No Fluff, Just Cotton: The Strategic Importance of Cotton Production to Development in West Africa Kimberly Pfeifer Oxfam America

Transcription

1 No Fluff, Just Cotton: The Strategic Importance of Cotton Production to Development in West Africa Kimberly Pfeifer Oxfam America The Strategic Importance of Agriculture in West Africa Cotton is a celebrated success story in African agriculture. It has contributed to the improvement of incomes, livelihoods, and access to social services. Over the past forty years cotton production has been systematically supported through state structures as a strategic sector for economic development. For a continent where 315 million people survive on less than one dollar per day, the average life expectancy is 41 years of age and one in six children die before the age of five, cotton production has offered a viable development strategy as it has had significant impacts for improving livelihoods and reducing poverty for farmers and their communities. 1 In general agriculture provides livelihoods for 70% of the population in Africa and constitutes nearly 30% of sub-saharan Africa s GDP and 40% of export earnings. In Benin and Burkina Faso, a very high percentage of the population is engaged in agricultural production: 70% in Benin, 85% in Burkina Faso. 2 In these same countries, agriculture is central to the economy, contributing 38% and 35% of GDP respectively. In Burkina Faso cotton production is responsible for 5.4% of GDP (2003/2004). 3 The importance of agriculture in Africa and specifically cotton in West Africa in terms of food security, livelihoods, and the fight against rural poverty simply cannot be overstated. To put this in context, in the United States, agriculture employs less than 1% of the population and generates only 0.9% of GDP. Since 2002, farm incomes in the US have been significantly higher than non-farm, reaching $67,000 that year, or $8,000 higher than the average non-farm income 4. By comparison, in Mali, 80% of the population depends on agriculture, and it generates 45% of the country s GDP. 5 Cotton alone accounted for 7.33% of GDP in The average income from cotton production in Mali is about $280 year and 64% of the population lives below the poverty line. Well over half the population in West and Central Africa live below the poverty line, mainly in rural areas 7. The economies of some of the world s poorest countries Mali, Burkina Faso, Benin and Chad are highly dependent on cotton for export revenues, and cotton is a significant contributor to GDP. In these West and Central African countries, cotton production currently provides one of the only real options for access to cash income and employment. 8 Their incomes and wages, in turn, stimulate local demand and markets, and pay for education and health care for their families, and tools and inputs for cultivation. Answering the following questions assists us to understand the importance of cotton production in West Africa. 1

2 What does cotton production mean to West African farmers, their families and communities? In a phrase, cotton sustains livelihoods. Up to 80% of West African agriculture is undertaken on small family farms of 3-10 hectares. 9 Cotton is also grown on relatively small family farms averaging between 4 to 6 hectares. Across the cotton regions of West Africa, cotton cultivation is part of a larger agricultural system which also includes cereals (maize, sorghum and millet); other food crops such as cowpeas, legumes, yams and groundnuts; fruits (mangos, oranges) and livestock (cattle and donkey for manure and draft power). 10 Maize and other cereals provide staple food, but households focus the majority of resources on cotton production. Cotton Generates Household Income Cotton is the main source of cash income in most of the cotton producing zones across West Africa. For example, in southern Mali and Benin revenues from cotton production account on average for 75% of total cash income per household. 11 Cotton sales account for half of all household income in Benin. 12 Cotton is the only cash crop that provides earnings which not only cover expenses but enable farmers to accumulate capital. 13 In Benin the average cotton farm cultivates about 2.3 hectare (5.73 acres). The annual crop value is about $1,070 (or $465 per hectare). 14 However, the profits are much smaller. In Mali a typical cotton farmer cultivated about 2 hectares (5 acres) of cotton and earns less than $280 annually. If producers follow the recommended use of fertilizers and pesticides net earnings on 1 hectare would be about $40. However, the typical poor farmer, who reduces the use of them, earns about $138 per hectare. 15 In Burkina Faso the average cotton farm cultivates 3.75 hectares of cotton and the average cotton household is about 12 people. 16 Average earnings (net income) on cotton per hectare for farmers in Burkina Faso are about $115. However, again the typical cotton farm does not follow recommendations and consequently earns about $244 per hectare. 17 In Burkina Faso where the average monthly expenditure for rural households is about $23 or $276 annually, cotton constitutes a critical source of cash to cover basic necessities. With health accounting for 28% of expenses, repayment of credit/loans 20%, food and clothing 19%, education 8% and production factors (such as labor and equipment) 5%, a decline in income from cotton can force households to make difficult sacrifices in terms of health and education. 18 While higher farmer incomes associated with strong agricultural growth of the recent past have been concentrated among better-equipped cotton farmers (with animal traction), well over half of rural household still do not produce sufficient food to meet their needs, hence food security depends on regular access to income and affordable prices for food throughout the year. 19 In the Malian cotton growing regions of Sikasso, Koulikoro and Ségou only 18%, 25 % and 30% of the population lives above the poverty line. 20 However, OECD has argued that as a consequence of successes in earning income from cotton, producers are considered better-off and more capable of emerging from poverty. 21 Burkina Faso is a case in point as the incidence in poverty amongst cash crop farmers 2

