisation des Producteurs de Coton du Cameroun SODECOTON Société de Développement du Coton du Cameroun SMIC Société Mobilière d'Investissements du Cameroun WCA West and Central Africa iv Executive Summary hile the cotton sector of Cameroon represents nearly a quarter of the country's W agricultural exports, the sector accounts for a mere six percent of total export earnings. Cotton is not a major contributor to the Cameroon economy, but it is the major cash crop for the North and Extreme North provinces. Cotton is also vital to rural livelihoods and has been since the parastatal SODECOTON was founded in 1974 with a mandate to purchase all seed cotton grown in Cameroon at a fixed price. This gave SODECOTON a monopoly on both seed cotton purchasing and processing. The government currently retains 59 percent of the shares of the company, while DAGRIS has 30 percent and a local investor 11 percent. According to farmer surveys, more than 90 percent of farmers in the cotton belt grow cotton. Production of seed cotton increased considerably from 20 000 MT in 1974 (at the creation of SODECOTON) to a peak of 300 000 Mt in 2004, and declined since then (to less than 220 000 MT), due to a reduction in the producer price, which makes cotton less attractive to producers. The yields, which were among the highest in WCA (1400 kg of seed cotton/ha), have remained stagnant or even decreasing since the mid 80s, probably due to declining soil fertility and sub-optimal fertilization. The cotton sector suffers from several geographic and climactic challenges, as well as an overpopulated and overworked growing area. The Northern part of the country is essentially isolated from all major transport routes adding cost and time delays to cotton. Soil conditions continue to decline due to increasing cultivation and an inappropriate land tenure system. The number of cotton farmers increased with production, and the average area cultivated per farmer remains very small compared to the other African producers, around .67 hectare per farmer. Given the small farm size and current levels of prices for seed cotton and inputs, cotton does not provide enough income for the smaller farmers to maintain them above poverty level, but it has undoubtedly contributed to the limiting of massive emigration from the Northern regions to the central and southern cities. Though the cotton sector of Cameroon has not undergone serious reform in the last 20 years, it is unlikely that reopening the failed privatization process will significantly improve the livelihoods of rural cotton farmers, who are feeling pressure from the falling price of cotton globally and the appreciation of the CFA Franc against the dollar--as is the case in all FCFA- zone cotton-producing countries. The combined effect of both factors is now contributing to SODECOTON's present dilemma: lacking the cash reserves to maintain producer prices, production levels are expected to plummet. In the past, while production levels remained relatively high, SODECOTON was able to offset ten straight years of profit losses through the sale of oil and cakes; however, expected production levels are raising concern. While not especially profitable, SODECOTON has managed to avoid major government intervention despite rebuffing calls from the IMF and World Bank to privatize the company. Reasons for this vary but include comprehensive and relatively efficient extension services, functional independence from GoC, and a strong management system whose geographic distance helps them resist political intervention. Additionally, SODECOTON's financial management is sound, which is more than can be said for most other parastatals, and further decreases any reason for political tampering. Despite comparative disadvantage due to the v landlocked situation of the cotton belt, SODECOTON compares favorably to other parastatals in terms of cost efficiency. It also managed to significantly improve the lint quality in recent years. The sector organization is characterized by a good cooperation between SODECOTON and the Farmers Association, which is sharing with SODECOTON the provision of extension services, decision on seed cotton prices and procurement of inputs. Sustainability of the cotton sector will depend on an adjustment of producer prices in accord with world lint prices. Effective soil fertility management techniques, like the use of organic manure, coupled with diversification into sunflower or soya beans, may alleviate the resultant increase in poverty. However, the main issue raised by the Cameroon model is the high cost of inputs, which are unsustainable at current cotton prices. It is therefore essential to improve soil management techniques and the need for fertilizers. The future of the cotton industry will depend to a large extent on the privatization of SODECOTON, which must be managed thoughtfully and with the interests of rural cotton producers in mind. It is therefore critical that professional investors be chosen following a consultative process involving producer associations and that the need to maintain an efficient rural development support and extension system in the cotton belt be fully taken into account. vi 1 INTRODUCTION The cotton sector of Cameroon The cotton sector of Cameroon is unique among its West and Central African peers in that no major structural reforms have been implemented over the last 20 years. SODECOTON, the national cotton company, remains under the control of the Government of Cameroon's (GoC). It has nevertheless expanded its operations and is able to operate without external support, in spite of the strong appreciation of its currency (the CFA Franc) against the US dollar in recent years. However, the company's suppliers continue to operate under difficult conditions, one of the major constraints being that the cotton growing area in the North is landlocked. Land pressure is also very high. As a result, farmers' holdings are small (incurring high extension costs) and chronic soil fertility problems only limit production. Cameroon's vertically integrated cotton conglomerate performs a wide range of activities related to cotton ginning, notably cotton oil production. While virtually every other cotton company in Western and Central Africa has abandoned direct oil production, SODECOTON still compensates to some extent for its losses in cotton lint sales with profits by the sale of oil and cakes. Despite strong sales over the past decade and a prudent pricing policy, the sustainability of the cotton sector is presently threatened by the combined effects of low prices and the appreciation of the local currency. SODECOTON is now facing a difficult dilemma: without cash reserves to maintain producer prices at their current level, the company fears that production levels will drop drastically. Importance of cotton in the economy Representing only six percent of total exports in 2005, (22 percent of agricultural exports), cotton does not play a prominent role in the national economy. It is however the only cash crop cultivated on a large scale in the Northern part of the country and is vital to the rural livelihoods, social well-being and political stability in this poor, landlocked region. 2 HISTORICAL BACKGROUND AND REFORM PROCESS 2.1. Historical background of the cotton sector Cotton production began in Cameroon in the early 1950s, at the end of the colonial era. It was under the control of CFDT, a French parastatal which was created a decade earlier to supply the French textile industry with fiber. In 1974, a decade after independence, SODECOTON was created as a mixed-economy company (société anonyme d'économie mixte), with the majority of capital belonging to the Government and a minority to CFDT (later renamed as DAGRIS). The company was granted a monopoly for developing cotton in the Northern part of Cameroon, purchasing seed cotton from farmers, as well as processing and marketing lint cotton. In return, the company assumed an obligation to buy all seed cotton produced anywhere in Cameroon at a fixed price. 1 Similar to CMDT in Mali, SODECOTON's mandate was not restricted to cotton, and included a more general rural development mandate as well. Immediately after its creation SODECOTON intensified the country's cotton production, which was fully extensive up to that time, without any fertilizer application. From 1974 until 1988, GoC and SODECOTON supported production through public investment initiatives, input subsidies, and favorable producer prices. This policy successfully expanded cotton production but resulted in huge deficits for SODECOTON (more than 60 billion FCFA of cumulative deficit,) which threatened the very existence of the company. In 1987, the Office National Camerounais des Produits de Base (ONPCB), a parastatal in charge of financing subsidies to the agricultural export sectors, went bankrupt after posting more than 20 billion FCFA in losses in 1986. With the assistance of donors (in particular Agence Française de Développement - AFD) SODECOTON and GoC, agreed upon a safeguard strategy in 1988. The strategy included an adjustment of the producer prices, an increase in prices for agricultural inputs, the development of a research program devoted to reducing production costs, and a drastic reduction in the extension costs borne by SODECOTON. 2.2. Pre-reform institutional set-up For the purposes of this paper, the pre-reform period will correspond to the time before the safeguard strategy was set up and the sector reorganized along the lines described in the following paragraph. The pre-reform period encompasses most of the 1980s. During the pre-reform period, overall management responsibility of the cotton sector fell upon GoC under the auspices of SODECOTON: input subsidies financed production, and SODECOTON's extension staff rigorously monitored farm activities. The company also extended credit to farmers for input purchases that was payable at the sale of the farmer's seed cotton. Marketing of seed cotton was fully organized by SODECOTON at a country-wide uniform price, though COPACO (a subsidiary of DAGRIS, which specialized in trading) assisted in the marketing of lint cotton. SODECOTON even ran its own cotton seed oil processing plant. 2.3. Past institutional and organizational changes Granting of management autonomy to SODECOTON In 1988 the GoC and SODECOTON signed the safeguard strategy performance contract by which management responsibility for the cotton sector transferred to SODECOTON while GoC retained a monitoring role as the company's dominant shareholder. By the early 1990s, SODECOTON was setting the national producer prices for seed cotton and inputs, and assumed the potential risk associated with poor central pricing. SODECOTON also began to distribute bonuses to producers after profitable seasons. Building up producers associations The sector's main institutional and organizational change over the past decade has been the rise of producer organizations, which are now fully entitled partners in SODECOTON's sector management strategy. Village cotton producers' organizations first appeared in the 1980s as informal groups composed exclusively of cotton producers responsible for the distribution of non-cotton agricultural inputs to their members; by 1994 they were granted legal status and have since operated as officially registered associations or GIE (groupements d'intérêt économique). An AFD-financed project incubated the groups and trained their members, and SODECOTON began capacity building programs. The goal is to progressively 2 transfer certain activities like the operation of local seed cotton markets on behalf of the cotton company, input distribution and credit recovery, as well as extension to those producer organizations with the greatest management capacity. The path towards co-management of the sector by SODECOTON and producers With the assistance of SODECOTON, village groups created regional associations and an apex organisation, Organisation des Producteurs de Coton du Cameroun (OPCC) in 2000. OPCC is a legal entity (Groupement d'Intérêt économique) that represents the interest of cotton producers by participating in the producers' price negotiations with SODECOTON, and procuring and selling inputs to farmers. The OPCC also staffs an in-house technical department to advise producers. Since its creation, OPCC has been increasingly involved in the management of the sector. It plays an important role providing extension services and a supply of inputs, as well as determining the producer price. While the initial producer price is ultimately decided by SODECOTON, the final price is generally the product of a consensus with OPCC. The premium paid by SODECOTON at the end of profitable seasons is now paid to OPCC and not directly to producers. OPCC decides whether to save the premium in a reserve account or pay it out the following season to producers as a complement to SODECOTON's producer price. 