Power In West African cotton supply chains

Transcription

1 Power In West African cotton supply chains A report by Simon Ferrigno, Daouda Traoré and Silvere Tovignan for Fair Trade Advocacy Office, Brussels February 2016

2 Table of Contents Acronyms...5 Introduction...7 Definitions Power structure and problem analysis of West-African cotton sector Cotton context Structural problems The cotton sector in West Africa: locally critical, globally little influential Raw material priorities and development impacts An increasingly financialised trading context Physical infrastructure and cotton A brief history the evolution of West African cotton sectors Post colonial cotton sector organisation and reform: turmoil and crisis What influences West African cotton producers? Producer power UNCTAD road map National and regional policy International policy Policy tools for African exports: EU and US policies International markets and trade Buffer stocks Child labour Subsidies Prices Cotton sector reforms Value chain set-up and stakeholder activity in the C4 countries Risk management and Smoothing funds in West and Central Africa cotton sector Producer participation in governance and supply chains Benin Burkina Faso Chad

3 1.4.6 Mali Senegal Influence map The benefits and disadvantages of the governance models in the C4 and Senegal The role of Fairtrade certification and the challenges it faces Fairtrade in West Africa Burkina Faso Mali Senegal Barriers faced by producers in marketing their Fairtrade cotton AProCA perspective on Fairtrade cotton and Fairtrade-organic cotton What governance structures support the spread of Fairtrade values and practices Moving potential blockages Best practices in West Africa Government policy Regional policy International partnerships Research Finance AProCA Producer organisations Subsidies and interventionist policies in other countries UEMOA interventions in the West African Cotton sector African Union OHADA Other international initiatives Conclusions Recommendations Production Further research The Fair Trade movement Capacity building

4 4.5 Markets & Finance National governments (in West Africa and in consumer countries that purchase form them or are potential markets) EU G International Institutions...79 List of persons interviewed or contacted...81 References and bibliography

5 Acronyms AFD: Agence Française de Développement (French Development Agency) AIC: Association Interprofessionnelle du Coton (Cotton Inter-Professional Association) AICB: Association Interprofessionnelle du Coton du Burkina (Burkina Faso Cotton InterProfessional Association) AProCA: Association des Producteurs du Coton Africain (African Cotton Producers Association) APROCOB: Association Professionnelle des Sociétés Cotonnières du Burkina (Burkina Faso Cotton Companies Professional Association) ARSC: Autorité de Réglementation du Secteur Coton (Cotton Sector Regulatory Authority) ASIC: Association Interprofessionnelle du Coton (Sénégal) (Cotton Inter-Professional Association of Senegal) AU : African Union BiCIA-B: Banque Internationale pour le Commerce et l'industrie Burkina (International Bank for Commerce and Industry, part of the BNP-Paribas group) CFDT : Compagnie Française de Développement des Fibres et Textiles (French Fibre and Textiles Development Company, now Geocoton) CIRAD: Centre de Coopération Internationale en Recherche Agronomique pour le Développement (Centre for International Cooperation on Development focused Agricultural Research) CMDT : Compagnie Malienne de Développement du Textile (Malian Textiles Development Company) Dagris: Developpement des Agro-industries du Sud (Development of Agro-Industry in the South, now Geocoton) FLO: Fairtrade Labelling Organisation (now Fairtrade International) FNPC : Fédération Nationale des Producteurs du Coton (National Cotton Producers' Federation GPC : Groupement des Producteurs du Coton (Cotton Producers' Group) ICAC : International Cotton Advisory Committee INERA: Institut de l'environemment et de Recherches Agricoles (Institute for the Environment and Agricultural Research) ITRAD: Institut Tchadien de Recherche Agronomique pour le Developpement (Chad Institute for Agricultural Research for Development) MAG : Marché auto-geré (Self-managed Market) MOBIOM: Mouvement Biologique Malien (Malian Organic Movement) MRSC: Mission de Restructuration du Secteur Coton (Mission for Cotton Sector Reform) OBEPAB: Organisations Beninoise Pour la Promotion de l'agriculture Biologique (Beninese Organisation for the Promotion of Organic Agriculture) OHVN : Office de la Haute Vallée du Niger (Office of the High Valley of Niger) SECO : Swiss Economic Cooperation Office SODEFITEX : Société de Développement des Fibres et Textiles (Fibre and Textiles Development Company) SOFITEX : Société des Fibres et Textiles (Fibres and Textiles Company) SONAPRA : Société Nationale pour la Promotion Agricole (National Company for Agricultural Promotion) TPP: Trans Pacific Partnership TTIP : Trans-Atlantic Trade and Investment Partnership 5

6 UEMOA: Union Économique et Monétaire Ouest Africain (West African Economic and Monetary Union) UNPCB: Union Nationale des Producteurs de Coton du Burkina (National Union of Burkina Faso Cotton Producers) UNPCT: Union Nationale des Producteurs de Coton du Tchad (National Union for Chad's Cotton Producers) USDA FAS: United States Department of Agriculture Foreign Advisory Service WCA: West and Central Africa WFTO: World Fair Trade Organisation WTO : World Trade Organization 6

7 Introduction This study investigates the question of power in the cotton supply chain in five countries of Francophone West Africa (the so-called C4: Benin, Burkina Faso, Chad and Mali, and also Senegal). It explicitly looks at this from the perspective of cotton farmers, and their power (and that of unions or associations who represent them) to influence, speak out, govern and change outcomes in the cotton sector1. A secondary aim is to look at the influence these cotton producing countries have on external forces, and at the power that in turn influences producers, from governments, from cotton companies, the market and external institutions, regions and countries. Who has power? Who can and does do what? What constrains them? Is anything changing? And what can be done? The study also looks at the role and potential of Fair Trade (and organic, and to some degree other sustainable cottons) to redress the balance of power, given that we already know that such programmes have positive impacts2, but need scaling up. How much can be done, and what policy changes and support can enable this to happen are explored in the report, covering obstacles and opportunities (see Section 2 in general, as well as Section 4 for various recommendations). We also explore some reasons why West African governments and other bodies and institutions (e.g., the EU) should support more Fair Trade in cotton. As the least industrialised cotton growing region, Francophone West Africa is in the unique position of being almost entirely export dependant, and a price taker (unable to influence global prices). This is largely a colonial and post-colonial legacy. Furthermore, while there are some relatively large producing countries in the region, they are small by international standards (especially compared to the largest 4-5 countries. See Table 1). West Africa's larger competitors benefit from either large volumes (and well organised sectors) or by combining production and processing in one place. These countries, and international markets determine prices, and influence. However, while clearly in a marginal position, is the C4 and Senegalese situation improved or worsened by domestic policies, governance and organisation? Is it a black and white situation, or rather more grey? And what other factors such as productivity, or quality, affect producers? This study took place in the context of a campaign on power by the Fair Trade Advocacy Office (FTAO 2014). The report, 'Who's Got the Power? Tackling Imbalances in Agricultural Supply Chains' looks at unfair trading practices and imbalances of power in agriculture. The present report looks specifically at the case of cotton, and whether trade patterns in West Africa fit into one of the four supply chain models identified in earlier work in the campaign (vertical integration, captive setups, relational networks or modular chains. See section 1.3). Definitions There is a multitude of terms used in discussing Fair Trade, including those that refer to certified and traded products, and those that refer to programmes, concepts and approaches. In this document, we are guided by the conceptual definition from the WFTO-Fairtrade International 1 Power is defined (OED) as 1. The ability to do something 2. The ability to influence people or events 3. The right or authority to do something and 4. Political authority or control 2 For cotton specific studies, see Baseline Study of Fairtrade Cotton in West Africa by Aideenvironment (2016, forthcoming March 2016), The economic impact of sustainability standards in the cotton sector in Africa by Ferrigno S. & Monday P GIZ: Eschborn 2014 & Fairtrade Cotton: assessing impact in Mali, Senegal, Cameroon and India (NRI) by Nelson V. and Smith S. (2011). Many other studies have looked at the benefits of Fairtrade for other commodities as well. 7

8 Charter of Fair Trade Principles (which recognises two complementary Fair Trade Channels), under which Fair Trade is "... a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers especially in the South. Fair Trade Organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade."3. This definition is useful for the purposes of examining power in supply chains. The present report is also more focused on the Fairtrade certification system as promoted by Fairtrade International (which is more applicable to small cotton farmers than the Fair Trade Accreditation System by the World Fair Trade Organisation WFTO). Fairtrade International define Fairtrade as 'an alternative approach to conventional trade based on a partnership between producers and traders, businesses and consumers.', while WFTO define Fair Trade as '...changing the practices in the supply chain to follow the 10 Principles of Fair Trade. To be able to deliver the promise of Fair Trade, practices from the production to the sale of products should pass the global Fair Trade standard set by WFTO. Fair Trade scrutiny should not only focus on the production sphere but also on the buying behaviour of organisations.'. In this report, when the term 'Fair Trade' is used, it refers to the first definition. When Fairtrade is used, it refers specifically to the Fairtrade International definition, its production standards and the products and producers certified under it. Farmers growing certified Fairtrade cotton are referred to as Fairtrade producers, and field level projects with Fairtrade Producers as 'Fairtrade projects'. Cotton certified under Fairtrade International standards is referred to in this report as Fairtrade Cotton. Sustainable cotton is used as a catch-all term to cover certified and/or verified cotton programmes aiming to reduce the environmental and/or social problems in cotton. These are organic cotton, Better Cotton and Cotton made in Africa as well as Fairtrade cotton. Organic cotton refers to cotton certified under organic standards, for example under EU or US regulations. 3 See more at 8

9 1. Power structure and problem analysis of West-African cotton sector 1.1 Cotton context Cotton shows off the best and the worst of human potential clever use of a renewable natural resource to provide textiles (while using by-products for food (cotton seed oil), animal feed and fertiliser (seed cake)), but serious abuses as well (trade inequalities (subsidies), human labour abuses (forced, bonded and child labour) and environmental degradation (overuse of pesticides, soil erosion, etc. Ferrigno 2012, FTAO 2014, PAN UK 2003)). As the FTAO report, 'Who's Got the Power?' (2014) puts it, 'The world cotton market epitomises trade globalisation and illustrates its inequalities: on the one hand, intensive large-scale cotton production, with high input levels, is concentrated in a few countries where farmers are heavily subsidised...; on the other hand, millions of small producers...are severely affected by market liberalisation...'. Yet cotton production can or could deliver many livelihood benefits to small producers if some of the barriers to their effective participation in the market were removed. Such potential benefits include access to knowledge, finance, incomes and economic opportunities. Despite all the problems, production in West Africa is rising (Reuters, 2015), 'as governments set high prices to draw farmers back to a regional sector that once grew 15 percent of the world's cotton ' with the USDA (2015) forecasting seed cotton production of 1.8 million tonnes for 2015/16, a '14 percent increase over the previous year' Structural problems The cotton sector in West Africa suffers from structural problems (infrastructure, investment), which reduce its ability to compete and develop. These include poor research capacity (seed development and breeding) and production methods and extension services, many of which reflect years of under-investment, poorly completed reforms, and local mismanagement. Specific problems in West Africa (where cotton is grown under rain-fed conditions) include overuse and misuse of pesticides and fertilisers (and their variable quality), erratic rainfall (with frequent sequences of drought, excess rain, and flooding), poor seed quality, debt linked to the costs of inputs, low productivity, intense pest pressure (further destabilised because of pesticides misuse and overuse), forced, bonded and child labour, water pollution and the fragmentation of land as population growth sees land divided up into smaller parcels. The sector badly needs more (and better funded) research, extension, seed breeding and development, and improved coordination. Production costs are a problem for farmers, due to the costs of pesticides and fertilisers, and problems are aggravated by environmental degradation and climate change, with farmers at the mercy of environmental and economic factors outside their control. Research and extension also need to support more environmentally friendly farming methods, that also reduce farmer costs and their exposure to debt (especially so for the smallest and most resource poor farmers). 9

