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Revitalising Africa's cotton sector

Opportunity as prices rise and demand grows

Market conditions are ripe for a resurgence of African cotton farming – recent global prices are more than double their average for the last 20 years. And prospects for sustained demand appear good as a number of developing country economies, as a by-product of continuing growth, search for greater supplies of cotton and textiles, Carla September reports.

 

Experts and African government officials and their development partners are meeting in Benin this week to decide on joint efforts to overcome obstacles blocking the way to expanded cotton production. The intent is to win greater profits for African farmers and broader and more long-lasting benefits for African economies.

* Road map for more yields, financing, domestic processing

These experts and government officials say steps must be taken to increase yields, since these lag behind global averages, and to provide financing so that farmers and domestic marketers can be more efficient and competitive. They also say concerted efforts should be made to ensure more domestic processing of raw cotton into finished products so that more jobs are created for Africans – and so that the higher wages and economic stability associated with manufacturing can devolve to Africans rather than to firms and economies overseas.

The outcome of the Pan-African Cotton Meeting on 27–29 June 2011 is intended to be a “road map” for accomplishing those goals along with a more detailed action plan. The meeting is organized by UNCTAD in collaboration with a series of agencies concerned with African farming: the Comprehensive Africa Agriculture Development Programme (CAADP) of the coordinating agency for the New Partnership for Africa’s Development (NEPAD), the Steering Committee of the European Union-Africa Partnership on Cotton (COS-Cotton), the Secretariat of the African Caribbean, the Pacific Group of States, and the Common Fund for Commodities (CFC). Sponsors include, most notably, the Government of Benin, and also the CFC, the European Union, and the Centre for the Development of Enterprise (CDE). Attending are representatives of regional economic communities, governments, producer organizations, national industries, international buyers of cotton, and development experts from international organizations.

Pascal Iréné Koupaki, Prime Minister of Benin, opened the three-day conference by citing the important role cotton plays in Benin’s economy and in other economies of the region, terming it not only a vital source of revenue but also critical for employment. Setting the broad outlines of a road map for transforming the growth and marketing of African cotton will be vital for attracting investment in the sector, he said. The Prime Minister added that he hopes international financial and technical partners will help in implementing the road map.

* The opportunity of South-South trade

UNCTAD Secretary-General Supachai Panitchpakdi said several trends need to be reversed. While global cotton lint yields have increased from about 500 kg per hectare in the mid-1980s to 700 kg per hectare on average today, in Africa yields have fallen from 400 to 300 kg per hectare, he said. In addition, “value added” activities in relation to cotton – that is, processing of raw cotton and its manufacture into such products as textiles and clothing – has remained stable for several decades or even has decreased in Africa, while value added activities in Asia have skyrocketed. For example, the volume of cotton yarn produced in Asia has almost quadrupled in the last 20 years, while its production in Africa has fallen by half.

Supachai said the cotton sector “requires appropriate institutions, investment, and the adoption of better technologies”. The Secretary-General also told the meeting that South-South trade – that is, growing trade between developing countries led by such economic giants as China and India – “provides an important opportunity”.

The “road map” coming out of the Pan-African Cotton meeting is intended to focus on the three priorities of increasing productivity, improving marketing, and increasing value addition.

Twenty-seven of Africa’s 53 countries produce cotton. Twenty are least developed countries (LDCs). It is estimated that the cotton sector employs directly or indirectly 15 million people in the West and Central African sub-region, where the commodity is most intensively grown. In this sub-region, a number of nations depend on cotton for 30 to 60% of their export revenues.

* Falling production in the Cotton-4

After reaching a peak in 2001 and 2002, when African countries ranked second in global cotton exports, production has been falling. In 2007–2008, Africa accounted for 5.6% of world cotton production. Low prices – for which subsidies paid by some developed and developing country governments to their domestic producers are sometimes blamed – made it difficult for comparatively inefficient African producers to earn profits. As a result, less cotton has been grown in recent years. Farmers in the so-called “Cotton 4” countries (Benin, Burkina Faso, Mali and Chad), abandoned the sector to such an extent that its production has fallen by half from its 2001–2002 peak.

Declining African production has had the cascading effect of increasing operating costs for Africa-based cotton marketers and manufacturers. The result, experts at the meeting said, has been heavy losses and increased dependence on government support in a region where millions of livelihoods are connected with cotton farming.

Recently, however, the situation has turned. Cotton prices a year ago averaged about 90 cents a pound – significantly above the average of preceding years – and then climbed as high as 200 cents a pound in February. In May, prices averaged 160 cents per pound, more than double the average price of the last 20 years.

Posted: 30 June 2011

Recommended citation: September, Carla (2011) 'Revitalising Africa's cotton sector', World Economy & Development In Brief, 30 Jun 2011, Luxembourg (www.wdev.eu)


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