2.4. Structural Reforms: Failed Attempts, Rationale, And Agenda Bowing to pressure from the IMF and the World Bank, the GoC privatized SODECOTON in 1994 within the framework of Cameroon's structural adjustment process. At the time, GoC owned a number of parastatal companies involved in agricultural production and processing, few of which were profitable. The decision to privatize SODECOTON was never clear, and certainly not based on a study of possible options; the company recorded consistent losses throughout the previous ten years and incurred further losses in 1992 and 1993 due to overvaluation of the local currency. The process was aborted when the investor declared bankruptcy and a legal dispute blocked privatization until 20021. This first attempt revealed the danger of privatizing SODECOTON and similar parastatal companies in a political environment characterized by a high level of corruption and inefficiency. The IMF and World Bank continued to put pressure on the GoC to privatize SODECOTON and in 2003 a tender was prepared to select a consultant who would facilitate the process. Though terms of reference were drafted for the consultancy, no one was ever chosen to carry out the work due to disagreements within in GoC relating to the consultant's objectives and the central premise that SODECOTON ought to be privatized. Some in the GoC assumed that the only option was full liberalization of the sector, which implied free-market competition among producers; the other camp felt that the consultant should study a range of options and let the report make recommendations for the future. Though privatization is still on the GoC agenda, no new decision has been made on the procedure or on the schedule of such a reform. The attitude towards privatization is mixed among major stakeholders: while the Ministry of Finance is still keen to proceed with the privatization, other branches of GoC fear that a failed privatization would be politically and socially disastrous. Farmers organizations are not against the move, provided the input supply 1 The private investor purchased shares of SODECOTON held but not owned by parastatal companies. It was ultimately impossible to track down the proceeds of those sales. 3 system is maintained, and they retain a stake which guarantees their continued input in management decisions. In fact, the Cotton Producers Organization has built up financial reserves to participate in the privatization of the company if it takes place. GoC currently holds 59 percent of SODECOTON's capital while DAGRIS retains 30 percent; the remaining 11 percent is controlled by Societe Mobiliere d'Investissement du Cameroun (SMIC), an indigenous holding company managed by a consortium of senior politicians from the north. 3 OVERVIEW OF THE COTTON SECTOR 3.1. Key macro-economic factors influencing the sector As in all FCFA-zone cotton-producing countries, the two main macro-economic factors influencing the Cameroon cotton sector are the decline in world prices and the appreciation of CFA Franc against the dollar since 2002. As shown in the figure below, the nominal dollar value in FCFA declined substantially between 2000 and 2006. Figure 1: Evolution of world prices in USD and FCFA 1400 300 1200 250 1000 200 800 150 600 100 400 200 50 0 0 Jul-95 Jul-98 Jul-01 Jul-04 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Apr-96 Apr-99 Apr-02 Apr-05 Oct-94 Oct-97 Oct-00 Oct-03 $/cfa cfa/kg cents/kg Figure 2: Nominal and real exchange rate in Cameroon nominal rate (base 800 102 100 in 1995) 100 FCFA/USD 600 98 400 96 94 200 92 0 90 1995 1997 1999 2001 2003 2005 nominal rate FCFA/USD Real rate exchange rate Cameroon 4 3.2. Production and yields trends 3.2.1 The cotton belt The cotton belt covers the Northern part of Cameroon and includes three provinces: North, Extreme-North, and a small part of Adamaoua. The cotton belt population (3.6 million) represents one quarter of the country's total. It is the poorest part of the country, with a high level of illiteracy and the recurrent risk of food deficit due to climatic hazards. The region and its inhabitants are largely governed by a traditional feudal power structure manifested in tribal chieftains called lamidé, who control most social and economic activities. The Northern part of the cotton belt (Extreme-North Province) is the primary historic growing zone where cotton was first introduced and developed, but represents less than one-third of total production. The zone is overpopulated, land pressure is high, and climatic conditions are less favorable than in the southern section of the cotton belt. Average rainfall hovers around 700mm yearly so the province is subject to a high risk of drought, especially at the beginning of the planting season. In the southern section of the belt (North and Adamaoua Provinces), rainfall is higher (around 1200mm yearly), so the risk of drought more limited, and land pressure lower. Consequently, there is higher soil fertility, higher yields, and larger farm sizes; more than two-thirds of the cotton produced comes from these two provinces. The potential for development is concentrated in this southern belt and this development has been stimulated by the migration of farmers from the Extreme-North. Nevertheless, large swaths of the southern belt have been designated national parks in which it is forbidden to fall trees and clear land; much of the remaining land is reserved for livestock, with which agriculture is often in competition. The cotton belt is effectively isolated from major transport routes with very difficult links to the capital and to the main port of Douala. Bales are transported on trucks from the ginneries to the railroad terminal Ngoundere where they are sent on to Douala. Both roads and railroads are in poor condition and result in delays and extra costs. The soil conditions vary locally, but tend everywhere to be on the decline because of an inappropriate land tenure system perpetuated by the lamidé chieftains (farmers have usually no secure ownership on the land they cultivate), high land pressure, increasing cultivation on marginal and fragile lands, erosion, and inappropriate techniques for maintaining soil fertility. 3.2.2 Production and area trends Phases in production growth Several phases can be identified in the production growth process. From 1951 to 1974 cotton producers used extensive agricultural practices with very limited inputs. After a peak in 1969 (27,000MT of seed cotton), production fell below 20,000MT following a succession of droughts. From 1974 to 1988, production increased rapidly, reaching 165,000MT in 1988, thanks to the intensification policy of GoC and SODECOTON. Production stabilized between 1988 and the 1994 devaluation of the FCFA, in response to the safeguard policy and the overvaluation of the FCFA, which had made cotton an unattractive investment. The devaluation of the CFA Franc, gave to the sector a new and sustained impetus for growth and production reached a new peak of 300,000MT in 2004. Production has since declined remaining between 208,000 and 220,000MT for the two past years. 5 Figure 3: Evolution of production and areas 350000 300000 250000 200000 area (ha) 150000 production (T) 100000 50000 0 51/52 57/58 63/64 69/70 75/76 81/82 87/88 93/94 99/00 05/06 Source : SODECOTON Evolution of areas cultivated with cotton and explanatory factors The area under cotton did not exceed 100,000 ha until 1994, but started to grow at a rapid pace after the currency devaluation. This growth was concentrated in the cotton belt's south and included not only new lands but new growers as well. The growth in area is related to SODECOTON's policy of developing the southern cotton belt. However, the past decade's increase in area is also clearly correlated to the increase in the seed cotton producer price, as shown on the table below. Figure 4: Producer price and areas cultivated with cotton 300000 250 250000 200 200000 150 area (ha) area 150000 producer price 100 100000 50 50000 0 0 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 6 Table 1: Cotton Production Area and Yields, 1994-2007 Area (Ha) Production (T) Yields (kg/ha) 94/95 141061 165737 1175 95/96 157897 195214 1236 96/97 190920 223100 1169 97/98 172246 193332 1122 98/99 172521 194689 1128 99/00 179576 197266 1099 00/01 198559 230931 1163 01/02 201576 246070 1221 02/03 181811 233839 1286 03/04 208204 242884 1167 04/05 247000 307000 1243 05/06 213500 208000 974 06/07 220000 3.2.3 Number and size of cotton farms Farm size and number of growers Unlike its counterparts in Mali or Burkina Faso, SODECOTON registers cotton growers within the same farm individually. Consequently, the number of cotton growers registered with SODECOTON and receiving inputs was 350,000 in 2006, significantly higher than the number of farms growing cotton. The changes in the number of cotton growers and the average cotton area per grower are shown on the figure below: Figure 5: Evolution of areas cultivated with cotton per grower 400 0.80 350 0.70 average area/farm (ha) 300 0.60 250 0.50 area (ha) 200 0.40 150 0.30 100 0.20 50 0.10 0 0.00 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 number farmers average area/farmer According to the most recent available SODECOTON M/E survey (2002/03), the average area under cotton per farm is 1.21ha. Considering that the season's total cotton area was 233,000 ha, one can estimate that the average number of farms growing cotton at 192,000, and the average number of cotton growers per farm at 1.8. The average area of cotton cultivated is thus very small (around 0.67 ha) as compared to other African producers. This makes extension services as well as the collection of seed cotton more difficult and costly for the cotton company. Characteristics of cotton farms The M/E unit of SODECOTON regularly administers an agricultural survey, sampling more than 1,800 cotton and non-cotton farms in 55 cotton belt villages. The full results of this survey are only available for the 1998/99 and 2002/03 seasons. In the 2002/03 season, the 7 average total farm size was 3.1 ha (excluding 0.48 ha of fallow) and the average number of residents per farm was 7.4. That figure is much smaller than in Burkina Faso and Mali. The average cultivated area per worker is also substantially lower than in neighboring cotton producers, reflecting land pressure. These average figures disguise regional differences: smaller farms are more common in Extreme-North and mountainous areas where the average farm size is less than 2 ha and the cotton area per farm is less than 1 ha. Larger farms are more common in the southern cotton belt, especially in areas with migrant inflows. In the south, the average farm size is around 5 ha and the cotton area above 2 ha. In all cases the cotton area per farm represents around 39 percent of the farm area. Table 2: Characteristics of cotton farms according to M/E surveys 2002/03 1998/99 Cotton Area (ha/Farm) 1.21 1.03 Total Farm Area (Excluding Fallow) 3.14 3.02 Cotton/Total Area 39% 34% Number Of Persons/Farm 7.4 7.5 Number Of Active/Farm 3.931 4.0 Number Of Active/ha 1.25 1.32 Number Of Cattle/Farm 2.4 2.7 Changes in farm size The average cotton area per farm increased between 1998/99 and 2002/03 from 1.03 to 1.21 ha. This growth was concentrated in the southern part of the cotton belt. Unlike Sahelian countries, there is no indication that any of the sub-regions underwent major changes in farm size or in the cropping pattern over the last 10 years (according to available time series), which suggests that the total increase in area cultivated with cotton is essentially due to the increase in the number of farmers. As the average area per farm has not substantially increased, probably as a result of land availability, the total increase in area must be due to an increased number of farmers growing cotton. This fact is probably related to land