10 1.1.2 The cotton sector in West Africa: locally critical, globally little influential Cotton production data for the C4 and Senegal 800, , , , Production 2014/15 Production 2015/16 (est.) Area (2014/15) in hectares 400, , , , Benin Burkina Faso Chad Mali Senegal Cotton production in the C4 and Senegal Presently, West Africa produces around 10% of the world's total cotton supply, and is the second largest export region after the USA (ICAC in WTO 2015). Within Africa, the largest producers are Burkina Faso and Mali, but their production is dwarfed by the largest global producers, India, China, the USA, Pakistan and Brazil, who all produce cotton in the millions of tonnes, compared to the tens or hundreds of thousands in West Africa. Table 1 shows how African countries compare. Burkina Faso is the 10th largest producer globally, but its 2014/15 production was just 4.3% of that of the number 1, India. Cotton yield averages for the C4 and Senegal 2014/15 1, , Yield average (kg/ha, seed cotton) n/a Burkina Faso Chad Mali Senegal 10

11 Graph: no data available for Benin Table 1: Comparison of largest African cotton producing countries against largest global producers Largest cotton producers in Africa Burkina Faso Mali Volume (2014/15) Largest global producers Volume (2014/15) India 6,641, China 6,532, USA 3,502, Pakistan 2,286, Brazil 1,524, Uzbekistan 871, Turkey 697, Australia 479, Turkmenistan 316, Mexico 266, Greece 261, Argentina 245, Burma 196, , , Cote d'ivoire 191, Benin 131, Egypt 114, Cameroon 109, Chad 48,

12 Senegal 9, Total Source: USDA FAS 2015 cotton world markets and trade March 2015 Even taken as a group, the West African producing countries, including the C4 and Senegal come behind Brazil, in 6th place on the largest producer list. With almost all production exported, the sector also suffers low yields, and is affected by currency volatility4, subsidies and other international market manipulations. Despite various programmes supporting it, there has never been much domestic processing in the region. What there is in decline. Some artisanal production does remain, and is strong in some countries, such as Burkina Faso, where traditional clothing is still prized. Both industrial and artisanal sectors are however threatened by imports of second hand clothing, and cheap Chinese imports. There are also problems in the cost and reliability of energy supply, the lack of skills, and capacity to manage international market demands (design and marketing) Raw material priorities and development impacts The cotton sectors in West Africa are highly regulated, with competition limited by law (Delpeuch & Vandeplas 2013). The intent of the organisational model was to ensure quality, quantity, consistency and ready availability of cotton for international markets, and this informs thinking to this day (with export dependency being a growing factor). The system has helped maintain smaller producers in cotton, and given them access to cash markets. It also has some benefits for food production. In crop rotation, crops planted after cotton can be more productive because of residual benefits from the use of fertilisers. However, there can also be negative impacts from the over-use of pesticides (food contamination, poisoning of people and livestock as well as water; PAN UK 2003, Glin et al. 2006) An increasingly financialised trading context Cotton trading is increasingly becoming 'financialised': cotton trading and markets are no longer used only for risk and price management and stability (by specialist cotton traders), but also for speculation by financial actors (Staritz et al., 2015). The newer actors are 'large institutional investors, pension funds...further, investment banks have increasingly offered diverse products for commodity derivative market investments'. The traditional commodity traders are themselves merging, or being subsumed into larger companies. One smaller player, Plexus Cotton, is leaving global trading altogether to focus on other business interests in Africa (including some physical trading), meaning the analysis by Staritz et al., (2015) is already out of date: 'traditional cotton commodity traders such as Reinhart and Plexus and smaller traders more generally have remained focused on physical trading activities'. This is bad news for small farmers, especially in a region where the chances of being in a vertical operation are small. Larger traders now use more financial instruments. This is having an influence on cotton pricing (both the Liverpool Cotlook A Index and the New York Futures market, which determine prices for 4 Cotton prices are generally quoted, and trade made, in US Dollars, but Francophone West African cotton producing countries use the CFA Franc, which is tied to the Euro, which swiftly exacerbates currency movements. 12

13 the physical trade and futures prices). For small farmers, this means more volatility, and less access to risk management for them and cotton companies, as 'commodity derivative markets have become the central pricing mechanism for international cotton trade with futures prices being increasingly transferred along the commodity chain to exporters and producers. This is particular problematic given the increased short-termism in derivatives trading that amplifies both the size of price swings as well as their frequency'. Farmers, producer organisations and national cotton companies are also having more risk passed on to them (Staritz et al., 2015). It is true that the cotton pricing mechanism in West Africa does somewhat protect producers from volatility, but exposes cotton companies instead. To counter this, Burkina Faso has developed a 'Fond de Lissage' (smoothing mechanism see Section 1.4.1). This, if proven financially sustainable should be rolled out from Burkina to other countries in the region, perhaps as a regional programme. National cotton companies could also 'sell through fixed price forward contracts to international traders' (Staritz et al., 2015), and many international traders recommend West African cotton companies do so (Ferrigno 2015, unpublished). Even Sofitex, the largest cotton company in Burkina does not make use of 'futures or options as hedging is seen as complicated and expensive and not part of their business focus on the physical market', even though this could help manage price volatility risks. The same is true of CMDT in Mali. Staritz et al., 2015 also suggest it is necessary to have alternative physical price determination mechanisms, and development of 'marketing and trading capacities in producer countries and through furthering local and regional processing'. Table 2: cotton production in the C4 and Senegal Cotton production and prices in West Africa 2013/ /15 Production Price Production Price Production Price Benin 307, CFA 393, , Burkina Faso 647,000 CFA 245, $ ,000 CFA 225, $ ,000 Chad 82,000 CFA 250, $ ,000 CFA 250, $ ,000 Mali 440,000 CFA 250, $. 547, CFA 235, $ ,000 Senegal 29,000 CFA 255, $ 0.41 CFA 255, $ ,000 26, /16 (estimates) Source: USDA FAS 2015, Reuters 2015, Interviews Physical infrastructure and cotton Among the C4 and Senegal, Burkina Faso, Chad and Mali are all landlocked. Cotton transport depends mainly on roads, and links to major ports in neighbouring countries. Benin and Senegal both have ports, although Cotonou at least suffers serious delays and congestion as well as customs delays (and corruption). Burkina Faso, Mali, Senegal and Benin have some rail services5, 5 A rail connection between Niger and Benin was due for completion at the end of A coastal rail linking Benin, Burkina Faso, Cote D'Ivoire, Ghana, Niger, Nigeria, and Togo is also planned 13

14 which are antiquated, slow and expensive (Burkina Faso and Mali are connected by rail to Dakar and Abidjan ports). Roads are often beset by problems (potholes, etc., caused by weather and rain, although road haulage is still cheaper and more reliable than rail), and borders by delays (see UNCTAD, 2007). UNCTAD (2007) point to '13 major transit corridors: seven road corridors, five rail or rail/road corridors and one rail/water corridor' available to the landlocked countries in West and Central Africa. Nine tenths of freight moves by road, despite their poor condition. More positive news is recent entry or re-entry of global investors to the port sector, attracted by new opportunities in mining, minerals and oil (Debrie 2012). However, UNCTAD (2007) point to a number of non-physical transport problems: 'Shortcomings in terms of inadequate regional cooperation, insufficient use of information and communications technology (ICT) due to technical and user problems and human resources constraints cause non-physical bottlenecks that keep transport costs unduly high. In particular, customs documents are not harmonized and bordercrossing procedures are lengthy and cumbersome despite regional agreements on the free movement of persons and goods'. There are also problems with 'illicit financial charges' (UCTAD 2007). Port capacity on the coasts is generally said to be sufficient for need, although problems in Cote D'Ivoire have disrupted cotton trade in recent years. Investments are coming, but may take some years to complete, and meanwhile, transport from West Africa remains costly, and slow, which is a brake on potential growth. Table 3: Main ports for cotton in West Africa Port name and location Transport links Countries shipping through port Lomé, Togo Road Togo, Niger Cotonou, Benin Road, rail (domestic only) Benin, Burkina Faso, Niger Dakar, Senegal* Road, rail Senegal, Mali, Burkina Faso, Niger Abidjan, Cote D'Ivoire* Road, rail Cote D'Ivoire, Burkina Faso, Mali Conakry, Guinea Road Guinea, (other countries not known for cotton) Tema, Ghana* Road, rail Burkina Faso, Ghana Douala, Cameroon* Road, rail (domestic) Chad, Cameroon Source: From Debrie 2012 and UNCTAD 2007 * These ports are considered most important for landlocked countries 14

15 1.2 A brief history the evolution of West African cotton sectors The value chain for cotton and textiles and its context1 15

16 1.2.1 Post colonial cotton sector organisation and reform: turmoil and crisis6 Centralised commodity boards and monopoly national cotton companies were the norm in West Africa for many years, sometimes with a strong involvement from foreign investors, especially the French state company Compagnie Française de Développement Textile (CFDT, which became Dagris and later Geocoton). CFDT assisted with research and marketing, with a view to ensuring raw material supply to France's textiles industry (as it had during the colonial era). This explains why domestic textiles industries, usually nationalised, remained of poor quality, focused on domestic markets. The goal was volume production of a cotton lint of consistent, uniform quality for export, meaning intensive production was the strategy chosen to ensure high yields. Subsequent global movements towards market liberalisation, along with currency crises and problems with production methods led to moves to reform the West African sector. These have however exposed the West African cotton sector to more market volatility, even as larger rivals have not reformed (USA), and continue to support their cotton sectors. Cotton sector support is now common, with China and India, major producers, also supporting prices through government intervention. There is however an argument that (at least some) reforms also focussed on a better division of profits with producers, as well as competitiveness (Delpeuch & Vandeplas 2013). This is particularly true with regards to the creation of Producer Organisations and Unions at village and national level. The state controlled monopoly and monopsony systems of West Africa also know as the 'filière7' system have been criticised for 'depressing farm gate prices' (Delpeuch & Vandeplas 2013), and offering unsustainable financial support to cotton producers (Baffes 2009a in Delpeuch & Vandeplas 2013)). However, while the price setting systems go against current neo-liberal thinking, it is understandable and even rational than West African countries want to support their cotton sectors against the impacts of far greater subsidy elsewhere. The approach is especially valid as the Doha round of WTO talks and C4 complaints have not yielded any results, and current negotiations of bilateral and geographically limited agreements such as TTIP and TPP seems to be destined to sideline LDC governments. Indeed, reform in this case could have negative outcomes (Delpeuch & Vandeplas 2013)). It remains to be seen if the December 2015 WTO meeting will achieve anything lasting. The Third World Network (December 2015) reports that the outcome on export subsidies is a victory for the USA (i.e., for subsidies), while All Africa (2015) suggests there was no progress on agriculture. To date, the cotton sectors in the five countries remain highly regulated, with Benin and Burkina Faso having liberalised most, with very different success. Burkina Faso is working relatively well, but the government of Benin has taken control of the cotton sector again, following a crisis. Mali and Chad remain almost unreformed. Senegal is such a small producer that allowing more liberalisation would cause problems, and SODEFITEX (now a public-private company) has proven quite efficient. Continued state support is blamed for the persistence of intensive cropping systems and the damage they cause (Delpeuch & Vandeplas 2013). More reform is delayed as 'differences in 6 For Benin see Section There is no exact translation of the French word filiere, although it is often given as supply chain or value chain. There is a hint of thread or connection in the word (fil), which suggests an interlinked system, perhaps with something of the vertically integrated chain about it. It is certainly a system where there is some continuity in buying and selling.