pressure which limits the expansion capacity of farms in the Northern part of the cotton area. Farm types and farm characteristics by type The SODECOTON M/E team segregates cotton farms into three classifications based on the level of their equipment: type C farms rely on manual cultivation; type F farms use mainly rented animal traction equipment; type D farms have one pair of oxen and their own equipment. The distribution and socio-economic characteristics of farms are synthesized on the following table: Table 3: Socio-economic characteristics of farm types (based on 2002/03 SODECOTON survey) Average Manual Rented animal Farms cultivation traction equipped for (Type-C) equipment animal (Type-F) traction (Type-D) % Of Farms Belonging To This Type 100% 25% 32% 43% Cotton Area (ha/Farm) 1.21 1.05 0.88 1.54 Total Farm Area (Excluding Fallow) 3.04 2.51 2.3 4.09 Cotton/Total Area 40% 42% 38% 38% Number Of Persons/Farm 7.4 6.2 5.9 9.1 Number Of Active/Farm 3.2 3.2 4.9 Number Of Active/ha 1.3 1.4 1.2 Number Of Cattle/Farm 2.4 0.2 0.6 5.3 % Literacy (Local Language) 20% 16% 17% 26% % Food Self-Sufficient Farms 43% 39% 39% 49% 8 The table shows that the level of equipment is correlated to the size of the farm. Equipped farms are 50 percent larger than non-equipped ones. As expected, equipment also corresponds positively to larger families and cattle holdings. Equipped farms also have a higher-than-average literacy rate and are closer to food self- sufficiency, although the survey finds that all farm types tend to purchase food from non- cotton farms. It is worth noting however that cotton farms are altogether more homogeneous than in other West African cotton producing countries, where the socio-economic characteristics of farms are usually more diversified. The table also shows that the percentage of farms still using manual cultivation is relatively high compared to other West African countries. Only 48 percent of farms are equipped with a plough and only 28 percent have two pieces of equipment. The level of equipment remained relatively stable between 1998 and 2003. 3.2.4 Yield trend, yield distribution and explanatory factors Explanatory factors for yield trend Cultivated virtually without inputs, yields did not exceed 500 kg/ha of seed cotton until 1974. It rose rapidly to a 1982 peak of 1,400 kg with the development of input supply on credit. Until recently, yields were also assisted by GoC input subsidies. Yields have declined since the early 1980s, as evidenced by the graph below. According to SODECOTON staff, pest pressure is lower in Cameroon than in other West African countries--instead, soil fertility is the limiting factor for improving yields. Declining yields are the likely outcome of sub-optimal fertilizer applications, a lack of organic matter, and erosion. It is interesting to note that the decline in yields started after a reduction in the average fertilizer application in the 1984/85 season (see Figure 9). The low yields in 2005/06 are mainly believed to be due to a sharp decrease in fertilizer applications following a decision by SODECOTON to limit the amount of fertilizer sold on credit to 100 kg/ha. Ostensibly, this contraction of credit reduced the risk coefficient (calculated by the amount of credit for input granted by the cotton company for one hectare to the value of cotton produced in the same area) for farmers. Figure 6: Evolution of areas, production and yields 350000 1600 300000 1400 1200 250000 1000 200000 area (ha) 800 production (T) 150000 yields (kg/ha) 600 100000 400 50000 200 0 0 51/52 54/55 57/58 60/61 63/64 66/67 69/70 72/73 75/76 78/79 81/82 84/85 87/88 90/91 93/94 96/97 99/00 02/03 05/06 9 Figure 7: Evolution of fertilizer applications and yields 1600 250 1400 200 1200 fertiliser (kg/ha) yield (kg/ha) 1000 150 800 600 100 400 50 200 0 0 72/73 74/75 76/77 78/79 80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 yield fertiliser applicatio (kg/ha) Yield distribution and explanatory factors With relatively favorable climatic and soil conditions, yields are significantly higher in the southern cotton belt where yields per hectare average some 1500kg compared to the Extreme- North where average yields per hectare are closer to 670kg according to the 2002/03 M/E survey. Geographic location is by far the main factor in this yield differentiation as shown in Figure 11 which compares yields in the northern and southern halves of the cotton belt. Note that both regions show declining yields. Figure 8: Comparison of yields in Northern and Southern Cameroon 1800 1600 1400 1200 1000 800 600 400 200 0 51/52 54/55 57/58 60/61 63/64 66/67 69/70 72/73 75/76 78/79 81/82 84/85 87/88 90/91 93/94 96/97 99/00 02/03 yield (North) yield (E-North) 10 Level of equipment is another differentiating factor for yields: Table 4: Yield differentiation per type of farms (2002/03 survey) Manual Rented Animal Farms Equipped For Cultivation Traction Equipment Animal Traction Average (Type C) (Type F) (Type D) Yield 1188 1090 1120 1259 Percent Deviation From Average 100% 92% 94% 106% Additionally, the M/E field surveys show that the average yields per farmer are also correlated to the area cultivated with cotton, as the yield for farms with small cotton plantings are around 20 percent below the yields for larger cotton growers. This difference may be partly due to the fact that farms are larger in the southern part, where yields are higher. Table 5: Yields and size of farms Cotton area/farm Average yield (kg/ha) % of average [0.125 ha - 05 ha] 1.061 89% [0.5 ha - 1ha] 1.119 94% [1ha - 2ha] 1.175 99% More than 2ha 1.254 106% Total 1.188 100% 3.2.5 Proportion of farms growing cotton According to field surveys, 92 percent of farms in the cotton belt grow cotton. Those farms that do not grow cotton are on average poorer and less developed: with the same population per farm, they have lower literacy rates, less equipment, fewer cattle, and less area per person suggesting limited access to land. Table 6: Comparing characteristics of cotton and non-cotton farms (2002/03 M/E survey) Cotton Farms Non-Cotton Farms Percentage Of Total Farms In The Sample 92% 8% % Literacy (In Local Language) 20% 9% Number Of Cattle/Farm 2.4 1.6 Number Of Ploughs/Farm 0.66 0.3 % Of Farms Owning A Plough 48% 25% Area Cultivated/Farm (Ha) 3.14 1.92 3.3. The ginning industry The right to commercially process seed cotton belongs exclusively to SODECOTON, although marginal quantities are reportedly smuggled into Nigeria. SODECOTON has nine ginneries scattered throughout the production area--six of which use electrical power­and a total processing capacity of 279,000 MT of seed cotton (which corresponds to the average present production), on the basis of 140 days of operation. In the past ten years, SODECOTON has built ginneries representing 110,000 MT of additional capacity (one new ginnery every three years on average), while others, with a capacity of 40,000 tons, were retired as part of normal turnover after 30 or more years in operation. The country's ginning equipment is generally considered to be in fair condition. 11 3.4. The domestic spinning industry The main textile manufacturer is CICAM, a local firm producing printed and traditional batik garments. CICAM represents more than 90 percent of the domestic cotton based manufacturing activity. The supply of lint cotton for the local industry increased from 2,000 MT in the 1980s to 4,500 MT in 1997 then decreased steadily to less than 1,000 MT in 2004/05. As in all CFA zone cotton producing countries, the textile industry is in a very difficult strategic situation, struggling to compete with smuggled Asian and Nigerian imports and imports of second hand garments. The selling price of a traditional pagne garment, a traditional West African loincloth, produced by CICAM is reported to be twice the imported equivalent, assuming the imported article escapes import duties. CICAM has recently made drastic staffing cuts and continues to shoulder heavy losses. Payments to SODECOTON for their purchase of lint are often late, which increases the financial difficulties of the cotton company. 3.5. The oil processing industry SODECOTON has two of its own cotton seed processing plants making refined oil and cakes. The capacity of the plants is sufficient to process the country's whole seed production (around 100,000 MT) over an 11 month period. Oil is sold in the whole country through a network of wholesalers. The operation is profitable, although selling prices have fallen recently thanks to competition from oils imported from Asia. Cakes are sold as animal feed, with seed cotton producers enjoying first purchasing rights. Profits from oil processing help offset the overall market risks associated with the sale of cotton. 4 CURRENT INSTITUTIONAL ARRANGEMENTS AND PERFORMANCES 4.1. Producers organization and overall sector management Village level producers associations 1900 village associations are classified by SODECOTON into three categories: The weakest organizations (Group 1) still need close monitoring by SODECOTON as they operate local seed cotton markets. These groups are assisted by a seasonal extension agent from SODECOTON. Group 1 accounts for roughly 48 percent of village groups. Intermediate groups (Group 2) are in charge of input distribution and credit recovery on behalf of SODECOTON. In addition to their role in gathering seed cotton, these groups have their own extension agents, recruited and paid by the group. They account for almost 48 percent of village groups. The best organized associations (group 3) take full responsibility for input distribution and credit recovery. There were 70 such groups in 2006. SODECOTON and OPCC plan to increase their number. These associations average 150 members, but some exceed 400 members. SODECOTON and OPCC consider these larger groups unmanageable. 12 Considering that most of the village associations were created more than 20 years ago, the transfer of responsibilities to village groups has been plodding and cautious. SODECOTON and OPCC have been hesitant to give management responsibilities to village associations whose membership show high levels of illiteracy. Citing fears of mismanagement, SODECOTON and OPCC did not extend credit to one hundred associations in 2006. Intermediary structures and OPCC Village level associations are grouped into 46 informal sector associations. All village level associations belong to the apex association, OPCC. OPCC has a technical department headed by a SODECOTON-approved manager. It is primarily funded through the sale of pesticides. The annual budget is 400 million FCFA/year, of which 25 percent is dedicated to overhead costs, 60 percent is set aside to support village associations, and 15 percent supports animal production. OPCC has a reserve fund managed by SODECOTON and is funded by the company's producer price premiums. OPCC also has a reserve account for their future participation in the capital of SODECOTON, built up on a levy on seed cotton collected. The board of OPCC is elected through local and regional assemblies of village groups. Elections are reported to be transparent in 90 percent of village groups and take place regularly. 4.2. Pricing of seed cotton The price mechanism As explained in Section 2.3, SODECOTON sets the initial producer price after consultation with OPCC. In profitable years, SODECOTON can add a bonus premium at season's end which is deposited into an OPCC account held on SODECOTON's books. OPCC can use these resources to complement the producer price or as it sees fit. Two coordinate procedures work side-by-side within the current pricing mechanism to mitigate the impact of world price variations on the fixed producer price. If OPCC considers SODECOTON's initial price as too low, it can issue a price complement financed by the premiums accumulated in previous years. SODECOTON created a similar price stabilization reserve fund in 1990 with a 2 billion FCFA grant from the Agence Française de Développement and has since been supported by the company's profits2. SODECOTON's reserve fund was used once during the 1993/4 season, and then fully depleted in 2005/6 when the total 11 billion FCFA balance was used to offset pricing shortages. The management of the price mechanism and its consequences Until 2004, SODECOTON set the initial price at a conservative level, paying a premium to OPCC at the end of nearly every season. OPCC was thus able to accumulate 10 billion FCFA in 2004. As in all countries of the FCFA zone, producers' prices have steadily improved from their lowest levels during the 1994 devaluation. The ratio of total price received by producers to the average Cotton Outlook index remained below 50 percent for any given season until 1998. In that year, OPCC became intimately involved with initial pricing and the ratio jumped up to 58:100. The ratio has stayed above 60:100 over the last three seasons. 2 The share of benefits allocated to the Price stabilization reserve fund and the amount of the fund to be used to support producer prices are decided by the General Assembly of the company, without any fixed rule. 13 Following reform, the combined strategies of SODECOTON and OPCC resulted in relative price stability for producers and avoided a sharp decline in the price expressed in constant value (see Figure 12 and Table 7 below). The producer price has ranged between 170 and 195 FCFA per kg since 1997, despite the fall of world prices and the appreciation of local currency. In fact, the prices received by producers in 2005/06 and 2006/07 (respectively 170 and 175 FCFA) were the highest of all countries in the FCFA zone and resulted in considerable losses for SODECOTON. Even with the burden of this price stabilization borne jointly by SODECOTON and OPCC, the cotton company suffered heavy losses. Unsustainable pricing quickly exhausted the reserves of both SODECOTON and OPCC. Thanks to SODECOTON's prudent policy before 2004 and its corresponding reserves, high producer prices have not had the same disastrous consequences on the financial viability of the sector as they had in Burkina Faso and Mali. Nevertheless, the stabilization of the producer price at its current level is clearly not sustainable. Figure 9: Evolution of producer prices and share of Cotlook Index 250 80% 70% producer price (FCFA/kg) 200 % of Cotlook index 60% 150 50% 40% 100 30% 20% 50 10% 0 0% 1994/95 1995/96 19996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 price recieved in 1995 constant price total price received by farmers Price received/index price paid (including payment to OPCC )/index Table 7: Evolution of producer prices and share of Cotlook index 94/95 95/96 996/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 Producer Price (1st Quality) 135 160 160 175 175 155 180 160 175 175 185 150 160 Premium Paid By SODECOTON To Farmers 20 20 20 15 20 Premium Paid By SODECOTON To OPPC 10 45 15 5 10 Average Total Price Paid By SODECOTON 154 174 159 170 179 167 233 178 185 195 185 152 160 Premium Paid By OPCC To Farmers 25 5 20 10 5 20 15 Total Price Received By Farmers 154 174 159 170 179 182 193 183 180 195 190 172 175 Cotlook Index 1029 1032 929 996 825 741 925 755 727 825 671 643 670 Price Received/Index 36% 40% 41% 41% 52% 58% 50% 58% 59% 56% 67% 64% 62% Price Paid (Including Payment To Opcc )/Index 36% 40% 41% 41% 52% 54% 60% 56% 61% 56% 66% 56% 57% Price In Dollars 0.36 0.27 0.25 0.26 0.33 0.37 0.33 0.33 Price Received In 1995 Constant Value 174 149 152 160 158 166 153 142 153 148 132 131 14 4.3. Research and extension Research Research is the responsibility of the Institut de Recherche Agronomique (IRAD), under the Ministry of Research and Innovation. The cotton research agenda is reviewed every year in cooperation with SODECOTON. It is then implemented under a contract agreement in which SODECOTON agrees to provide the program's funding. The program received 170 million FCFA in 2005 or USD $340,000. The research program is focused on entomology and genetics, specifically variety development, fiber quality (micronaire) selection, and ginning outturn ratio improvement. IRAD also manages a test plot of 10ha dedicated to organic fertilization research. Trials are also underway for introduction of sunflowers and soya in rotation with cotton. Two new varieties have been introduced in the last 10 years and are still in use: A 12-39 on the main part of the cotton zone, and D 742 on more marginal zones. The research has been relatively successful in the development and dissemination of other crops: maize has replaced coarse grains, and direct sowing with the use of herbicides has been adopted by a large number of farmers, they are also using organic manure on a greater basis. However, the research has been less successful promoting integrated pest management techniques based on scouting by village groups in which the numbers of insects in a given area are surveyed. The village applies pesticides when the surveyed populations exceed a predetermined ceiling. Village oriented scouting produced unsatisfactory results and was progressively replaced by individual scouting. The GoC does not currently permit research into genetically modified cotton in the absence of a bio-safety regulatory framework. Extension The Ministry of Agriculture-managed extension services are virtually nonexistent in the production area, despite a costly World Bank project to rehabilitate them. Extension for cotton farmers is therefore provided by SODECOTON in conjunction with OPCC. The scope of the extension services varies widely and includes advisory services to farmers, input supply supervision, credit and seed cotton marketing, and data collection. The same extension agents are also responsible for rural development including food crops, soil fertility management techniques, and animal production. Finally, extension agents provide advisory services to the management of farmers groups. SODECOTON used to have a very dense network of extension agents with 1,300 full time agents in the 1990s. However, many of these agents have since been transferred to farmers associations and the OPCC. SODECOTON cotton extension services fall under the company's Agricultural Production Department. The cotton area is divided into nine regions, 37 sectors, and 266 zones. SODECOTON's own cotton extension system is now composed of 312 permanent agents working at the sector and zone levels and a number of part-time agents for those village groups who have not yet been able to recruit their own staff. Farmers associations tend to form groups of two or three in order to recruit and pay for their own extension staff at a typical rate of 3500 FCFA/ha plus a fee of 1.5 FCFA/kg of seed cotton. 15 In terms of rural development activities, SODECOTON is implementing the Project Eau-Sol- Arbre (Water, Soils and Trees) project with GoC and AFD funding support. The project employs a team of technicians to develop soil fertility management techniques. In particular, the program promotes Sowing Under Vegetal Cover (SCV), which is still at the experimental stage, but preliminary results are encouraging. SODECOTON and OPCC both contribute funding for advisory services to animal producers. Some 30 technicians are employed to promote the use of organic manure, improve animal nutrition, veterinary care, and increase the sale of veterinary products. SODECOTON and OPCC also employ 9 regional supervisors and 76 sector supervisors respectively to provide management support to village-level producers associations, as well as providing literacy training to some 2000 farmers annually. The new system under which village-level agents are recruited directly by producer groups from among village members, is considered more efficient and much less costly than the previous regime. The unit cost for a locally recruited village level agent is only 150,000 FCFA/year. 4.4. Input and credit provision Until recently, farmers' organizations were only involved in credit provision through a mutual guarantee whereby the groups were jointly responsible for the defaults of their members on credit for inputs. Input procurement and logistics are overseen by SODECOTON. SODECOTON begins the procurement process by assessing the magnitude of input demand on the bases of planting forecasts. OPCC then organizes international tenders for corresponding procurement. The OPCC arrangement allows SODECOTON to avoid internal procurement procedures. Procurement bids are accepted or rejected by a joint technical commission including SODECOTON and OPCC. Once inputs are purchased, SODECOTON transports them to villages where, depending on local capacity, the company or village associations handle distribution. The company is now looking to gradually devolve management responsibility for inputs supply. SODECOTON claims that its policy of importing generic products in bulk results in lower costs for farmers; the process is facilitated by the relatively dense network of field agents able to disseminate the formulation, preparation and application techniques to farmers. The OPCC determines the selling price of inputs to farmers and is calculated on a full cost basis with a markup for pesticides but not for fertilizers. Until 2006, there was no credit charge added to the cost as the inputs were financed by the OPCC and SODECOTON. However, in 2007 the OPCC and SODECOTON had exhausted their reserve funds and now borrow from banks to cover the initial purchase costs. By and large, cotton inputs are sold on credit reimbursable upon delivery of seed cotton. Credit is guaranteed by mutual guarantee groups made up of representatives from SODECOTON and village associations. Inputs for food crops are also supplied by OPCC, but the organization offers only limited credit for these items. Village groups have to pay 50 percent of the cost by the end of June (two to three months before harvest), which limits demand. In 2005/06, the total credit extended for inputs was 14 billion FCFA for cotton and 1.6 billion for food crops. Until 2005, credit recovery performance was good, with recovery ratios 16 ranging from 95 to 99 percent. This rate deteriorated dramatically in 2006, falling to only 90 percent, because of declining producer prices combined with low yields. OPCC also grants a two year credit for the purchase of animal traction equipment (300 million FCFA in 2005/06.) This credit is increasingly focused on carts as plowing is replaced by direct sowing. Strater Foundation seeds are produced by the Research Institute, and pre-multiplied in a seed farm belonging to SODECOTON. They are in turn multiplied by contract farmers under SODECOTON's control. Seeds are not delinted. 4.5. Lint marketing and quality performances Grading seed cotton Seed cotton is gathered by farmers associations at 2,700 assembly points, and then collected by SODECOTON's trucks. Seed cotton is bought on the basis of two quality grades, with 10 FCFA difference in prices between grades. Until 2005, SODECOTON was rather lax in grading seed cotton, and the first grade represented more than 95 percent of purchases. Though purchased at a premium, much of that seed cotton was ultimately discarded for its low quality. In 2005, SODECOTON decided to dramatically change its purchase policy, launching a quality campaign, and enforcing strict guidelines for sorting and grading of seed cotton. In 2005/06, 20,000 tons were rejected as below standards, while the grade 1 represented only 30 percent of seed cotton collected. This new policy was finally accepted by farmers, who subsequently took much better care in cleaning and sorting their seed cotton. This move resulted in a substantial improvement in the quality of the lint cotton and lower losses corresponding to impurities. Marketing of lint cotton Marketing of lint cotton is the exclusive responsibility of SODECOTON. In its first years, COPACO (a subsidiary of DAGRIS) acted as SODECOTON's selling agent, taking a one percent fee. In 1994, SODECOTON began marketing 40 percent of its own production raised, selling directly through weekly auctions to a number of selected traders. This system was generalized in 2000. The company now sells its entire weekly output through such auctions to the three highest bidders and less than 5 percent of total output is now sold to COPACO. The base price for the auction is based on the Cotton Outlook Index, with a 50 FCFA/kg deduction to bring it to FOB levels for lint cotton. The base price is also adjusted for grade and fiber length with a 1 Eurocent/kg premium for the SODECOTON's higher grade and 1 Eurocent for 1/16th kg of length. Lint cotton grading and quality In keeping with regional custom, SODECOTON uses its own quality types based on color and cleanliness, with an additional grading according to fiber length. All grading of lint cotton is done manually in one location (Garoua), allowing for standardized grading. SODECOTON does not use Standardized Instrument for Testing of Cotton (SITC) In the early 1990s, Cameroon cotton was significantly depreciated on the market due to a pervasive stickiness problem. The reputation of cotton suffered and prices were sharply discounted. In the subsequent decade SODECOTON developed a quality improvement strategy which is successfully addressing the problem. As stickiness mostly comes from late harvest, the company offered farmers incentives for early picking. Despite these improvements the country's reputation continues to suffer. 