17 bargaining power of producer associations, the processing sector or government stakeholders who are either unwilling to give up on rents, or believe that reforms would not be beneficial to farmers', according to Delpeuch & Vandeplas (2013). Reforms in East Africa for example have led to lower farmer prices, as well as less farmer support. Given that cotton represented 50% of export revenues for Benin and Burkina Faso in 2006, it is not surprising governments are hesitant. However, with public budgets declining and falling yields, change is needed. It is though a questions of whether it is change in cotton alone, or changes in both production and crop patterns (Delpeuch & Vandeplas 2013). Diversification needs to be considered: 'Whereas governments in WCA have historically presented cotton production promotion as one of the most efficient ways of pulling rural populations out of poverty, they should now try to improve opportunities for diversification, or design more efficient social safety nets that target recipients based on needs rather than on cultivation choices'. That said, it can also be argued that improvements in the efficiency of regulation, government management and sector organisation are also needed. Reforms have too often been ineffective, incomplete, and political. At the same time, cotton sectors are trying to fulfil a disparate range of goals: to drive exports and earn foreign currency, modernise infrastructures, but also protect livelihoods and improve rural development. There are conflicting economic and social security goals. The next sections look in more detail at the cotton sectors in each country Burkina Faso Cotton production in Burkina Faso is entirely rain-fed. It was established during the colonial era, when the country was known as Upper Volta. Initially unsuccessful, cotton production was relaunched in 1949 by the CFDT, to supply raw material for the French textiles industry. The independent Burkinabé government did seek to establish textiles (Voltex SA) and oil seed production (CITEC Huileries) in This was followed by the Société Fibres et Textiles (SOFITEX) in 1979, with the aim of developing cotton production in suitable regions. An industrial development strategy covering 12 sectors was launched in 1998, of which cotton was the most important. The idea was to promote competitive industries, with cotton moving from an export leader to an organised sector promoting national agricultural and industrial development. Three key reforms characterise this change: A contract between the Government and SOFITEX on government disengagement ( ) An inter-professional agreement to enhance professionalism ( ) Creation in 2004 of three cotton companies (SOFITEX, Socoma, and Faso Coton) in the western, eastern and central regions. These led to the creation of the Professional Association of Burkinabé cotton companies (APROCOB), and of the national cotton producers' association (UNPCB), which come together to make up the Burkinabé cotton inter-professional Association (AICB). AICB is the effective seat of sector governance (under government legislation). The year 2004 also saw a new agreement between government, cotton companies and UNPCB governing the cotton sector, to capitalise on achievements and improve performance and competitiveness. Running to 2012, it has been continued and amended for

18 The AICB is governed by 8 representatives each from APROCOB and UNPCB in the general assembly, and 16 directors on the Board of Directors in the same proportions. There is an 8 member executive board (4 from each member organisation), and the board is led by a president. Other important bodies in the sector include: - The Association fonds de lissage (Smoothing Fund Mechanism. This body is a legal vehicle established in 2008 between APROCOB and UNPCB to mitigate the effects of price volatility on producers and cotton companies. It provides stability and sector solidarity by establishing surpluses in good years, paid out to support incomes in bad years. - The Burkinabé Association Fund for Cotton Inputs is a legal vehicle created in 2012 to manage the cotton inputs fund, and support the financing of inputs for cotton production. The organisation of farmers, and leadership and power in Burkina Faso's cotton sector Farmer's organisations first appeared in Burkina Faso in the 1950s, and their promotion became more important following independence, with over 600 groups listed by The creation of village groups on a large scale really began in 1974, backed by a government drive for community development. According to A. Faure and D. Pesche, "the administration wants to introduce a VG by village. These VG are most of the time the passage obliged to procure inputs and credit; they also serve as transmission belt for the technical themes popularized by public or parastatal company (SOFITEX) agents. Village is designed as a unit of development to which government provides technical support" (network GAO1993). By 1993, there were 8,535 village groups identified, of which 1,893 were in the 7 provinces making up the western cotton area (Houet, Kénédougou, Mouhoun, Kossi, Sourou, Comoé and Bougouriba). In the same areas, SOFITEX devolved primary marketing (sales of cotton from farmers to the gin) to capable village groups, as a "self-managed cotton market" (MAC), including payment of social investment grants. By the early 1990s, village groups controlled 95% of primary marketing. These groups were also responsible for ensuring collateral security for credit to farmers for short and medium term credits. The groups began to federate in the early 1990s, pushed by individuals convinced that producers could play a more significant role than public authorities or development companies assumed (S. Couret and. Traoré). Producer Groups have been able to stand up to SOFITEX with protest and advocacy, for example in 1996/97 and 1997/98, by boycotting pesticides purchases deemed ineffective and organising their own imports. Village Groups in the early 1990s found it hard to manage debt collateral, and crisis occurred when heavy pest pressure in 1991/92 led to low cotton production. Although loans were rescheduled, and some later cancelled, SOFITEX concluded that village level collateral was not appropriate, as villages were not always homogeneous. As a result, groups were reorganised to reflect relations of solidarity. These groups were named Groupements des Producteurs de Coton (GPC, or cotton producer group). Some 4,000 of these were found in cotton areas after the change, based on location, kinship, or ethnicity in the case of migrant populations. However, problems of unpaid debts continued, with a realisation that to function well they need support to develop their structures and to train their officials. This conclusion was backed by SOFITEX and the French development agency, AFD. 18

19 Chad Cotton was first grown in Chad in 1911, in Mayo Kebbi in western Chad (The Sudanian region also know as 'Chad Utile', or useful Chad). Spinning was manual, but the colonial power took an interest, and initial trials led the entry of several colonial companies. By 1928, cotton was a compulsory crop, with the Franco-Belgian cotton company COTONCO holding a monopoly between 1930 and The Compagnie Cotonnière Française took over from 1960 to 1970, when the government created COTONCHAD, in which the government was the major shareholder (75% of shares). There have been many crises, with the most recent leading to a new COTONCHAD company being created to replace the old one in The sector is vertically integrated, with a single cotton company managing input supply and marketing. A price stabilisation fund was abandoned in Cotton growing led to cereal crops being abandoned, and to soils becoming degraded; food insecurity grew as a result. However, cotton production has continued to increase (CotonTchad 2012). The organisation of farmers, and leadership and power in Chad's cotton sector Cotton producers in Chad began to be organised in 1986, with the creation of groups to manage input needs assessment and distribution. From 1988, following work by vocational agricultural training centres, producers took over responsibility for cotton primary marketing. Supported by the staff of the national rural development agency, they organised into Village Associations (AV). These associations ran self-managed markets (MAG). As of 1992, there were 3,445 MAGs marketing cotton in the Sudanian zone. Village Associations deliver seed cotton to COTONCHAD, and are responsible for paying producers after deducting the value of inputs supplied. COTONCHAD pays producers per tonne of seed cotton. Over a 10 year period, the 350,000 producers in the Sudanian zone oversaw a big increase in the sector, with their participation critical to maintaining input prices at a reasonable level. The producer groups also took responsibility for credit repayments, and applicable collateral (caution solidaire). Collateral responsibility begins with family members, grouped in input management groups (Groupement de Gestion des Intrants), and then the Village Association. Collateral is called upon if any producer has repayment difficulties, or if any defaulters are in breach of loan repayments. These may then be excluded from the group (Prosper 2014). Sector liberalisation Moves to liberalise the Chadian cotton sector began in 1999, instigated by the World Bank. A technical cell was set up to investigate the potential for privatisation of the cotton sector, as well as to develop strong producer organisations, able to fulfil a role after reforms. However, the liberalisation process failed for two reasons: lack of will, and financial problems in the cotton company. Sensitised farmers are generally opposed to reforms, and instead seek subsidies for intensification, or for cotton transport and processing. Fears exist over abrupt withdrawal of the state and other actors, and over the loss of input subsidies (which have been as high as 50%). These have already almost disappeared, for inputs and equipment (AProCA et al., 2014) Mali Cotton has long been an engine of development in the south of Mali, since the colonial era (when its production was compulsory; Campbell, in Benamou 2006). The irrigated areas of Office du Niger were planned and constructed largely to ensure the supply of cotton to metropolitan France. 19

20 Beginning in the 1930s, cotton began to be irrigated, but this was abandoned due to technical difficulties in 1971 (11 years after independence). Rain-fed cotton production was also part of the colonial system, and was further developed after the second world war, especially in the Sikasso region. A major step forward for the Malian cotton sector was the establishment of the Malian Textiles Development Company (CMDT) in The company is now a semi-public company, with capital owned 60% by the Malian government and 40% by the French company Dagris, now called Geocoton. CMDT holds an almost complete cotton monopoly in Mali. The other actor is the Office de la Haute Vallée du Niger (OHVN), which only controls 6% of national cotton production. After a series of crises, CMDT recapitalised with an increase the state's share, which is now 98%. CMDTs original mandate was to ensure development of cotton growing areas and improvement of farmers living standards in particular by cotton production development (Saha, Barter and al. 2007). The set-up was similar to that found in other Countries in the CFA Franc zone of West Africa, with a government controlled cotton company in charge of upstream and downstream activities, an obligation to purchase from farmers, fixed prices for cotton and inputs, and contractual obligations to producers (Fok, Kaur et al ; Fok 1999; Hugon 2005). Over the two decades between 1970 and 1990, there was strong growth, with Mali at the forefront in Africa in terms of area sown, volumes and fibre quality, as well as for producer revenues and contributions to national income and the economy. The value of exports rose by 27% in the 1970s, 34% in the 1980s, and 30% between 1990 and It made up 46% of exports between 1989 and 1994 (Dhar and Kaur 2010). Between 2000 and 2010, there were more crises with decreases in yield, linked to socio-economic and technical factors, including errors in extension advice (fertiliser dosing, variety selection, etc.). Farmers planted cotton on poorer lands, while inputs (as in other countries) were often diverted to food crops; the area increased, however, as more farmers planted cotton, but poor knowledge often meant low productivity Senegal Senegal pioneered cotton production in Sub-Saharan Africa, which was established around 1720, when the French brought in slaves to develop it. Although a failure, there was a renewed attempt between 1816 and 1861, with various attempts based on both plantation agriculture and family farming. By 1860 however, cotton had given way to a groundnut monoculture, and cotton was eclipsed. It was revived in 1961 as the Senegalese government sought to liberate itself from 'peanut tyranny'. An irrigated cotton trial was implemented with the French cotton development company CFDT. Rain-fed trials followed in The Senegalese cotton and textiles company, SODEFITEX, was then established in 1974 with a public shareholding of 77.5%. CFDT held 20% and the International Bank of West Africa (BIAO, now the West African Banking Company CBAO) 2.5%. A change occurred in 2003, with SODEFITEX passing under the control of DAGRIS (now GEOCOTON) with 51% of shares, and the government of Senegal retaining 46.5%. Its new mission included a strong focus on sustainable development (and other crops than cotton; for example, SODEFITEX bought old groundnut equipment from the failed national groundnut company), as well as an increase in capital. 20