17 SODECOTON has also had to manage a trade off between using the IRMA 1239 variety, which has short fiber but a high ginning outturn ratio, and the BLT variety, with lower ginning outturn but longer fibers. SODECOTON's quality improvement drive has increased the share of BLT in recent years. This production shift has allowed SODECOTON to enter the segment of fine cottons. More than 90 percent of the lint cotton sales by volume are reportedly of higher than standard quality. Contamination problems are considered moderate. As most contamination originates at the stage of harvesting and seed cotton collection, the use of cotton sheets has been generalized to meet the new strict seed cotton grading policy introduced in 2005. Overall performance According to SODECOTON's statistics, the marketing price (636 FCFA in equivalent CIF price) was, on average, 97 percent of the Cotlook index average for standard quality in 2004/05 (a season of high production, but lower quality), 106 percent in 2005/06 (713 FCFA in CIF equivalent), and 101 percent (665 FCFA in CIF equivalent) in 2006/07 (as of end of September). SODECOTON reports that its highest quality is usually sold with a premium of 40 FCFA on the Cotlook index. Sub-standard output can sell at a similar discount. The overall marketing performances can therefore be considered good. 5 COST, RETURNS TO PRODUCERS AND SUSTAINABILITY 5.1. Ginning outturn ratio The ginning ratio increased from less than 30 percent in the 1950s to a peak of 43 percent in 1983/84. It remained around a relatively stable 42 percent thereafter. According to SODECOTON's management, the ginning ratio is influenced by a number of factors, primarily the variety grown, but also the cleanliness of the seed cotton; however, in 2005/6 local climatic and soil conditions accounted for local ratio variations from 41.9 to 44.0 percent. As mentioned above, SODECOTON used to favor low outturn, high quality varieties with long fibres but SODECOTON has recently decided to reemphasize a higher ratio, lower quality variety. This decision should result in a further increase of the ginning ratio. Figure 10: Evolution of the ginning ratio ginning ratio 50% 45% 40% 35% 30% 25% 52/53 55/56 58/59 61/62 64/65 67/68 70/71 73/74 76/77 79/80 82/83 85/86 88/89 91/92 94/95 97/98 00/01 03/04 ginning ratio 18 5.2. SODECOTON's performance 5.2.1 Processing and marketing costs for cotton SODECOTON's labor productivity Since the 1994 devaluation, SODECOTON has been able to increase its labor productivity. While the total number of employees has remained stable since 1993, lint production has increased 200 percent, resulting in a productivity gain per employee from 45 tons/man-year in 1993 to 104 tons/man-year in 2005. Meanwhile, salaries have increased an average of 6 percent annually, well exceeding inflation. Over the same time period, the ratio of total salaries over sales has remained stable at around 10 percent. Table 8: Evolution of Labor Productivity 1993/9 1994/9 1995/9 19996/9 1997/9 1998/9 1999/0 2000/0 2001/0 2002/0 2003/0 2004/0 4 5 6 7 8 9 0 1 2 3 4 5 Number Permanent 1,527 1,527 1,604 1,726 1,629 1,726 1,767 1,786 1,746 1,784 1,807 1,863 Number Seasonal 1,314 1,474 1,557 1,397 1,272 1,223 1,350 1,438 1,175 1,049 1,204 1,098 Salaries (MFCFA) 390 695 898 1,024 917 725 693 940 1,678 1,564 1,401 1,528 Tons/Employee 45 55 62 71 67 66 63 72 84 83 81 104 Salary Cost/Turnover 10% 9% 7% 7% 8% 9% 9% 7% 11% 10% 11% 10% Production and intermediary costs The net intermediary cost (total FOB sale price of lint cotton minus the purchasing price of seed cotton and the value of seeds), a good measure of cost, remained remarkably stable since devaluation (after deduction of taxes, which were important until 1998, and decreased substantially when expressed at a 1995 constant value3 (See Table 9). Table 9: Evolution of intermediary costs 1995/ 1996/ 1997 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2004/ FCFA/kg Lint Cotton 1996 1997 /1998 1999 2000 2001 2002 2003 2004 2005 Total Intermediary Costs (Before Taxes) 236 284 332 293 258 239 255 278 308 258 Minus: Value Of Seeds 24 29 31 32 25 38 29 30 29 25 Net Intermediary Costs (Before Taxes) 213 255 301 261 233 201 226 248 279 233 Taxes 137 105 69 6 5 5 2 2 2 2 Net Intermediary Costs (After Taxes) 350 360 370 267 238 205 228 250 281 235 Net Intermediary Cost Before Taxes In 1995 Constant Value 350 338 330 238 207 177 190 197 220 183 Net Intermediary Cost After Taxes In 1995 Constant Value 213 239 269 233 202 173 189 195 218 182 Source: SODECOTON Net result on cotton activities Despite the good performance in terms of intermediary costs, cotton processing was only profitable until 1998. With the exception of the 2004/05 season, high producer prices resulted in losses for SODECOTON. Table 10: Net result on cotton activities (FCFA/kg of lint cotton) 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2004/ 2005/ FCFA/kg Lint Cotton 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 06 Net FOB Cost 782 746 793 711 648 766 656 700 754 689 664 FOB To CAF Cost 77 82 76 74 70 72 48 Average Selling Price 879 830 873 727 686 834 656 678 784 598 663 Net Margin On Cotton 20 3 4 -58 -32 -4 -48 -22 30 -91 -1 3 Using the CPI as deflator 19 Detailed analysis of the intermediary costs Net intermediary costs in 2004/05 amounted to 235 FCFA/kg of lint cotton, on par with regional standards; they are much lower than in Mali, but slightly above Burkina Faso. When compared to a theoretical standard based on an analysis of unit costs, Cameroon's performance is acceptable, despite a number of disadvantages or adverse externalities. These issues include: High extension costs associated with the rural development functions still performed by SODECOTON. A poor road network and an expansive cotton belt result in high marginal collection costs. Ginnery to port logistics are relatively expensive (35 FCFA/kg) due to the geography of the cotton belt and rail transport pricing. Tolls and administrative fees associated with transit (also 35 FCFA/kg) are extremely high (and even increased in 2006), mainly due to hidden taxes at the port of Douala. In fact, Cameroon outperforms the theoretical standard on financing costs, because at least until 2006 SODECOTON was able to minimize the use of external credit relying instead on its reserve funds and OPCC's funds deposited with SODECOTON. Table 11: Detailed analysis of the intermediary cost (2004/05) and comparison with standard Theoretical 2004/05 Model FCFA/kg USD/kg USD/kg Collection Of Seed Cotton 48.8 0.097 0.083 Scattered production area Processing Costs 67.7 0.134 0.135 Normal Financing Costs (Short Term) 6.4 0.013 0.038 Low because mainly self financed Landlocked area + high transit costs Cost From Ginnery To FOB 76.0 0.151 0.128 (including taxes on transit) Sub-Total 198.9 0.394 0.383 Capital Costs (On Investment) 4.035 0.008 0.035 Mainly self-financed (not included in costs) Overhead And Contengencies 26.6 0.053 0.052 Dagris Fee 6.0 0.012 0.000 Not included in the theoretical model Total Intermediary Costs 235.5 0.467 0.470 Purchase Cost Of Seed Cotton 454.7 0.901 Critical Functions (Extension, Research, Seeds) 21.1 0.042 0.019 High, because of rural development function Taxes 2.0 0.004 Not included in the theoretical model Total FOB Cost 713.3 1.413 Minus: Value Of Seeds 24.6 0.049 0.050 Normal Net FOB Cost 688.7 1.365 5.2.2 Processing cost and margins for oils and cakes The production cost of refined oil is 410 FCFA/litre assuming a book value of seeds of 30 FCFA/kg, which is 30 to 50 percent higher than the market price. The current factory gate price is 538 FCFA/litre excluding VAT. In addition, cakes are sold between 50 and 100 FCFA/kg, depending on their content. The production amounted to 19 million liters of refined oil, and 64,000 Mt of cake in 2006. Oil extraction appears to be a very profitable activity for SODECOTON with an aggregate average net profit of more than 5 billion FCFA annually. It is all the more valuable when lint cotton prices are low. 20 Based on the accounts of SODECOTON's two oil processing plants, one can calculate the breakeven value of seeds (the price of seeds at which the oil factory would breakeven). This figure reaches 85 FCFA/kg, well above the prices that other FCFA zone cotton companies fetch for their seeds. This clearly demonstrates the profitability for a cotton company in operating its own oil processing facility. This profitability does not translate perfectly to regional competitors as Cameroon's domestic demand for cotton oil outstrips supply. Prices are therefore subject to less downward pressure from imports or potential substitute oils. Difficult commercial transportation in northern Cameroon means that some of SODECOTON's largest oil markets are inaccessible to competition. Table 12: Breakeven value of seeds Maroua Unit Garoua Average Seed Supply 42,279 T 74,555 116,834 Crude Oil Produced 6,639 000 liters 14,826 Yield 16% 20% Unit Production Cost Of Crude Excl Seeds 8.3 per liter 14.3 12.5 Refined Oil Produced 5,936 000 liters 13,374 Refined/Crude Oil 89% 90% 90% Refined Oil/Seeds 14% 18% 17% Quantity Of Cakes Produced 18,284 T 45,523 Yield Cake/Seeds 43% 61% 53% Selling Price Of Refined Oil (Excl Taxes) 538 FCFA/l 538 Selling Price Of Cakes (Excl Taxes) 70 FCFA/kg 70 Production Cost Of Refined Oil (Excl Seeds And Packaging) 102 FCFA/l 108 105.2 Package Cost Of Refined Oil 105 FCFA/l 122 113.5 Cost Of Bottled Refined Oil Excl Taxes 207 FCFA/l 230 219.0 Total Production Cost Of Refined Oil Excl Seeds 1,228,108 M FCFA 3,082,096 Unit Production Cost Of Cakes Excl Seeds 11.3 FCFA/kg 8.4 9.7 Total Production Cost Of Cakes Excl Seeds 206,609 MFCFA 380,370 Total Cost Excl Seeds 1,434,717 MFCFA 3,462,466 4,897,183 Selling Value Of Refined Oil 3,193,568 MFCFA 7,195,212 10,388,780 Selling Value Of Cakes 1,279,880 MFCFA 3,186,610 4,466,490 Total Selling Value 4,473,448 MFCFA 10,381,822 14,855,270 Margin 3,038,731 MFCFA 6,919,356 9,958,087 Breakeven Value Of Seeds 72 FCFA/kg 93 85 5.2.3 Financial results of SODECOTON and the cotton sector SODECOTON profited every year between 1995 and 2004. During those years the shortfall of lint cotton was counterbalanced by the profits on oils and cakes. In 2005 the company registered a net loss of 11 billion FCFA in 2005, its first loss since devaluation. SODECOTON's cumulative net profit from 1990 to 2004 was 20 billion FCFA. These profits have been used to repay existing debts (6.7 billion FCFA from 1993), to pay dividends to shareholders (9.8 billion FCFA), and to increase the Price Support Fund (11.5 billion accumulated between 1993 and 2004). The Price Support Fund was emptied in 2005 to compensate for SODECOTON's loss. Despite the favorable pre-2005 results, the cotton supply chain is presently facing fiscal hardship. SODECOTON had to use the totality of its Price Support Fund to compensate for losses in 2005. With no cash on hand, the company can expect its capital costs to increase in 21 the upcoming years. OPCC had accumulated 11 billion FCFA in its reserve fund (used to finance inputs) and another 4 billion FCFA in 2005/06 to pay a premium to producers. The 2006/07 season will probably result in a further loss, for which SODECOTON has no more reserves to balance. More than likely, some level of external support for the company will be necessary for the next season. Cameroon's cotton supply chain has been able to maintain its current level of productivity and output up to now without external support. Thanks to accumulated reserves, the company has offered producer prices higher than what would otherwise be profitable given the prevailing combination of low world prices and low dollar-to-FCFA exchange rate. However, the company can no longer draw on its financial reserves to maintain this price level. 5.2.4 Contribution of SODECOTON to the national budget Over the past 14 years, SODECOTON paid GoC 3.3 billion FCFA per year for miscellaneous taxes (export duties, taxes on land, and vehicle registration fees among others), 870 million for taxes on earnings, 2.3 million for import duties (mainly on inputs), and 350 million in dividends. The total yearly transfer to GoC averaged 6.9 billion or 10 percent of the company's total sales. 5.3. Cost competitiveness at farm level 5.3.1 Input consumption and agricultural practices The use of fertilizer on cotton started in the early 1970s and reached a peak between 1980 and 1986 when fertilizers were subsidized, as shown on Figure 11. Since that time fertilizer usage has increased and decreased in tandem with GoC and SODECOTON policies. When GoC subsidies ended, fertilizer usage dropped, but trended upwards between 1995 and 2004. In 2005, fertilizer usage dropped again as SODECOTON decided to reduce its credit offering to cover only 100 kg/ha of fertilizer. The apparent consumption4 of fertilizer in 2004/05 was 170 kg/ha, of which 50 kg was urea and 120 kg was compound fertilizer. This is lower than the amount recommended by SODECOTON (200 kg in the Extreme-North and 250 in the North). In reality, the quantity of fertilizer actually applied to cotton fields is probably much lower. According to M/E surveys, as much as 17 percent of the cotton fertilizer purchased on credit is sold by cotton farmers (probably to farmers without cotton), due to urgent cash needs. M/E surveys do not show significant difference in fertilizer consumption for cotton between farm types. The average seed consumption is 50 kg/ha. Seeds are sold to farmers at a subsidized price, but farmers have to buy pesticides for seed treatment at market values. Herbicides are used by an increasing proportion of farmers thanks to the growth of direct sowing, which skips traditional land preparation in favor of herbicide application. 49 percent of cotton farmers now practice direct sowing while 51 percent still plough their land with animal traction. Insecticide usage depends on the pest pressure, and varies accordingly from year to year. The average number of sprays is not known. Organic manure is used to a limited extent. According to the 2002/03 M/E survey, organic manure is applied in more or less equal proportions on cotton, maize and sorghum. The average area of organic manure application is 0.15 ha per farm or 1 percent of the area under 4 quantity of cotton fertilizer purchased by farmers 22 cultivation. However, if the impact of manure application is assumed to last three years, the proportion of the farm with manure rises to 45 percent. When applied, the average dose per hectare is 2.3 MT. 5.3.2 Input prices The unit price for inputs (including credit cost) is given on the table below. One should note the substantial increase in the price of compound fertilizer and urea in 2006/07 that followed recent increases in world prices. Fertilizers are sold at cost by OPCC, which for urea is twice the world price for bulk product FOB Europe (USD 304/MT or 154 FCFA/kg), reflecting the high transport cost that OPCC has to pay. The price of fertilizer is 20 percent higher on average than in Mali and Burkina Faso and points to potential cost inefficiencies in OPCC's input supply operation. Table 13: Price of inputs 2006/07 (FCFA) Unit 2005/06 2006/07 (USD) Seeds kg 15 15 0.03 Compound Fertilizer (15.20.15.6.1) kg 270 310 0.61 Urea kg 230 304 0.60 Herbicide (Gramoxone) liter 3500 3400 6.73 Insecticides (Endosulfan 500) liter 4500 4333 8.58 5.3.3 Production cost per farm type M/E surveys do not collect all data necessary to calculate production costs. In the absence of a participatory rapid appraisal, the estimated production costs are calculated on the basis of data available, complemented, when necessary, by findings in Mali and Burkina Faso. Two criteria for farm differentiation have been used: Level of equipment (using SODECOTON's typology which identifies manual farms, farms with rented equipment and farms with their own equipment) Direct sowing versus plowing: direct sowing is less labor intensive and implies the use of herbicides. In general, operations employing direct sowing show lower production costs. According to M/E surveys, the cost of hired labor (on which 50 percent of farms rely at least in part) is substantially higher than in Sahelian countries (Mali or Burkina Faso). Labor cost varies depending on the type of work, ranging between 600 and 800 FCFA per man-day (against 500 FCFA in Sahelian countries). All other conditions being equal, the total production cost (including labor, whether family or hired) is therefore slightly higher than in Sahelian countries and varies between 124 and 156 FCFA/kg. 23 Table 14: Estimated production cost depending on farming practices and type of farms (in 2006/07) Manual Rented Equipment Own Equipment Herbicid Herbicid Herbicide Ploughing e Ploughing e Ploughing Inputs (1) Fertilizer 31,000 31,000 31,000 31,000 31,000 31,000 Urea 14,896 14,896 14,896 14,896 14,896 14,896 Insecticide 17,680 17,680 17,680 17,680 17,680 17,680 Herbicide 12,354 12,354 0 12,354 0 Seeds And Treatment 750 750 750 750 750 750 Sub-Total 76,679 64,326 76,679 64,326 76,679 64,326 Rental Of Equipment Or Maintenance (2) 4,602 4,602 6,122 6,122 6,024 6,024 Depreciation Of Equipment (3) 7,000 7,000 Maintenance Of Oxen (3) 9,000 9,000 Land Renting (2) 1,927 1,927 1,927 1,927 1,927 1,927 Total Excluding Labor 83,208 70,854 84,728 72,374 100,631 88,277 Number Of Days Harvesting (30 kg/Man-Day) (3) 36 37 42 37 42 42 Number Of Days Other Works (2) 73 104 73 55 73 55 Value/Day (2) 700 700 700 700 700 700 Total Cost Of Labor 76,767 98,933 80,710 64,867 80,710 68,110 Total Cost/Ha 159,974 169,787 165,438 137,241 181,341 156,387 Yield (2) 1,090 1,090 1,120 1,120 1,259 1,259 Cost/kg 147 156 148 123 144 124 Price Of Seed Cotton (1) 175 175 175 175 175 175 Gross Income 190,750 190,750 196,000 196,000 220,325 220,325 Remuneration Of Man-Day 981 848 965 1,334 1,038 1,357 (1) data collected from SODECOTON reports (2) M/E survey 2002/03 (3) own estimate (based on findings in Mali and Burkina) The hypotheses for the calculation are the following: Inputs: all models are assumed to have the same inputs consumption level (except herbicides), which corresponds to the findings in the M/E surveys; prices are 2006/07 prices; quantities/ha are assumed to be 100 kg for complex fertilizer (corresponding to maximum allowed on credit by SODECOTON), 49 kg for urea (M/E survey), 4.1l/ha for insecticides and 36l/ha for herbicides (when used), on the basis of the 2005/06 actual consumption. Labor requirements: labor requirements excluding harvesting have been calculated by M/E unit, both for direct sowing, and ploughing without herbicide; for harvesting, a standard of 30 kg/man-day (lower than in Mali, but equal to the Burkina standard, is assumed. Yields: yield averages found by the M/E survey for each type of farm are used, assuming that yields are not significantly different whether direct sowing or ploughing. Price of seed cotton: the price received by farmers in 2006/07. The difference in production cost is only 30 FCFA/kg between manual farms, which have the highest cost, and fully equipped farms. This is a function of the small variability in yield between farm types. The yield phenomenon, peculiar for the region, can be explained by the fact that farm sizes are much more homogeneous than in Sahelian countries due to land pressure. Additionally, existing farm typologies do not take into account yield differentiation by region which is more important than the differentiation by type of farm. With a yield of 750 kg/ha, which seems to be the "normal" yield for a manual farm in the northern part of the zone, the production cost would be 200 FCFA. That cost drops to 125 FCFA with a yield of 1500 kg, which seems to be the "normal" yield for a fully equipped farm in the Southern part. 24 5.4. Return to farmers and impact on poverty 5.4.1 Return per day of work Table 15 above shows that at the price of seed cotton paid in 2006/07 (175 FCFA/kg), the return per day of work is, in all cases, above the average agricultural wage. 5.4.2 Margin after payment of inputs Between 1994 and 2004, the gross margin after payment of inputs ranged from 140,000 to 180,000 FCFA/ha, depending on the fluctuations of producer prices and yields. The rate dropped precipitously to 103,000 FCFA in 2005/06 due to a fall in the producer price and the average yield, coupled with an increase in input costs. At a 1995 constant value, the margin declined even more drastically and is currently only half of what it was after devaluation. Figure 12: Evolution of the gross margin after payment of inputs 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 cost of inputs/ha margin after payment of inputs margin after payment of inputs in 1995 prices Table 15: Evolution of the gross margin after payment of inputs 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 Yield/Ha 1,175 1,229 1,169 1,122 1,128 1,099 1,163 1,221 1,286 1,142 1,270 952 Price/kg 154 174 159 170 179 182 193 183 180 195 190 172 Gross Income/Ha 180,950 213,846 185,871 190,740 201,912 200,018 224,459 223,443 231,480 222,690 241,300 163,744 Cost Of Inputs/Ha 32,850 42,846 29,971 49,640 57,812 60,818 60,859 70,143 69,780 69,790 52,600 60,044 Margin After Payment Of Inputs 148,100 171,000 155,900 141,100 144,100 139,200 163,600 153,300 161,700 152,900 188,700 103,700 Margin After Payment Of Inputs In 1995 Prices 148,100 160,413 139,151 125,941 124,994 119,785 136,948 120,720 126,576 119,329 144,381 77,334 5.4.3 Importance of cotton in the farming system and income comparison between cotton and non-cotton farms Total income for cotton and non-cotton farms can be derived from the M/E field surveys done in 1998/99 and 2002/03 (see Annex 1). According to 2002/03 data, cotton accounts for 43 percent of farm gross total income, including production for home consumption. Cotton accounted for 57 percent of total cash income for cotton farms. 25 The total net margin of the average cotton farm, after deducting the cost of inputs, amounted to 408,000 FCFA, or 132,000 FCFA/ha (with an average of 3.1 ha/farm). That is 55,000 FCFA/person (with 7.4 people/farm). The margin increased slightly between 1998 and 2002 thanks to higher cotton yields. Non-cotton farms showed cereal yields 10 percent higher than those for cotton farms. On average, non-cotton farms sell more cereal than cotton farms despite the fact that non-cotton farms often lack self sufficiency. The average total net margin of non-cotton farms is 293,000 FCFA/farm, (153,000 FCFA/ha or 40,000 FCFA/person). According to this survey, cotton farms have higher income than non-cotton farms. However, the difference is not due to higher cereal yields or higher production value per hectare (the net margin per hectare is lower for cotton farms than other farms), but that cotton farms typically have more land. This suggests that the difference in income between the two types of farms is not due to cotton cultivation, but rather that farms with limited access to land cannot cultivate cotton for income. Unlike Burkina Faso and Mali, cotton cultivation has no obvious impact on cereals yields, which are lower on cotton farms than on others (2.3MT/ha against 2.7 MT/ha in 2002/03). This surprising finding could be explained by the fact that there is an active black market for inputs through which non-cotton farmers, who cannot receive credit for input supply directly, can still get access to inputs. The high percentage of cotton farms explains the evident surfeit of cotton inputs used on non-cotton farms. 