21 Production in Senegal reached 50,000 tonnes in 1991/92, but has since been mostly in decline, reaching 11,400 in 1998/99. It rose again to 52,422 tonnes in 2006/07, but has since fallen again to only 9,000 tonnes in 2014/15. Senegal is highly responsive to global prices and demand. SODEFITEX is however struggling to maintain services such as funding fertilisers for the 50,000 farmers it supports. The organisation of farmers, leadership and power in Senegal's cotton sector Farmers in Senegal were not organised under the old CFDT led regime. Producer organisation development began in 1979, when grassroots producer associations were launched (known as ABP, or Association de Base des Producteurs). These were also used to implement literacy and post-literacy programmes. Accountability of the organisations grew, leading to them becoming involved in supporting credit and later primary marketing, activities previously done by SODEFITEX. The supply of free inputs ceased in 1988/89. Their purchase by farmers was instead supported by credit, repaid from producer's earnings. This led to many producers boycotting cotton for a time, until increased involvement of producer organisations in the cotton sector helped improve the situation, although further problems occurred in 1996/97 over debt collateral (the 'caution solidaire'). This additional crisis spurred the creation of a national producers' federation, the Fédération Nationale des Producteurs de Coton (FNPC), federating the many village level grass-roots organisations. 1.3 What influences West African cotton producers? This section sets out to map relations with input providers, ginners, and middlemen (with regard to pressure by the fashion industry) of producers in the C4 countries Using the value chain approach ('the whole range of activities from production to consumption including the links that bind them' (FTAO, 2014)) and its four dimensions (input-output structure, territory, governance structure, institutional framework), power in West Africa appears to be mediated locally (a tripartite structure with producer unions, government and cotton companies) and globally (traders, themselves influenced by and under power of others). The cotton market itself is often distorted globally by government policies or subsidies, as well as by current demand from spinners and ultimately retailers (but in anonymous supply chains, decisions over fibre sourcing rest with spinners, not brands). The influence of producers is weak, pushed down by external forces. For example, setting high cotton prices in West Africa will weaken others in the sector, e.g., cotton companies and governments, whose reduced revenues further affect sector services such as cotton seed research and development. So a response aimed to protect the sector actually weakens it, but is an apparently rational response to sector support in wealthier countries and with stronger industries. Governments' role is meant to be hands off, but is also designed to support a balance of interests, including its own (revenues and employment, with cotton also playing a sort of social safety net role8). For all that can be done in the domestic governance sector, such as continuing to build the power of farmers and ensuring fair representation within producer unions (for smaller farmers, women, workers), the sector in West Africa remains largely at the mercy of global forces, meaning that national cotton associations and regional alliances need to increase their power within global institutions as well as domestically. 8 Where cotton companies prefer larger, efficient farmers rather than smallholders they see as costly, gvernments like to see them maintained in cotton. Cotton supports a measure of food security, as well as cash income. 21

22 Producer power in West Africa is mediated first and foremost via their producer unions and national federations, and then AProCA as a regional representative body. Through these, producers are connected to gins, cotton companies, their national governments, and regional groups such as UEMOA or the African Union. Much then depends on the capacity of the federations and associations to manage relations, understand and track policy and markets, and effectively lobby on behalf of producers. This is a big ask for small, under-staffed and underfunded organisations relying also on elected members for time and skills. Regional cotton companies, governments and institutions are also buffeted by external forces: markets, donors, policies and so on. The fashion industry influences markets, certainly, but it is a big question how much compared to other factors (although that fashion and textiles brands could have more direct influence if desired is certainly true. Investment by Victoria's Secret in Fairtradeorganic cotton is an example of this, as is the role of the German Otto brand in developing the Cotton made in Africa (CmiA) programme through the Aid by Trade Foundation (AbTF)). Local actors have little or no control over external forces, except for those institutions which have a local base and a need for West African cotton. Arguably, it is possible to influence and cooperate with traders, especially those with a long term interest. This is why the sale of Plexus' trading activities is a concern, as are the disappearance or take over of other traders such as Dunavant or Reinhart with a history of involvement in Africa. The C4 and Senegal are competing with cotton producers who are either in countries with textiles manufacturing bases for international markets (India and China, for example) or are in countries with well organised logistics and often wellfunded promotion boards, such as the US, Brazil, and Australia. West African producers are a long way from the market. Indeed, despite rising production and exports from the region, cotton exports from Least Developed Countries, which include all the C4 and Senegal, have fallen as a percentage of the total since 2003 (WTO ). When policies in these countries such as subsidies or other support are taken into account, the situation looks even worse. Donors and international institutions also influence what happens in the sector, simply by what they choose to support, or by pushing for certain reforms. From further afield, market movements, prices, and supply and demand also influence West Africa, with little that can be done to mitigate impacts, except to work to improve quality to make the cotton as attractive as possible. Here, though, reduced investment in seed research and breeding mean the response is difficult. In the case of Burkina Faso, the introduction of Bt cotton has led to price losses as the staple is now shorter than its previously prized cotton. While some farmers have gained (larger farmers may have lower labour costs), others are losing, and traders may be losing profitability. The situation is such that Burkina Faso is reducing its Bt cotton area, while some reports are emerging that it will be phased out altogether, with reparations demanded from Monsanto (Dowd-Uribe and Schnurr, 2016) In this context, pressure by the fashion industry is a relatively small influence on the cotton sector: cotton demand itself is fairly stable with small movements up or down, and a general tendency to increase, although cotton's market share is declining as textiles demand growth is largely supplied by synthetic fibres (Polyester represents 73% of demand growth since the 1980s). Increases in market speculation, oil prices, competition for land use, and subsidies all impact cotton, and cotton companies and traders. Between 2004 and 2009, man-made fibre consumption grew at 21% per capita, compared to just 11% for cotton (FAO and ICAC 2011). 22

23 Natural and Man made share in world textiles demand % 90% 80% 70% 60% Natural fibres Man made fibres 50% 40% 30% 20% 10% 0% Source: elaborated by the authors from FAO and ICAC, 2011, ICAC 2013 and Textiles World, 2015 On a positive note, consumers like cotton, and so do many brands. They like to use it, but the relative price of cotton and other fibres, especially polyester, guide much of the decision-making over a significant proportion of cotton use. High (relative to polyester) cotton prices are thus important. West Africa is however a price taker in the global market, as it has little or no domestic manufacturing capacity and in recent years has suffered a declining quality reputation, meaning that it is a fibre of last resort for many buyers rather than a first choice, so global pressures can have a larger impact than in other regions where there is a manufacturing base (Turkey), and/or strong government support (US, China, India). Input suppliers on the other hand have little influence on West African cotton, as sales of inputs are controlled by domestic cotton sectors. Input needs are put out to annual tender, rather than supplied in a free market. However, the entry of GM cotton and Monsanto may change this, as pressure may grow both to use GM seed and then associated chemicals. With external influences growing, more competitors in the export market, and protectionist measures in other producing countries, West African producers are weaker than ever. Although local state control has reduced and producers participate more in the cotton sector, their power remains weak. Within their unions, there may also be dominance by larger farmers, or well connected individuals. The vulnerability of producers' situation is also exacerbated by growing problems with climate, rainfall, environmental degradation and local political turmoil (a live problem in Burkina Faso for example, where the President of UNPCB has been indicted for misappropriation of funds). In Benin, the government has had to intervene and take back control of the sector, after a dispute with a cotton company owner, Mali's reforms remain blocked (and the head of CMDT was recently sacked) and financial problems have seen the government in Chad take back ownership of the cotton company. Only Senegal seems a relative haven of peace. 23

24 It remains to be seen what the long term impact of new players in West African will be. These include the Biotech giant Monsanto, Brazilian research presence in Mali and Burkina Faso on soil fertility, and China offering seeds and textiles equipment Producer power Referring to the analysis in the FTAO Power report (2014), West African cotton producers are best classified as part of captive set-ups, where 'small suppliers are transactionally dependent on much larger buyers. Suppliers face significant switching costs and are, therefore, captive '. In the case of the largest cotton traders, such as Cargill or Dreyfus, this puts many national cotton companies on the same level as producers in terms of leverage. The main mediators of global power in West Africa are traders. However, given cotton sector reform pressures, we need to add global institutions (IMF, WB) and policy makers in countries supporting their cotton sectors (e.g., USA, China, India) to the list of those with power in or over the C4 and Senegal. This sees West African producers' not only forced to accept prices, but also credit and input supply, leaving them vulnerable to debt and income losses. Ultimately, cotton from the region does end up in Western fashion, but there is no direct link, except for some Fairtrade and organic, small-scale, projects. There is opportunity within national cotton companies for producers to engage with foreign traders where producer unions have acquired a share in cotton companies, and international companies such as Geocoton and Reinhart are also shareholders. The shareholdings offered to producer unions under reform are designed to offer producers a stronger voice in decisions by companies. Trading is a sector where more concentration is occurring, and there are few new entrants to the sector. Plexus Cotton (now 25 years old) was one of the few, and as mentioned, is withdrawing from trading, a concern as it has had a good record in Africa and sustainable cotton. Nurturing small trading houses or new trading and buying platforms (Including farmer owned companies) for West African cotton is an idea whose time has long since come, especially for regional trading and the pooling of sustainable cottons. But knowledge and personal relations do play a role in cotton trading, so this is something that needs to be built, and is why traders themselves may be part of the solution as well as the problem. The fact that Plexus is moving out of anonymous trading to focus on direct relations and investments is interesting and worth watching. It may represent a new model, but it is too early to know what the outcome will be or what the details are, at the time of writing. The table below gives an example, for Burkina Faso, of cotton shareholdings in cotton companies. Table 4: Corporate data for the three cotton companies in Burkina Faso Company name SOFITEX SA Faso Coton SA SOCOMA SA Established Capital 4,400, 000,000 F CFA 3,300,000,000 F CFA 6,000,000,000 F CFA Shareholder s State (60%), DAGRIS/Geocoton, Banks (BIB, BiCIAB), UNPCB) (shareholdings have DAGRIS/Geocoton (51%), UNPCB (20%), SOBA (20%), AGRITA (5%), SYA Participation (4%) Paul Reinhart AG (31%), Ivoire Coton (29%), UNPCB (10%), SOBA (20%), AMEFERT 10% 24

25 changed following recapitalisation in 2005/6, and state is now majority shareholder) Turnover (2005) (2005) CFA (2005) Zones West Centre East Gins (capacity) 14 (405,000 tonnes) 1 (45,000 tonnes). 3 (100,00 tonnes) Staff 1,300 permanent, 2,900 seasonal, (300+ production related staff) (39 field staff) (42 field staff) Registered producers 234,500 24,000 40,000 Area under cotton (Hectares) 558,611 (2007) 41,620 (2005/6) 75,834 Production (Tonnes lint) 253,850 (2005/6) 17,593 (2005/06) 27,228 (2005/6) Many textiles brands report that they do not have direct links with traders, only occasionally with spinning mills, infrequently with CMT mills, and more commonly with agents. Here is another pressure point for power in the supply chains out of West Africa (Ferrigno 2014, RSN 2014). Companies use this to deny being able to trace where their cotton is sourced from (e.g., to deny the use of Uzbek cotton), although the link and traceability is possible. Brands are however reluctant to take responsibility for another part of the supply chain (as they are already contending with labour issues in factories, water pollution from dye houses, and so on) but shows how those with potential power are able to refuse to take responsibility UNCTAD road map The United Nations Conference on Trade and Development is pushing interventions to support West African cotton, as 'Despite its significance in local economies, the African cotton sector is faced with serious problems. Yield is low and has considerably diminished during the last decade. Cotton research in most countries suffers from a lack of organization and means. Support structures for trade and marketing are not always commensurate with the economic importance of the sector' (UNCTAD 2015). The roadmap 'seeks to respond to the issues in the cotton sector linked to productivity, marketing and value-addition'. Proposed interventions also include on inputs, credit, natural resource management, extension and training, and advisory services. Areas like inputs need attention. They do not only need to be available, but suitable. Managing intensive production is difficult for the most resource poor farmers (See PAN UK, 2003). Credit to smallholders is also a risk, and needs to be addressed with a focus on reducing costs and risks for small farmers. Done well, this helps address natural resource management. Extension, training and marketing all need addressing through improved profitability and competitiveness of cotton 25

26 companies, investment in research and development, and a more strategic vision for trade are needed, including more use of financial instruments by producing countries and companies in West Africa. While UNCTAD (2015) suggest the latter part of the bottleneck is in the hands of cotton companies and international traders, governments also need to facilitate the right legal and regulatory framework. The cotton sectors in West Africa need to be resilient in the face of market volatility, responsive to fibre quality requirements, offer support for entry to the sector, including in niche markets (organic, Fairtrade), support local industry, and as a sector, support governments' ability to negotiate internationally. Governments and industry also need to support investment in the infrastructure (storage, transport, energy, water) that backs up cotton production (and also other commodities grown on cotton farms that can bring in additional revenues to producers, companies and states. Research should be a critical underpinning of any moves, and investment is important before staff are lost due to underfunding, low morale, and age National and regional policy Since independence, West African governments have been focused on intensive, volume production, aiming for consistent quality and fibre characteristics, to appeal to traders and spinners overseas (initially in France). This laid the foundations for future problems, with high use of inputs and high levels of debt, and reduced attention to other options, whether development of local processing, other crop options or support for alternative cotton systems such as organic and Fairtrade. Existing frameworks for cotton sector regulation need to embrace these systems, which have growing markets and bring added value, for which a tripartite support is needed from government, producer unions and cotton companies. We also need to see cotton sectors embrace other aspects of sustainable development, such as diversification, food security, soil regeneration, and improved attention to managing the productive systems as a whole (e.g., IPM), and not forgetting social issues (labour, wages, children, gender equity). To a degree, all cotton sectors have integrated some of this, due to the development imperative that attaches to cotton and its importance to economies and rural communities. However, links to industrial and export policies can be improved. New approaches such as the Smoothing Fund, if proven to be sustainable, can be critical for this, and stakeholders (including donors) need to support this International policy International policy (including national cotton policy potentially affecting world markets and prices) is too often the elephant on West Africa's back. This is especially true of policy regarding cotton subsidies, export subsidies paid to cotton farmers, and national policies relating to the manipulation of production and stocks to influence global prices. These partially explain why fixed prices remain a policy tool in the C4 countries and Senegal. It is an area over which producers and unions have little control, and while AProCA might play a role in lobbying and advocacy, as could governments via international fora, capacity is often lacking. The International Cotton Advisory Committee does regularly raise the issue, and the issue remains live in WTO negotiations, but little changes as the question is ignored, and the new US subsidy rules are simply rewritten to avoid obvious attack points. Cotton companies in the region and even many traders have little influence on the subject either. The fact that international negotiations like the WTO are now being bypassed by processes such as TPP or TTIP (deals between developed regions in the main) is a further cause for concern, as developing countries are not included, especially not the C4 and Senegal. The global balance of 26

27 power is such that there is little pressure for a more balanced approach to trade and subsidy rules, where reform should be demanded of all players, and not just some. Support from the international community to West Africa comes mainly in the form of aid and sometimes now in kind (such as donations of textiles equipment. China has for example donated equipment to Benin, although without any technical assistance on its use), in exchange for access to local markets (where dumped clothing, new or second hand, further impacts local textiles industries). West Africa receives donor assistance for cotton from a variety of sources including the European Union, the USA and France. According to the WTO (2015), Brazil and China also offer support programmes. Brazil offers the C4 (through the Brazilian Cooperation Agency) a cotton industry development programme, while China has a programme to share 'cotton plantation technology, and to provide machinery and other input to cotton producers, particularly in the Cotton-4 countries' Policy tools for African exports: EU and US policies. The US offers its duty free access programme through the African Growth and Opportunities Act, which was renewed in It supports duty free access for some African textiles. However, fibre is not always African, as it is yarn and fabric that are covered9. A 2008 report highlighted a 12% increase in textiles exports in from reduced internal and external barriers to trade in Africa (including duty reductions), mostly to the EU because of historic links and EU requirements to use certain fabric origins to benefit from duty free or reduced access; AGOA in that period did not have any effect, but upon renewal preferential access is extended to certain textiles, so may have more impact. Fabric for export in apparel to the US is often imported, as there is not enough African production, and African fabric is used for EU exports. Industry growth is hampered by capital constraints, energy supply cost and reliability, skills shortages, transport weakness and water (sources and infrastructure). Of exports from SubSaharan Africa (SSA), 43% went to the EU, and 30% was within the region, a total of $467 million out of global textiles exports of $123,520 million. Of the SSA exports, 12 and 11% respectively go to Italy and UK. Reports also find that liberalisation was more advanced in Eastern and Southern Africa (US International Trade Commission 2008). AGOA exports to the US (for all products) fell in 2014 (USITA 2014). It thus appears that AGOA is overall a failure despite some increases in exports. Its potential has not been achieved (Naumann 2015), although AGOA was due for renewal again in Williams (2015) view is that European bilateral agreements are more effective than AGOAs' one way approach. The few positive impacts have otherwise been in apparel for a small number of countries (Condon and Stern 2010). International programmes are also supported by the International Trade Centre, which is supporting a joint UK-China programme for jobs and growth in Africa10. The WTO estimates there are some 30 active cotton programmes in Africa, for a value of US$ 247 million International markets and trade Changes in international markets, trading and cotton pricing systems affect producers and the 9 See

28 cotton sector in West Africa. As already mentioned, the process called 'Financialisation'11 is of concern, as the growth of speculation and the entry of funds looking for profits in cotton has an impact on price formation and trading. This phenomenon is not unique to cotton, and is growing worldwide. But where cotton markets were once used primarily to manage risk, they are now seen as a source of profit for non-cotton actors and a refuge in times of low returns in conventional stock markets and investments. This has worrying implications for cotton farmers and cotton companies, as those holding financial clout will not be concerned for sector stability. If speculation and financialisation affect prices, and lead to wealthier countries protecting their producers, African producers lose out, but have no influence on the situation. While it is not easy to find out what share of the cotton trading sector is now subject to speculation, rather than traditional hedging or physical trading, the situation is serious enough for it to be addressed by the ICAC, particularly at the height of the global financial crisis, where it is said to have led to a situation where 'many merchants could not recover from these losses in the physical market. Some were driven into bankruptcy and others decided to go out of the cotton business' (Townsend, 2009). Another sign of the resulting change is that there is less trust in the cotton futures market by banks, with resulting tighter credit, and 'difficulties for merchants to purchase in advance and at fixed prices large quantities of cotton (as was commonly done before the futures market crisis)' (Townsend 2009). The actual size of financial versus physical trading is difficult to quantify, but together with subsidies will have an impact on small producers, who are far from markets and have themselves no access to price support or hedging. Regarding the volume of speculation versus traditional commodity trading, Staritz et al., (2015) note that 'several large international traders have their own financial services units or hedge funds. Such traders... increasingly resemble financial holding companies dealing with a wide spectrum of financial services and investments. While the proportion of company revenues coming from such financial activities has remained relatively small and variable, they have grown with respect to revenues derived directly from the trading of physical commodities'. The authors also note that while there has always been some specialist financial speculators in cotton (playing against those taking physical positions to hedge risk), there has been an entry of other investors such as hedge funds, pension funds, institutional investors, and investment banks, especially since the financial crisis. Here, the authors suggest 'an increase in the share of financial investors fluctuating around 60 per cent from 2006 to 2015' (Staritz et al., 2015). This study also states that futures prices, rather than the physical trade linked Cotlook A, is becoming the cotton reference point for price setting and that Burkina Faso has looked at setting producer prices based on New York Futures rather than the Cotlook Index. A recommendation from this is to increase the use of price stabilisation/smoothing funds such as the one in Burkina Faso Buffer stocks Buffer stocks are used in some countries (notably China) to manipulate prices and support domestic industries. They are designed primarily to ensure a constant supply of raw material to the cotton sector, rather than to increase sales. In the current global context, it is large producers who can afford these, such as China, and India (India held a stock deemed 'comfortable' of 6 to 7 million bales (1.06 to 1.23 million tonnes) at the end of the 2014/15 season, for example, sufficient 11 'The increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies (Epstein 2005, 3, in Staritz et al., 2015)

29 to stabilise prices for the following year12). They protect textiles industries, while also helping somewhat with price management and supporting producer incomes. Buffer stocks are usually run by public entities, with only one private trader risking this, Louis Dreyfuss, one of the largest cotton traders in the world (but it only holds some 15,000 tonnes of cotton, held in Asian ports, where most world demand comes from, Zaslavsky 2015). In the West African context, it is ginners who currently take the risks and costs of any cotton stocks, except for those few Producer Organisations that manage sales, like OBEPAB in Benin (although there will be some short term free storage after ginning). It would be harder to get this for long for larger stocks. But with niche cottons, where supply at harvest often exceeds demand, only small stocks are going to be held, for speculation purposes. Spinners on the other hand ask traders to hold delivery stocks near factories in order for them to assess cotton characteristics, to programme blends with other supplies, and ensure delivery according to production calendars. This is what Devcot do for TDV (A French textiles company), in Dunkirk (Zaslavsky 2015). Sustainable cottons are thus usually only held if the holding producer group takes the risk. Generally, non-committed niche cottons are quickly sold into conventional markets, where market uptake remains very low under most sustainability initiatives (Ferrigno 2016, forthcoming, Zaslavsky 2015). West African sustainable cotton producer groups try to sell unsold cotton as rapidly as possible. In a highly competitive textile value chain, with reducing margins, spinners are shifting risk downstream to traders, cotton companies and producers. This is even more troublesome in West Africa where producer-cotton company relations can be fraught. Zaslavsky (2015) however suggests that holding a buffer stocks has few benefits given the financial costs and risks, as losses can mount to one or 200 million CFA for stocks as low as 100 or 200 tonnes, for a simple loss of 10% in the value of the Euro. The current situation also reflects the difficult trading conditions for West Africa, including small volumes in individual projects that are of little interest to larger buyers. Nonetheless, it is the opinion of the authors of the present report that there is a strong case for more trading autonomy for POs in the region for niche cottons, and that both they and cotton companies should still explore the use of forward contracts13 and other financial instruments, where risks could be offset, with stocks held against forward sales at set prices. Building demand for Fairtrade and other sustainable cottons is though essential and urgent for West Africa to avoid the need to stock unsold sustainable cotton in the first place (hence the need for regional strategies and new trading models the current volumes are simply not large enough to interest cotton companies, let alone traders (See Ferrigno 2016, forthcoming, for more discussion of possible options and strategies) Child labour Child labour remains a problem in the West African cotton sector. It can be divided into different types, ranging from underage children being employed full time in non-family farms to child trafficking for forced labour purposes. Child labour occurs for various reasons, including poverty, exploitation, discrimination, and lack of schooling. However, not all work children perform in cotton farming is harmful to their development or exploitative. Children work supporting family farming on 12 Source: The Economic Times accessed February A forward contract is a cash transaction where cotton is bought for a set price and specified delivery and transfer of ownership date, where a futures contract does not necessarily involve delivery, and is a trading instrument. See the Cotton Guide for more information at (accessed February 2016)