5.4.4 Impact of cotton on poverty According to the GoC's 2002 Poverty Assessment, the incidence of poverty in the cotton- producing Extreme-North and North Regions is slightly below the rural average. However, the poverty incidence increased from 44.4 to 45.7 percent between 1996 and 2001, a period of time during which cotton developed rapidly. During the same period, poverty decreased for the overall rural population from 59.6 to 49.9 percent. The fact that poverty has not fallen with the development of cotton must be related to the economics of cotton income. At 55,000 FCFA per person per year, cotton farmers register an average yearly income far below the poverty threshold of 232,000 FCFA per person per year. Under current cropping conditions and current prices cotton is probably not profitable enough to reduce the incidence of poverty in the cotton growing region. This is evidenced by: The lack of dynamism within the cotton economy of Northern Cameroon relative to Mali or Burkina Faso; The size of farms and the area under cotton per farm remains stable due to land pressure; The level of equipment remains relatively low because farms are often too small to take full advantage of animal traction equipment; There is no evidence that cotton farms have better yields in other crops. On the other hand, cotton has probably played a major role in maintaining the rural population in the Northern part of the country. Thanks to cotton employment, the North has avoided massive migrations, and because of the relative abundance of land in the Northern Region, it has absorbed migrants from the Extreme-North into its own cotton sector. If cotton production collapsed, farmers would probably shift en masse to cereals. This would undoubtedly result in a market glut and further increase poverty. 26 5.4.5 Spillover effect of cotton on other crops Despite the fact that cereal yields are no higher on cotton farms, it can still be argued that cotton (or rather SODECOTON) had a strong spillover effect on other crops. The company developed maize varieties which reach very impressive yields given the soil fertility problems in the cotton area; moreover, the company gave the farm sector access, either directly or indirectly through sales between farmers, to inputs. SODECOTON disseminated new cropping techniques, like direct sowing with the use of herbicides, and markedly reduced illiteracy. Finally, it contributed to improvements in animal production and developed the now critical use of organic manure. 5.5. Sector sustainability Assuming stable world cotton prices, the sustainability of the cotton sector is contingent on a downward adjustment of the producer price to a level around 155 FCFA. This corresponds to the breakeven producer price at a world price of USD $0.60/lb and an exchange rate of 1.3 Euro/dollar. However, a further decline in producer prices will undoubtedly result in increased poverty in a region where the poverty index is already high. A decline in producer prices will probably also result in a further decline of areas and production, as the price elasticity of supply comes into play. Moreover, this scenario may cause an increase in the risk coefficient on input credit and make the intensive package recommended by SODECOTON less and less financially sustainable. One way to overcome this dilemma might be to develop alternate and more cost effective soil fertility management techniques, such as sowing under vegetal cover and the use of organic manure. For the cotton company as well as for farmers, production diversification might represent another improvement. For instance, SODECOTON management is considering the development of new oil seeds like sunflower or soya beans. 6 LESSONS LEARNED Cotton has undoubtedly played a key role in the rural development of Northern Cameroon although it has not generated sufficient income to eliminate poverty. To date, the cotton sector's successes have been a function of: (a) A comprehensive and relatively efficient extension system, which introduced an intensive production regime in a difficult context. The sustainability of such a costly extension services network, as well as the sustainability of the intensive packages which are presently in question because of declining world prices and unfavorable exchange rates. (b) The integration of a well managed oil production operation within SODECOTON, which has allowed the company to offset recent losses in the ginnery sector. (c) The overall efficient management of SODECOTON and a functional independence from political pressure, despite the fact that the government still has a majority stake in the company's ownership. This counter intuitive situation can be explained by: The strong regional lobby to support cotton in Northern Cameroon; The geographic isolation of cotton company headquarters far from GoC offices which reduces the risk of political pressures; The cotton company's historic profitability; 27 The support of cotton by local chieftaincy which is very powerful in Northern Cameroon; The company's strong management. Serving for years at a time, management administrations have left few obvious opportunities for politically motivated outsiders to influence decisions. (d) The close cooperation between the cotton company and producers' associations. The risks associated with the company's current business model are: A weak financial position which necessitates a reduction in producer prices in order to avoid further losses. This will likely have a negative impact on poverty and production in the absence of alternative cash crops. Precarious soil fertility, which demands innovative and cost effective soil fertility management techniques in an area where land and demographic pressures are limiting factors for profit and production. The geography of the cotton belt which makes logistics costly and reduces the competitiveness of the cotton sector. The deterioration of good governance and the rise of corruption in Cameroon, which is a chronic sector-wide liability. In such a context, the future privatization process should be carefully planned and studied in order to avoid dismantling the sector. The process must ensure transparency and avoid attracting non-professional investors. At the same time it must remain open to the input of producers' associations in the management of the sector and take into account the need for an efficient rural development support and extension system in the cotton belt. 28 ANNEX 1: INCOME PER FARM IN 1998 AND 2002 Income/Farm Cotton Farms Non Cotton Farms Productio Net Productio Net Gross n Cost Margin Gross n Cost Margin Productio Pric % Gross Monetary (Excluding (Excluding Productio Pric % Gross Monetary (Excluding (Excluding n e Sold Income % Income % Labor) Labor) n e Sold Income % Income % Labour) Labour) In 1998/99 100 198,95 Cotton 1,150 173 % 0 39% 198,950 54% 0 0 0% 0 0% 41 Maize 1,051 80 42% 84,080 16% 35,314 9% 404 88 % 35,552 15% 14,576 9% 24 Sorghum 1,047 70 22% 73,290 14% 16,124 4% 1153 67 % 77,251 32% 18,540 12% 48 Groundnut 357 208 52% 74,256 14% 38,613 10% 91 231 % 21,021 9% 10,090 7% Other Crops (Onions And Misc) 27,000 5% 27,000 7% 71,000 29% 71,000 46% 457,57 204,82 Total Agriculture 6 89% 316,001 85% 4 84% 114,207 74% Livestock 37,300 7% 37,300 10% 21,500 9% 21,500 14% Other 18,500 4% 18,500 5% 18,500 8% 18,500 12% 513,37 100 100 244,82 100 100 Total Farm Income 6 % 371801 % 147,400 365,976 4 % 154,207 % 62,000 182,824 In 2002/03 100 251,30 Cotton 1,436 175 % 0 43% 251,300 57% 0 0 0% 0 0% 105,94 80 123,31 Maize 1,394 76 50% 4 18% 52,972 12% 1561 79 % 9 34% 98,655 40% 20 101,50 Sorghum 895 75 19% 67,125 12% 12,754 3% 1223 83 % 9 28% 20,302 8% 54 Groundnut 393 210 58% 82,530 14% 47,867 11% 133 220 % 29,260 8% 15,800 6% Other Crops (Onions And Misc) 24,000 4% 24,000 5% 59,000 16% 59,000 24% 530,89 313,08 Agriculture 9 91% 388,893 88% 8 86% 193,757 79% Livestock 35,000 6% 35,000 8% 28,000 8% 28,000 11% 29 Other 17,000 3% 17,000 4% 25,000 7% 25,000 10% 582,89 100 100 366,08 100 100 Total Farm Income 9 % 440,893 % 174,000 40,899 8 % 246,757 % 73,000 293,088 source: M/E SODECOTON survey 30 ANNEX 2: BIBLIOGRAPHY Rapports annuels de la Direction de la Production agricole de SODECOTON Rapports d'activité de SODECOTON Impact des nouvelles techniques culturales sur l'évolution des surfaces de coton; M/E SODECOTON; Nathan Bello; Adoum Yaouba, April 2002 Annuaires statistiques et résultats de l'enquête permanente: S/E SODECOTON; November, 2005 Utilisation des revenus 04/05 et gestion des intrants agricoles 05/06 par les exploitations agricoles: S/E SODECOTON; March, 2006 Etude comparative des coûts des filières coton au Burkina, au Mali et au Cameroun: N. Gergely; Agence française du Développement; 2004 31 Africa Region Working Paper Series Series # Title Date Author ARWPS 1 Progress in Public Expenditure Management in January 1999 C. Kostopoulos Africa: Evidence from World Bank Surveys ARWPS 2 Toward Inclusive and Sustainable Development March 1999 Markus Kostner in the Democratic Republic of the Congo ARWPS 3 Business Taxation in a Low-Revenue Economy: June 1999 Ritva Reinikka A Study on Uganda in Comparison with Duanjie Chen Neighboring Countries ARWPS 4 Pensions and Social Security in Sub-Saharan October 1999 Luca Barbone Africa: Issues and Options Luis-A. Sanchez B. ARWPS 5 Forest Taxes, Government Revenues and the January 2000 Luca Barbone Sustainable Exploitation of Tropical Forests Juan Zalduendo ARWPS 6 The Cost of Doing Business: Firms' Experience June 2000 Jacob Svensson with Corruption in Uganda ARWPS 7 On the Recent Trade Performance of Sub- August 2000 Francis Ng and Saharan African Countries: Cause for Hope or Alexander J. Yeats More of the Same ARWPS 8 Foreign Direct Investment in Africa: Old Tales November Miria Pigato and New Evidence 2000 ARWPS 9 The Macro Implications of HIV/AIDS in South November Channing Arndt Africa: A Preliminary Assessment 2000 Jeffrey D. Lewis ARWPS 10 Revisiting Growth and Convergence: Is Africa December C. G. Tsangarides Catching Up? 2000 ARWPS 11 Spending on Safety Nets for the Poor: How January 2001 William J. Smith Much, for How Many? The Case of Malawi ARWPS 12 Tourism in Africa February 2001 Iain T. Christie D. E. Crompton ARWPS 13 Conflict Diamonds February 2001 Louis Goreux ARWPS 14 Reform and Opportunity: The Changing Role and March 2001 Jeffrey D. Lewis Patterns of Trade in South Africa and SADC ARWPS 15 The Foreign Direct Investment Environment in March 2001 Miria Pigato Africa ARWPS 16 Choice of Exchange Rate Regimes for April 2001 Fahrettin Yagci Developing Countries ARWPS 18 Rural Infrastructure in Africa: Policy Directions June 2001 Robert Fishbein ARWPS 19 Changes in Poverty in Madagascar: 1993-1999 July 2001 S. Paternostro J. Razafindravonona David Stifel ARWPS 20 Information and Communication Technology, August 2001 Miria Pigato Poverty, and Development in sub-Sahara Africa and South Asia 32 Africa Region Working Paper Series Series # Title Date Author ARWPS 21 Handling Hierarchy in Decentralized Settings: September Navin Girishankar A. Governance Underpinnings of School 2001 Alemayehu Performance in Tikur Inchini, West Shewa Zone, Yusuf Ahmad Oromia Region ARWPS 22 Child Malnutrition in Ethiopia: Can Maternal October 2001 Luc Christiaensen Knowledge Augment The Role of Income? Harold Alderman ARWPS 23 Child Soldiers: Preventing, Demobilizing and November Beth Verhey Reintegrating 2001 ARWPS 24 The Budget and Medium-Term Expenditure December David L. Bevan Framework in Uganda 2001 ARWPS 25 Design and Implementation of Financial January 2002 Guenter Heidenhof H. Management Systems: An African Perspective Grandvoinnet Daryoush Kianpour B. Rezaian ARWPS 26 What Can Africa Expect From Its Traditional February 2002 Francis Ng Exports? Alexander Yeats ARWPS 27 Free Trade Agreements and the SADC February 2002 Jeffrey D. Lewis Economies Sherman Robinson Karen Thierfelder ARWPS 28 Medium Term Expenditure Frameworks: From February 2002 P. Le Houerou Concept to Practice. Preliminary Lessons from Robert Taliercio Africa ARWPS 29 The Changing Distribution of Public Education February 2002 Samer Al-Samarrai Expenditure in Malawi Hassan Zaman ARWPS 30 Post-Conflict Recovery in Africa: An Agenda for April 2002 Serge Michailof the Africa Region Markus Kostner Xavier Devictor ARWPS 31 Efficiency of Public Expenditure Distribution May 2002 Xiao Ye and Beyond: A report on Ghana's 2000 Public S. Canagaraja Expenditure Tracking Survey in the Sectors of Primary Health and Education ARWPS 34 Putting Welfare on the Map in Madagascar August 2002 Johan A. Mistiaen Berk Soler T. Razafimanantena J. Razafindravonona ARWPS 35 A Review of the Rural Firewood Market Strategy August 2002 Gerald Foley in West Africa P. Kerkhof, D. Madougou ARWPS 36 Patterns of Governance in Africa September Brian D. Levy 2002 ARWPS 37 Obstacles and Opportunities for Senegal's September Stephen Golub International Competitiveness: Case Studies of 2002 Ahmadou Aly Mbaye the Peanut Oil, Fishing and Textile Industries 33 Africa Region Working Paper Series Series # Title Date Author ARWPS 38 A Macroeconomic Framework for Poverty October 2002 S. Devarajan