30 weekends or holidays, performing light tasks and learning skills. According to local sources, it is common for children in West and Central Africa to assist with their family household cotton production, including other agricultural production and undertake a number of domestic household tasks, like fetching water, cooking food and cleaning the house and so forth. The explanation provided for children s work is that it is part of the child s acquisition of life skills, although poverty and/or exploitation certainly play a part. In Mali it was suggested by key informants and producers that children s work on family cotton farms does not interfere with their schooling as children work on Saturdays and Sundays or during the holidays. This is also true during the harvest times. The authors have noted in our studies in the region that Fair Trade (and organic) cotton farming have positive effects on producer households as the Fair Trade and organic benefits like higher prices and premiums enable some producers to hire adult workers, and adult workers also contribute to improved cotton quality, which also increase sales. We also have reports from organic farmers in Benin that higher incomes enable some producers to support their children s education and children have more time to focus on their schooling 14. In 2014, Mali took modest steps to eliminate the worst forms of child labour. The Government adopted the National Policy for Child Promotion and Protection, which aims to strengthen national policies and programs to protect children from violence, human trafficking, and exploitative work. The Government participated in several programmes to combat the worst forms of child labour and assist vulnerable households. Also in 2014, Burkina Faso took concrete steps to eliminate the worst forms of child labour. The Government published a study on hazardous child labour to update existing legislation, and established the National Coordination Committee for the National Action Plan on the Fight against the Worst Forms of Child Labour. It also adopted Law N /AN, for the suppression of the Sale of Children, Child Prostitution and Child Pornography, which strengthens existing prohibitions on commercial sexual exploitation of children and child pornography. However, children in Burkina Faso are engaged in labour, including its worst forms in mining and cotton production. Limited resources for the systematic enforcement of child labour laws impede government efforts to protect children from the worst forms of child labour and the lack of funding has hampered the implementation of child labour policies. The conditions faced by many children engaged in cotton work are harsh, and payment nonexistent or far below adult earnings. In Benin, migrant children aged between 6 and 17 in the main cotton growing region in the north earned around $105 for a seasons work in 2003, working 10 hours a day on average in harsh conditions. In Burkina Faso, cotton labourers earn far below the country s minimum wage. The youngest children, in charge of herding animals, earn as little as 75 Euros/year. Older children may earn 90 to 105 Euros per year if they stay for a full season, although bosses may renege on the agreed wage, paying instead for the amount of work done. If the farmer claims to have not made enough from the harvest, the children must stay and work for another year before receiving any money (many will live with the households and receive board and lodging). In Mali, child labourers, sent to the fields by impoverished parents, receive a small bull in return for seven to eight months work for cattle owners as well as board and lodging. This does mean that impoverished parents are relieved of the need to support the child, and the child is not forced into begging. Other children work seasonally, missing school, to provide their families with a few bags of grain. Children who work directly for their parents receive a new outfit and pair 14 Although not documented in the course of formal impact assessments, these anecdotes are common, and we have recorded them in various field research reports between 2002 and

31 of shoes once the cotton has been sold. In West Africa it is has been reported that child traffickers exploit children for cotton work, with or without their parent s consent. They are forced to remain months on end before receiving little or no payment. They endure extremely long hours, with some working seven days a week, all year round (meaning they work on other crops other than cotton, for example, livestock pasturing outside the cotton season). They are commonly exposed to pesticides, poorly nourished, and are often subjected to verbal and physical abuse when they become too tired to work. Some have been forced to work through the night. Organic cotton farming could have an increased risk for child labour if attention is not paid to ensuring that children are not involved. For example, children of migrant cotton workers could help their parents out as parents see the lack of chemicals and pesticide use as safe for their children. Furthermore, if producers do not have cattle to help rake up weeds, children are often engaged to clear the weeds by hand using dangerous tools. The risk for brands is severe with the US publishing a list of countries where goods are produced by child labour, and the UKs Modern Slavery Bill, which places a requirement on companies to report possible child and/or forced labour in their supply chains. While child labour is a problem, and threat to West African cotton, it is an opportunity for Fairtrade and other sustainability initiatives to target producer led risk mitigation programmes, including community based monitoring and remediation systems in child and/or forced labour Subsidies Around half of global cotton production receives some subsidy or other state support (e.g., export or import bans or loans, stockpile/buffer policies ). These disproportionately affect those countries and producers less able to respond, such as the C4 and Senegal. According to the ICAC (2015), 'Subsidies to the cotton sector, including direct support to production, border protection, crop insurance subsidies, and minimum support price mechanisms are estimated at a record $10.4 billion in 2014/15, up from a record of $6.5 billion in 2013/14'. Subsidies were paid by 12 countries, for an average 22 US$ cents per pound of cotton. Up to 83% of world production received subsidy in 2008/9, and the average has been 47% between 2009/10 and 2013/14 (In 2014/15, the average was 76%) (ICAC 2015). Many subsidies are linked to world prices, i.e., the amount rises as prices fall. In West Africa, subsides are usually given for inputs only (seeds fertilisers, pesticides). For the C4 countries and Senegal, the amounts quoted by ICAC are Mali ($26 million (5 US Cents/lb)), Burkina Faso ($30 million (5 US Cents/lb)), and Senegal ($2 million (9 US cents/lb)). China paid the highest total subsidies in 2014/15, ahead of India, Turkey and the USA. China also pays the highest subsidy per pound (58 cents/pound). The question of subsidies remains on the agenda for the WTO, which met again in December 2015, in Nairobi, Kenya. On the agenda was how to 'achieve duty free and quota free access for cotton exports from least-developed countries (LDCs) to developed countries and to increase import opportunities in developing countries' (WTO 2015, AllAfrica 2015). There seems little hope of progress in the near future (quite the opposite according to SUNS 2015), despite that the problem has been on the agenda since This underlines the lack of power of African producers. Meanwhile, the new (2014) US farm bill is reported by Andersen et al., (2015) as having ''significant trade-distorting effects' and that 'This continues to be particularly problematic for many developing countries which largely rely on cotton production for export, such as the C-4 in West Africa''. 31

32 Historically, the cotton dispute (by the C4 with Brazil) came to a head during the so-called Doha Development round of WTO negotiations, with goals including elimination of 'export subsidies by developed countries; provide duty and quota-free access for cotton exports from the leastdeveloped countries; and ambitiously reduce trade distorting domestic subsidies for cotton' (WTO 2015). It is reported that 'Our simulation model results suggest that US subsidies are causing and will cause significant financial hardship for US competitors in the world market for cotton: we find that, at an expected price of US$ 0.70/lb of cotton, all US cotton programs together artificially inflate US cotton acreage by about 2 million acres, boost US cotton export by 3 million bales of cotton a year, and suppress the world cotton price by almost 7 percent', at a financial cost of US$ 3.3 billion (Andersen et al., 2015). Given the higher Chinese subsidy, how much does this cost and would it not be enough to compensate for the current costs of the cotton system in West Africa? Prices Countries in the C4 and Senegal fix prices before the growing season, as a way to encourage farmers to grow cotton and to ensure some stability. Producer prices are not dependent on prevailing international prices at the time of harvest (e.g., Cotlook A or New York futures), although cotton company sales will be based on prevailing prices, unless fixed price forward contracts are in place (traders feel national companies should use these more). Few national cotton companies do this, although the traders who are their shareholders may do so. The prices fixed by governments and regulatory associations do not correlate to prices and futures at the time of fixing: while global Cotlook A prices have been in decline since May 2014, producer prices for 2015/16 look et to rise in Benin and Burkina Faso. One problem is that setting prices before planting means movements cannot be predicted, another is that most WA governments have ambitious production targets, yet reducing prices would lead some farmers to reduce or stop cotton plantings Cotton sector reforms Cotton sector reforms in Africa are often poorly and partially implemented, poorly financed and supported, and undertaken in isolation from what is happening elsewhere, meaning they leave producers even more vulnerable. 1.4 Value chain set-up and stakeholder activity in the C4 countries Input supply (via cottcos and Pos) Interprofession: (state regulation) POs, cotton companies Government (state regulation) (regulation, Cotton companies Price-setting, Value Chain map Ginners Research, (part, full or extension) not privatised) Producers International traders and unions (many shareholders (input supply, in cottcos) Price-setting, Cottco shareholding, Sector governance) West African cotton value chain map 32

33 The graphic above shows the different organisations involved in the sector and their roles, from seed cotton growing, to the gin and on to fibre trading. The graphic under Section 1.2 showed the longer supply chain, actions and relations for cotton. Table 3 shows details on the three cotton companies in Burkina Faso, for which we have detailed data. The example below is of seed supply and breeding, showing the different relations and interactions (from Ferrigno, 2012) Value chains in West Africa, covering seed cotton production, ginning, and fibre trade are all fairly similar, aiming to link producers to gins, and gins to traders and primarily onto the international market. In most countries, farmers are linked to zones, and to specific gins/buyers, although Benin had a system whereby the state allocated cotton to gins, until its recent crisis. In return for selling at a fixed price to a guaranteed buyer (the gin), farmers receive inputs supplied on credit, and usually some extension (of variable quality), the value of which is deducted from cotton payments. These are usually made to producers a few weeks after harvest, when the cotton has been ginned. Seed is also supplied to producers, either by cotton companies or by the government or research (seed is developed, bred and multiplied by research institutions, with cotton companies sometimes involved in multiplication). Specialised farmers produce clean planting seed, which is kept separate from other seed cotton at the gin to maintain purity. Seed quality however is a reported problem for many farmers, and research is often underfunded. New varieties are released quite rarely, as a 33