Reduction Strategy Papers : With an Application Delfin S. Go to Zambia ARWPS 39 The Impact of Cash Budgets on Poverty November Hinh T. Dinh Reduction in Zambia: A Case Study of the 2002 Abebe Adugna Conflict between Well Intentioned Bernard Myers Macroeconomic Policy and Service Delivery to the Poor ARWPS 40 Decentralization in Africa: A Stocktaking Survey November Stephen N. Ndegwa 2002 ARWPS 41 An Industry Level Analysis of Manufacturing December Professor A. Mbaye Productivity in Senegal 2002 ARWPS 42 Tanzania's Cotton Sector: Constraints and December John Baffes Challenges in a Global Environment 2002 ARWPS 43 Analyzing Financial and Private Sector Linkages January 2003 Abayomi Alawode in Africa ARWPS 44 Modernizing Africa's Agro-Food System: February 2003 Steven Jaffee Analytical Framework and Implications for Ron Kopicki Operations Patrick Labaste Iain Christie ARWPS 45 Public Expenditure Performance in Rwanda March 2003 Hippolyte Fofack C. Obidegwu Robert Ngong ARWPS 46 Senegal Tourism Sector Study March 2003 Elizabeth Crompton Iain T. Christie ARWPS 47 Reforming the Cotton Sector in SSA March 2003 Louis Goreux John Macrae ARWPS 48 HIV/AIDS, Human Capital, and Economic April 2003 Channing Arndt Growth Prospects for Mozambique ARWPS 49 Rural and Micro Finance Regulation in Ghana: June 2003 William F. Steel Implications for Development and Performance David O. Andah of the Industry ARWPS 50 Microfinance Regulation in Benin: Implications June 2003 K. Ouattara of the PARMEC LAW for Development and Performance of the Industry ARWPS 51 Microfinance Regulation in Tanzania: June 2003 Bikki Randhawa Implications for Development and Performance Joselito Gallardo of the Industry ARWPS 52 Regional Integration in Central Africa: Key June 2003 Ali Zafar Issues Keiko Kubota ARWPS 53 Evaluating Banking Supervision in Africa June 2003 Abayomi Alawode 34 Africa Region Working Paper Series Series # Title Date Author ARWPS 54 Microfinance Institutions' Response in Conflict June 2003 Marilyn S. Manalo Environments: Eritrea- Savings and Micro Credit Program; West Bank and Gaza ­ Palestine for Credit and Development; Haiti ­ Micro Credit National, S.A. AWPS 55 Malawi's Tobacco Sector: Standing on One June 2003 Steven Jaffee Strong leg is Better than on None AWPS 56 Tanzania's Coffee Sector: Constraints and June 2003 John Baffes Challenges in a Global Environment AWPS 57 The New Southern AfricanCustoms Union June 2003 Robert Kirk Agreement Matthew Stern AWPS 58a How Far Did Africa's First Generation Trade June 2003 Lawrence Hinkle Reforms Go? An Intermediate Methodology for A. Herrou-Aragon Comparative Analysis of Trade Policies Keiko Kubota AWPS 58b How Far Did Africa's First Generation Trade June 2003 Lawrence Hinkle Reforms Go? An Intermediate Methodology for A. Herrou-Aragon Comparative Analysis of Trade Policies Keiko Kubota AWPS 59 Rwanda: The Search for Post-Conflict Socio- October 2003 C. Obidegwu Economic Change, 1995-2001 AWPS 60 Linking Farmers to Markets: Exporting Malian October 2003 Morgane Danielou Mangoes to Europe Patrick Labaste J-M. Voisard AWPS 61 Evolution of Poverty and Welfare in Ghana in the October 2003 S. Canagarajah 1990s: Achievements and Challenges Claus C. Pörtner AWPS 62 Reforming The Cotton Sector in Sub-Saharan November Louis Goreux Africa: SECOND EDITION 2003 AWPS 63 (E) Republic of Madagascar: Tourism Sector Study November Iain T. Christie 2003 D. E. Crompton AWPS 63 (F) République de Madagascar: Etude du Secteur November Iain T. Christie Tourisme 2003 D. E. Crompton AWPS 64 Migrant Labor Remittances in Africa: Reducing Novembre Cerstin Sander Obstacles to Development Contributions 2003 Samuel M. Maimbo AWPS 65 Government Revenues and Expenditures in January 2004 Francisco G. Carneiro Guinea-Bissau: Casualty and Cointegration Joao R. Faria Boubacar S. Barry AWPS 66 How will we know Development Results when June 2004 Jody Zall Kusek we see them? Building a Results-Based Ray C. Rist Monitoring and Evaluation System to Give us the Elizabeth M. White Answer AWPS 67 An Analysis of the Trade Regime in Senegal June 2004 Alberto Herrou-Arago (2001) and UEMOA's Common External Trade Keiko Kubota Policies 35 Africa Region Working Paper Series Series # Title Date Author AWPS 68 Bottom-Up Administrative Reform: Designing June 2004 Talib Esmail Indicators for a Local Governance Scorecard in Nick Manning Nigeria Jana Orac Galia Schechter AWPS 69 Tanzania's Tea Sector: Constraints and June 2004 John Baffes Challenges AWPS 70 Tanzania's Cashew Sector: Constraints and June 2004 Donald Mitchell Challenges in a Global Environment AWPS 71 An Analysis of Chile's Trade Regime in 1998 July 2004 Francesca Castellani and 2001: A Good Practice Trade Policy A. Herrou-Arago Benchmark Lawrence E. Hinkle AWPS 72 Regional Trade Integration inEast Africa: Trade August 2004 Lucio Castro and Revenue Impacts of the Planned East African Christiane Kraus Community Customs Union Manuel de la Rocha AWPS 73 Post-Conflict Peace Building in Africa: The August 2004 Chukwuma Obidegwu Challenges of Socio-Economic Recovery and Development AWPS 74 An Analysis of the Trade Regime in Bolivia August 2004 Francesca Castellani in2001: A Trade Policy Benchmark for low Alberto Herrou- Income Countries Aragon Lawrence E. Hinkle AWPS 75 Remittances to Comoros- Volumes, Trends, October 2004 Vincent da Cruz Impact and Implications Wolfgang Fendler Adam Schwartzman AWPS 76 Salient Features of Trade Performance in Eastern October 2004 Fahrettin Yagci and Southern Africa Enrique Aldaz-Carroll AWPS 77 Implementing Performance-Based Aid in Africa November Alan Gelb 2004 Brian Ngo Xiao Ye AWPS 78 Poverty Reduction Strategy Papers: Do they December Rene Bonnel matter for children and Young people made 2004 Miriam Temin vulnerable by HIV/AIDS? Faith Tempest AWPS 79 Experience in Scaling up Support to Local December Jean Delion Response in Multi-Country Aids Programs (map) 2004 Pia Peeters in Africa Ann Klofkorn Bloome AWPS 80 What makes FDI work? A Panel Analysis of the February 2005 Kevin N. Lumbila Growth Effect of FDI in Africa AWPS 81 Earnings Differences between Men and Women February 2005 Kene Ezemenari in Rwanda Rui Wu AWPS 82 The Medium-Term Expenditure Framework: The April 2005 Chukwuma Obidegwu Challenge of Budget Integration in SSA countries AWPS 83 Rules of Origin and SADC: The Case for change June 2005 Paul Brenton in the Mid Term Review of the Trade Protocol Frank Flatters Paul Kalenga 36 Africa Region Working Paper Series Series # Title Date Author AWPS 84 Sexual Minorities, Violence and AIDS in Africa July 2005 Chukwuemeka Anyamele Ronald Lwabaayi Tuu-Van Nguyen, and Hans Binswanger AWPS 85 Poverty Reducing Potential of Smallholder July 2005 Paul B. Siegel Agriculture in Zambia: Opportunities and Jeffrey Alwang Constraints AWPS 86 Infrastructure, Productivity and Urban Dynamics July 2005 Zeljko Bogetic in Côte d'Ivoire An empirical analysis and policy Issa Sanogo implications AWPS 87 Poverty in Mozambique: Unraveling Changes August 2005 Louise Fox and Determinants Elena Bardasi, Katleen V. Broeck AWPS 88 Operational Challenges: Community Home August 2005 N. Mohammad Based Care (CHBC) forPLWHA in Multi- Juliet Gikonyo Country HIV/AIDS Programs (MAP) forSub- Saharan Africa AWPS 90 Kenya: Exports Prospects and Problems September Francis Ng 2005 Alexander Yeats AWPS 91 Uganda: How Good a Trade Policy Benchmark September Lawrence E. Hinkle for Sub-Saharan-Africa 2005 Albero H. Aragon Ranga Krishnamani Elke Kreuzwieser AWPS 92 Community Driven Development in South October 2005 David Everatt Lulu Africa, 1990-2004 Gwagwa AWPS 93 The Rise of Ghana''s Pineapple Industry from November Morgane Danielou Successful take off to Sustainable Expansion 2005 Christophe Ravry AWPS 94 South Africa: Sources and Constraints of Long- December Johannes Fedderke Term Growth, 1970-2000 2005 AWPS 95 South Africa''s Export Performance: December Lawrence Edwards Determinants of Export supply 2005 Phil Alves AWPS 96 Industry Concentration in South African December Gábor Szalontai Manufacturing: Trends and Consequences, 1972- 2005 Johannes Fedderke 96 AWPS 97 The Urban Transition in Sub-Saharan Africa: December Christine Kessides Implications for Economic Growth and Poverty 2005 Reduction AWPS 98 Measuring Intergovernmental Fiscal Performance May 2006 Navin Girishankar in South Africa David DeGroot Issues in Municipal Grant Monitoring T.V. Pillay AWPS 99 Nutrition and Its determinants in Southern July 2006 Jesper Kuhl Ethiopia - Findings from the Child Growth Luc Christiaensen Promotion Baseline Survey AWPS 100 The Impact of Morbidity and Mortality on September Zara Sarzin Municipal Human Resources and Service 2006 Delivery 37 Africa Region Working Paper Series Series # Title Date Author AWPS 101 Rice Markets in Madagascar in Disarray: September Bart Minten Policy Options for Increased Efficiency and Price 2006 Paul Dorosh Stabilization Marie-Hélène Dabat, Olivier Jenn-Treyer, John Magnay and Ziva Razafintsalama AWPS 102 Riz et Pauvrete a Madagascar Septembre Bart Minten 2006 AWPS 103 ECOWAS- Fiscal Revenue Implications of the April 2007 Simplice G. Zouhon- Prospective Economic Partnership Agreement Bi with the EU Lynge Nielsen AWPS 104(a) Development of the Cities of Mali June 2007 Catherine Farvacque- Challenges and Priorities V. Alicia Casalis Mahine Diop Christian Eghoff AWPS 104(b) Developpement des villes Maliennes June 2007 Catherine Farvacque- Enjeux et Priorites V. Alicia Casalis Mahine Diop Christian Eghoff AWPS 105 Assessing Labor Market Conditions In June 2007 David Stifel Madagascar, 2001-2005 Faly H. Rakotomanana Elena Celada AWPS 106 An Evaluation of the Welfare Impact of Higher June 2007 Noro Andriamihaja Energy Prices in Madagascar Giovanni Vecchi AWPS 107 The Impact of The Real Exchange Rate on November Mireille Linjouom Manufacturing Exports in Benin 2007 AWPS 108 Building Sector concerns into Macroeconomic December Antonio Estache Financial Programming: Lessons from Senegal 2007 Rafael Munoz and Uganda AWPS 109 An Accelerating Sustainable, Efficient and December Hans P. Binswanger Equitable Land Reform: Case Study of the 2007 Roland Henderson Qedusizi/Besters Cluster Project Zweli Mbhele Kay Muir-Leresche AWPS 110 Development of the Cites of Ghana January 2008 Catherine Farvacque- ­ Challenges, Priorities and Tools Vitkovic Madhu Raghunath Christian Eghoff Charles Boakye AWPS 111 Growth, Inequality and Poverty in Madagascar, April 2008 Nicolas Amendola 2001-2005 Giovanni Vecchi AWPS 112 Labor Markets, the Non-Farm Economy and April 2008 David Stifel Household Livelihood Strategies in Rural Madagascar 38 Africa Region Working Paper Series Series # Title Date Author AWPS 113 Profile of Zambia's Smallholders: Where and June 2008 Paul B. Siegel Who are the Potential Beneficiaries of Agricultural Commercialization? AWPS 114 Promoting Sustainable Pro-Poor Growth in June 2008 Michael Morris Rwandan Agriculture: What are the Policy Liz Drake Options? Kene Ezemenary Xinshen Diao AWPS 115 The Rwanda Industrial and Mining Survey June 2008 Tilahun Temesgen (RIMS), 2005 Survey Report and Major Findings Kene Ezemenari Louis Munyakazi Emmanuel Gatera AWPS 116 Taking Stock of Community Initiatives in the June 2008 Jean Delion Fight against HIV/AIDS in Africa: Experience, Elizabeth Ninan Issues, and Challenges AWPS 117 Travaux publics à Haute Intensité de Main d' August 2008 Nirina H. Andrianjaka Oeuvre (HIMO) pour la Protection Sociale à Annamaria Milazzo Madagascar : Problèmes et Options de Politique AWPS 118 Madagascar : De Jure labor Regulations and August 2008 Gaelle Pierre Actual Investment Climate Constraints AWPS 119 Tax Compliance Costs for Businesses in South August 2008 Jacqueline Coolidge Africa, Provincial Analysis Domagoj Ilic Gregory Kisunko AWPS 120 Umbrella Restructuring of a Multicountry October 2008 Nadeem Mohammad Program (Horizontal APL) Restructuring the Norbert Mugwagwa Multicountry HIV>AIDS Program (MAP) in Africa AWPS 121 Comparative Analysis of Organization and October 2008 Gérald Estur Performance of African Cotton Sectors AWPS 122 The Cotton Sector of Zimbabwe February 2009 Colin Poulton Benjamine Hanyani- Mlambo AWPS 123 The Cotton Sector of Uganda March 2009 John Baffes AWPS 124 The Cotton Sector of Zambia March 2009 David Tschirley/ Stephen Kabwe AWPS 125 The Cotton Sector of Benin March 2009 Nicolas Gergely AWPS 126 The Cotton Sector of Cameroon March 2009 Nicolas Gergely 39