34 result of funding shortages. Seed development and other research should be paid for (by state and through levies on the sector), but low returns in the cotton sector, partly due to high producer prices, mean finance is often short. Only in the case of Burkina Faso, with the entry of GM, can we see some change, and even there there is little money for new variety development (Ferrigno, 2012) Risk management and Smoothing funds in West and Central Africa cotton sector Few national cotton companies have the in-depth knowledge, and even less professional practice, of using risk management instruments. However, as the limitations of a fixed price system and its limitations when cotton is sold up to 18 months after planting became obvious, a need exists for ginners/cotton companies to be more sophisticated in managing price risks. That explains the genesis of the smoothing mechanism. The use of market risk management and futures instruments remains low in West And Central Africa. This is partly explained because cotton and other commodities have been used as stabilisers for national economies, aiming to protect them from market fluctuations. The use of market instruments (financial futures, options) can be useful to cotton companies that carry market risk, to help manage these within a growing and marketing season, but are not used by national cotton companies. The recent accumulation of heavy losses at cotton companies reflects both low international prices, and companies' own deficiencies in managing sales and price risks. The idea of smoothing prices is based on ensuring deductions are made when prices are high, to feed the fund, and then 'spent' when prices are low to compensate for losses. However, more awareness is needed among sector stakeholders (including cotton companies, producer organisations and banks) before these funds become more widespread outside the pioneer, Burkina Faso. Producer organisations need to understand the risks cotton companies face in the market, and how risks can be minimised, to play a better role in the sector How the smoothing fund works The smoothing fund in Burkina Faso was set up by the Inter-professional organisation, AICB, to reduce the impacts of price volatility. The fund is the property of AICB, and is organised around the following activities: - Determine standard costs, with the umbrella organisation. - Determine a pivot FOB price at the beginning of the season, based on the need to smooth out projected fluctuations through the season, using the average price over the previous two seasons. - Fix the producer price at the beginning of each marketing season by deducting the FOB price from the standard costs. - Calculate a season end balance, based on production, average Cotlook quotes and updated costs. - If the result is positive, the fund is replenished up to its ceiling, with the balance shared between producers and cotton companies. - If the balance is negative, support is paid to cotton companies. 34

35 AICB entrusts the fund's management to a bank as per its rules The role of the bank The commercial banks who manage the fund are are selected through a tender process. The successful bidder then manages the fund and its deposits, for a three year mandate. The fund totals up to 10 Billion FCFA (15 million Euros), and the account is not allowed to go into deficit. The responsibilities of the bank include: - Calculating the pivot and producer prices and submitting them to the inter-professional committee for approval. - Determining at the end of each growing season the results and gross margin on the basis of the production information provided by the inter-profession/aicb. - Issuing transfer requests for payment by the cotton companies if margin is positive - Issuing a payment request if the balance is negative to the cotton companies - Maintaining the account in accordance with the rules, and report on it to to AICB. AICB oversight is via its Executive Secretary. Fund accounts are externally audited Producer participation in governance and supply chains As already described, all countries except Chad now have national producer federations, which participate in sector governance, and are also members of the African Cotton Producers Association (AProCA). This ensures their participation in sector governance, within the limitations of the capacity of elected and appointed officials. This is one of the problems that must be addressed, alongside equality and participation within POs and between members (gender, minorities, smaller producers; in other words, power relations). Producer organisations thus have some power, but it is relative. They have a seat at the table of national sector governance, in price setting, and regulation. However, it is Cotton Companies and international traders who mediate between national sectors and international markets. Producer power here comes through their shareholdings in cotton companies, although the levels of this are low compared to others, meaning they have no functioning majority or veto. Meanwhile, the overall vision for cotton, implemented at the grassroots, still remains one of high and intensive production, of large volumes of consistent quality cotton for export. Who does this work for? Do all farmers share, or benefit from, this vision? How much influence are producers really having on cotton sector vision? Is any work looking at a new vision for the cotton sectors, that takes into account the different needs of different kinds of farmers as well as of the cotton companies and international markets? These questions show why a strong AProCA is essential, as an umbrella organisation with a lobbying remit, among its other roles. Where national associations may be best placed to lobby their own governments and local cotton companies, a pan-african association is best placed to lobby regional institutions, donors and international bodies and to work with its stakeholders on a pro-farmer sector strategy. However, lack of capacity (in staff numbers and training) and funding for general research, advocacy, information and lobbying work hampers AproCAs ability, and limits much of their work to funded project work, although the organisation is trying to make its funding more sustainable through membership fees. 35

36 1.4.3 Benin Benin faces an uncertain future for cotton over potential new reforms, the shape of which is not yet clear. Reform has been pending since 2012, when the government took back control of the sector following a crisis, centring around one of the private ginning companies that entered the sector after earlier part-privatisation. The earlier reform began in 1999, when the Association Interprofessionnelle du Coton (AIC), an inter-professional association groups cotton sector stakeholders (constituted of three families: Inputs importers, Ginners and Farmers Associations), was first created. The following year, the seed cotton monopoly previously held by SONAPRA (the national cotton company) was abolished. Gins were privatised but the allocation of seed cotton to gins was still controlled by the state. A credit agency for managing payments (CSPR Centrale de Sécurisation des Paiements et Ristournes) was also established, to manage financial flows in the sector, including payments to producers. Reform continued with cotton sector management being passed to private operators, and the establishment of a ginners' association and a Cotton Development Company (SODECO), providing a framework for consultation between the state and the cotton sector. Producers were organised through the establishment of village level cotton cooperatives (CVPC Coopératives Villageoises des Producteurs de Coton), with an agreement then signed between the Producer Organisation and the AIC. Since 2010, inputs for use in cotton have to be approved by the National Committee for the Approval and Control of Phyto-chemicals (CNAC). Since 2012, and pending reforms, there is a Transitional Institutional Framework for the Management of the Cotton Sector. Among ideas for cotton sector reform are the introduction of zones similar to Burkina Faso, to the number of 4, and a commission for cotton procurement. The government is also setting cotton prices and has established a central office for input importation called Centrale d Achat des Intrants Agricoles du Benin. Meanwhile, all cotton sector operations are directly led by the Ministry in charge of agriculture and its structures in the ground. In this context, farmers organisations are hardly visible in terms of decision making. However, informants suggest nothing is permanent, as the country is currently in an electoral process that will lead to a new president and government in April Informants also hope that new reforms place the cotton sector back private and producer organisation hands, with the public sector setting a favourable environment for this. In 2015 a Sector Regulatory Authority was set up, 'responsible for, inter alia, monitoring compliance with texts and their implementation' (WTO 2015). Table 5: Benin cotton data Production 2014/ /16 393,000 tonnes 500,000 (est.) Revenue contribution to government 200 Billion CFA (70% state revenues, 20% GDP) Employment 10 million Source Reuters

37 Meanwhile, external forces have their eyes on Benin, with China offering ' to improve Benin's cotton yield by introducing a Chinese cotton variety that gives 6 tons of cotton per hectare against a Beninese variety that produces less than 2 tons per hectare," (Forum on Africa-China Cooperation, 2015). As there is no mention of any field trials taking place, this seems unlikely cotton seed research exists because varieties cannot simply be transplanted from one country to another success depends on adapting to different ecologies, pest and disease complexes, and so on. Benin is also home to antique textiles equipment given under earlier schemes, which is not in use, as well as more modern donated equipment. However, there is a lack of trained staff, design capacity, marketing, finance and reliable and affordable energy supply and so this is another failed scheme. The Forum on Africa-China Cooperation (2015) is also promising farmer training, to address 'reduced fertility of the soil, climatic changes, high production costs and lack of training for farmers' Burkina Faso Burkina Faso has seen relatively successful reform, and the establishment of a stable cotton sector, albeit with some concerns over politics within the producer association UNPCB, the relative size of concessions and the impact of the introduction of GM cotton, as well as over the state of domestic cotton research. Cotton sector reform started in 1998, when the National Union of Cotton Producers of Burkina Faso (UNPCB) was officially recognised, with producers being handed a 30% share of national cotton company SOFITEXs capital. SOFITEX supported this movement, hoping for more professional and receptive partners. The structure begins with grassroots village groups (GPC), department (county) level groupings (UDPC), regional federations (UPPC) and then the national structure, UNPCB. There are some 12,250 GPCs in 4,162 villages, 280 departments and 36 provinces. An inter-professional association (AICB) was then established, and in 2001 the SOFITEX monopoly was broken up, and the cotton area divided into three zones. Two new companies were created (Fasocoton and Socoma), although SOFITEX received the best and largest concession. Producers received capital in the new companies as well. GM trials began in In 2006, a Professional Association of Cotton Companies of Burkina Faso (APROCOB) was established. The Price-Smoothing Fund Association (Association fonds de Lissage AfdL) was established in 2008, followed by the Cotton Inputs Fund Association of Burkina (AFICB) in Cotton zone concessions were renewed in 2014 (WTO 2015). The state remains involved in SOFITEX (Staritz et al., 2015), however, and SOFITEX probably retains quite a lot of power in the sector as a whole due to its large size (Ferrigno, 2011), controlling 80% of the country's production (Staritz et al., 2015). Two Traders, Reinhart of Switzerland and Geocoton of France (ex-dagris and CFDT) are shareholders in SOFITEX, SOCOMA and Fasocoton, meaning traders have influence in the whole sector via all three companies. Each company is effectively a monopsony in its zone, buying all cotton and providing credit and input packages to farmers. As well as a fixed price, the smoothing mechanism allows for potential payments to farmers at the end of the season, if world market prices are above the agreed floor price (which is set at the 37

38 beginning of the season, Staritz et al., ). Farmers in Burkina benefit from knowing prices in advance and can plan accordingly, with the limitation that there are not many other crop options (which suggests a need to invest in diversification). The ultimate guarantor and responsible party is the government. Table 6: cotton production data for Burkina Faso 2014/ /16 Production 690,000 tonnes 531,000 tonnes Area 660,592 Bt cotton area 446,000 (69%) Yield 1,079 tonnes/hectare Fertiliser price 15,500 CFA/5kilo bag (-5% on previous year) Export share 17.7% Farmers 350,000 Source: FAS Gain Prospects for cotton in Burkina Faso are reasonable, with EcoBank (2015) reporting a higher output than FAS at 707,145 tonnes of seed cotton for 2014/15, or 300,000 tonnes of fibre, which is 31% of the (Francophone) region's output (USDA FAS 2015 give a figure of 288,000 tonnes, slightly lower). The 2015/16 price is reported as CFA 235/kg, which no other sources report as yet this set at a level to retain farmers and achieve higher production: 'Given that cotton fibre exports are the second largest source of FX earnings, after gold exports, the Burkinabè government plans to offset the cost of higher farm-gate prices elsewhere in the chain, rather than risk a collapse in output'. They also report that the Bt cotton area will be reduced in the coming season (from 73% to 53%), as Bt cotton has a shorter staple length than domestic varieties, which means it fetches a lower price on the global market (despite it reportedly reducing labour costs and costing less overall). Work is under way to improve the cotton variety into which the Bt gene will be introduced. The reduction in Bt area makes something of a mockery of the Crop Life (2015) claims that Bt cotton has provided Burkina Faso a 'massive economic boost' with '$100 million in additional economic benefits' (which the article fails to quantify or detail). But in an intervention designed to hand Monsanto more power and influence in Burkina Faso, and despite this Bt cotton setback, the company is launching a service called Mobicot, 'a free mobile cotton consultancy service.(which) aims to improve practices and yields vis SMS messaging' [Ecofin reported in Com-Watch 2015). Production is expected to be 800,000 tonnes of seed cotton in 2015/16, higher than other estimates, although the El Nino weather could lead to drier conditions and lower production (Ecobank 2015). To support the sector, a decrease in input prices is also being supported by a new 38

39 government fund, which 'acts as a guarantee for cotton companies inputs purchases'. Burkina Faso is also being supported by donors Stakeholder roles One of UNPCBs roles is economic, concerning seed cotton marketing, strategic and non-strategic input supply and marketing, and credit management, as well as a wide range of services such as information, training, and support to Council members. In terms of marketing, seed cotton collection is done by producer groups (GPC) through self-managed markets, which are paid for by cotton companies through seed cotton purchase commissions ( 6.48 per tonne of seed cotton). The government participates by defining agricultural policy, developing infrastructure and developing and implementing the regulatory and legislative framework. Similarly, government plays a role in the regulation and control of sector actions through protocols signed with producers and cotton companies in September The Government supports producers and cotton companies by subsidising inputs for cotton production. Cotton companies ensure: Input supply to producers; Support to the producers' council; Purchase and collection of seed cotton; Seed cotton ginning; Adding value to finished products (fibre) and by-products (seed, fibre waste) Input supply includes procurement and distribution of inputs, and provision of credit for their acquisition. Producers are involved in the process, beginning with an assessment of needs by local groups. Cotton Companies then lead an international call for tenders for cotton pesticides and fertilisers, using funding from a banking pool including local and/or foreign banks. Distribution to producers is done through cotton companies, with credit to producers being supported by banks such as BICIA-B and local 'caisses populaires', which are micro-credit institutions. Recovery of credit is by deduction from farmers payments. A national banking pool also ensures the initial purchase of seed cotton, with an international pool ensuring payment of balances. Banks also support capital investments (e.g., lorries, plant). Cotton research is led by INERA, the national research institution for environment and agriculture. Cotton research is funded by the sector, which through SOFITEX and other companies has contributed just over 3 million Euros in the last 10 years. The role is essential to the sector especially with the push for biotechnology, with Monsanto and AICB also contributing to budgets. However, budgets do seem insufficient Chad Chad's cotton sector is little reformed, with a single cotton company, CotonTchad, recently taken back under state control following financial problems. There is no single national producer federation (attempts at reform date back to 2000, with the set up of a task force). CotonTchad 39

40 leads input distribution, seed cotton collection from producers, ginning, transport and marketing of fibre. Table 7: Chad cotton production data 2014/ /16 Production 130,000 tonnes 216,000 tonnes Lint exports 31,700 tonnes 52,000 tonnes (est.) Area 256,000 ha Yield 510 kg/ha Main export partners Bangladesh, India, Indonesia, Portugal, Germany Price (top grade) 240 CFA/kg People dependent on cotton Nearly 3 million Chad subsidies to inputs CFA 6.9 billion (fertiliser, budget) Source: CotonTchad SN Reform does however remain on the agenda for Chad, with plans relating to market access (boosting supply to drive exports), domestic support (support livelihoods, education and health) and export competition. On export competition, Chad continues to call for action on subsidies in order to level the playing field, as 98% of its crop is exported. Research in Chad is led by ITRAD (Institut Tchadien de Recherche Agronomique pour le Développement), created in 1997 after the French institute CIRAD quit the Sudanian zone of Chad. ITRAD is organised as Regional Centres for agronomic research and thematic research programmes. It conducts planting seed production (base and pre-base), and research on crop protection (diagnosis of resistance of Helicoverpa, for example), herbicide experiments (Calliope, Syngenta), agrarian diagnostics, and analyses of studies and practices. Table 8: Production figures, producer income, and sale price ( to ) Year Cultivated area (ha) Seed Yield Producer Cotton (kg/ha) income Lint output Lint export Export price (CFAF/kg) (metric (metric tons) Tons) , , , , , , ,229 65,437 40

41 , , ,474 74,834 69, , , ,978 58,077 56, , , ,912 67,363 62, , , ,613 74,311 68, , , ,802 42,022 40, , , ,230 83,906 79, , , ,335 71,489 68, ,470 98, ,843 40,291 38, , , ,091 46,471 39, ,796 70, ,073 28,574 26, ,200 35, ,702 14,038 13, ,700 52, ,613 21,355 20,820 1, ,380 78, ,157 31,955 31, Source: COTONTCHAD SN The final important actor in Chad is the Office National de Développement Rural (ONDR). This (state) organisation is in charge of extension and supervision of producers, covering the entire the territory. It is also in charge of structuring the rural world. It has two agreements with CotonTchad, one to provide training for the cotton field agents, and the other to take part in the commission for arbitrating on cotton seed factory quality disputes. Producers are organised through the National Union of Chad's cotton producers (UNPCT), the most representative producers organisation. It ensures cotton production, which it sells to COTONTCHAD through self-managed market (MAG). It also participates in tenders for inputs. It suffers from a lack of structure and organisation, which reduces its weight in the cotton sector. Other POs are structured around production, storage, processing and marketing of agricultural products Cotton, which used to be the jewel in the crown of the economy of the republic of Chad (AproCA et al., 2014), accounted for 90% of the country s exports in However, numerous problems in the cotton sector have compelled the State to launch a weak liberalisation process, privatising CotonTchad s oil mills and soap factories, a process which has yet to deliver on its promises. The economic weaknesses in the sector, and the existence of a cotton monopoly in terms of cotton purchase, processing and marketing destabilise the sector. The cash flow problems of the company aggravate the situation, and mean the sector's producers are largely left to their own devices. This is why it is essential to set up a strong and functional federation of cotton producers able to participate in sector management and governance, and improvements are needed to ensure the survival of a sector on which 3 million people depend. 41

42 1.4.6 Mali Cotton sector reform in Mali has been on the cards since 2001, when the Mission de Restructuration du Secteur Coton (MRSC) was established (under pressure from donors and the World Bank). This followed financial crises in the cotton sector in the late 1990s. Despite the break up of production into four subsidiaries under a central holding company within the Compagnie Malienne des Fibres Textiles (CMDT), cotton in Mali remains a monopoly (although there is a very small second company, OHVN, which controls around 5-6 % of cotton production). In 2008, a national cotton producer cooperative and a professional association for cotton companies were set up. Technically, CMDT capital was opened to private parties in Since 2010, the sector has been governed by a National Strategic Framework for the Development of the Cotton Sector (CSNDSC) and a Cotton Sector Regulatory Authority (ARSC). A price setting mechanism has been in operation since 2002, which links prices paid to farmers to production costs, industrial costs and international prices. Table 9: Mali production data 2014/ /16 Production 547,000 tonnes 650,000 tonnes Area 538,000 Hectares Yield 1,015 kgs/ha Source: USDA FAS 2015 A tender process was launched in 2003 for the sale of one gin, in the OHVN rather than CMDT cotton area. The process was halted in 2004 due to a lack of suitable candidates. The Malian government still wanted to privatise CMDT (representing 95% of national production) by the end of However, that process was postponed several times according to the MRSC, due to presidential elections and the importance of cotton to the South of Mali, where half the population lives. More delays are expected, especially as few stakeholders are very enthusiastic about liberalisation. As well as reform of CMDT, there were also goals to build the capacity of producer organisations, the establishment of an inter-professional organisation, a price support fund owned by producers, and a quality classing office. The establishment of four subsidiaries of CMDT did take place in 2009, and the government paid off farmer cooperative debt. In 2005, one of the cotton seed crushing plants (Huicoma) was also sold to a group of local investors. Tenders for the privatisation of CMDT subsidiaries were launched again in 2010, and a short-list established. The goal was for private investors to own 61% of the capital, with producers and company staff holding 20 and 2% respectively, with the remaining 17% held by government. Each subsidiary would have a regional monopoly on cotton purchase, ginning and sale. The process was disrupted by a coup in March Senegal The cotton sector in Senegal has a single cotton company, SODEFITEX (Société de Développement des Fibres et Textiles), and producer unions organised via the Fédération Nationale des Producteurs du Coton (FNPC), who work under a framework agreement between 42

43 them. As a very small producer Senegal has focused on the quality of its cotton, especially since losing most of its textile industry and well regarded spinner Cotonnière du Cap Vert (although there are rumours of new mills under consideration). SODEFITEX has also developed into supporting crop diversification and rural development. Table 10: cotton production in Senegal 2014/ /16 Production 26,000 tonnes 30,000 Yield 1,059 kgs/ha Area 25,000 ha Source: USDA FAS 2015 The main advantage of the Senegalese cotton sector is the strong partnership between its two key actors: FNPC and SODEFITEX. Their collaboration is governed by a three way agreement between them and the government. There is also a quality charter, aimed at making Senegalese cotton quality a major selling point (it already receives a good price on global markets). The sector also has other strengths, notably a good management system integrating quality, safety and the corporate work environment in a unified management system. The system also protects cotton supply for local spinners, while receiving a high market price, so farmers are guaranteed better incomes. FNPC is a member of the SODEFITEX board, as an observer, pending a forthcoming acquisition of a 20% share in the company (for the time being these are held by the government). SODEFITEX and FNPC are both stakeholders in the Senegalese inter-professional cotton Association (ASIC). SODEFITEX has been involved in Fairtrade cotton for a number of years, and there is also a Fairtrade-organic project, organic from 1994, and Fairtrade since The Federation Nationale des Producteurs du Coton was born from an initiative by SODEFITEX and a desire by producers to become more professional. The grassroots farmer organisations (ABP) were village based organisations, not crop based (and so included all products, such as groundnut, maize, rice and cotton). This made them hard to manage. In 1998, the 70,000 cotton farmers organised free democratic elections by secret ballot, forming the FNPC around local producer groups (GPC). It has a board of directors formed of 16 sector union presidents. Its primary mission is cotton production, and activities cover research through producers and village based technicians, extension activities, monitoring of production methods, and collection of data for SODEFITEX. The FNPC also checks and distributes inputs ordered through village managers, and manages the subsequent credit debt and its repayment at GPC level. FNPC manages credit of 3 to 4 billion FCFA annually, and manages the debt solidarity (caution solidaire) programme. FNPC is also a member of the support fund set up by government, SODEFITEX and donors (The French Development Agency, AFD). The set up, although beneficial, is however threatened by the current trend in world cotton prices. 43

44 1.4.8 Influence map Table 11: Producer influence map 1.5 The benefits and disadvantages of the governance models in the C4 and Senegal Participation by producers is by far the best outcome of reforms to date. Strong and effective farmer unions can positively influence outcomes and policy, although over-attention to producer concerns in countries highly dependent on cotton has risks, for example that prices will be set too high to ensure producers plant cotton, thus rendering the sector uncompetitive and financially weakened, affecting for example investment in research. Balance has yet to be found. The focus on high volume production has also led to over-use of inputs, and attempts to subsidise these have not prevented many farmers falling into debt traps. Senegal, followed by Burkina Faso, offer the best examples of well functioning producer organisations and well organised multi-stakeholder governance between producer unions, state and cotton companies. Shareholding by producer unions in cotton companies is another example of good practice. Burkina Faso's Fonds de Lissage is another good example, albeit it is early to say if it is financially sustainable. More needs to be done here to manage the prices set for farmers, and their expectations of always getting a good price. There is a role for AProCA here in monitoring 44