3 declined from 50.1% to 42.4% between 1994 and In comparison, poverty levels amongst food producing farmers increased by 2% for the same period. 22 Cotton Income has Multiplier Effects Income from cotton also allows cotton farmers to contribute significantly to the economy though spending. For example, every $1 in spending by cotton farmers has a multiplier effect on spending of $3.30 in Benin s economy. 23 Cotton income creates employment in communities through multiplier effects such as creating the need for bicycle repairers, carpenters, blacksmiths, millers, etc. 24 Expenditure surveys conducted after the devaluation showed that farms reporting higher incomes generally spent cotton revenues on consumer goods (radios, televisions, cement and roofing for housing, bicycles, motorcycles, generators, sewing machines). 25 Income enables investment in community development Cotton farmers are able to invest in social services for their communities with their income. In cotton communities in Chad, farmers invest in their communities through repayments, which serve as the sole source of investment in community development. Farmers are able to invest in schools, pharmacies, credit groups, stores and water pumps for example. 26 Cotton farmers in Burkina Faso also invest in community services through rebates. Between 1997/87 and 2002/03, farmers invested $6.5 million into community resources such as schools and hospitals with visible results. 27 Literacy rates and school attendance rates in cotton producing regions are higher than national average rates at 34% and 56% respectively compared to 21.8% and 44.1%. 28 Farmer organizations in Mali have played an important role in the cotton producing zone. The investment of the revenues earned from marketing and seed cotton assembly fees has had an impact in the cotton sector but more importantly in social infrastructure in the form of new schools and health centers. The cotton funds have enabled communities to successfully increase schooling rates and improve access to medical care. 29 What does cotton production mean to the ability of West African national economies to invest in development for cotton producing communities? Source of revenue for national expenditures including healthcare and education Cotton production constitutes an important source of fiscal revenues and export earnings and serves as a development strategy for governments in West Africa. In Mali, the cotton sector is the largest employer and has provided highly sought after and well-paid jobs. 30 In Burkina Faso, 17% of population depends on cotton for their livelihoods (including 200,000 farmers and 700,000 farm workers). 31 Thus, cotton has not only a significant role in economic development in terms of generation of employment, but also in the creation of a tax base to fund national expenditures. In Burkina Faso, customs and import duties, value-added tax and taxes on wages and salaries from the cotton sector generate significant revenue for the State. The 3

4 combination of the four has added up to $28.4 million to $51 million annually from in cotton sector contributions to the state. 32 Importance of cotton exports as proportion of national export revenues in 2001 and 2002: Country Share of agricultural exports (2002) Share in Total exports (2002) Benin 72.6% (61.9%) 37.6% (34.9%) Burkina Faso 70.6% (53.6 %) 51.4% (32.7%) Mali 62.1% (58.8 %) 25% (12.9%) Sources: OECD, 2005; World Bank Development Indicators, 2004 and FAO Stat The importance of exports earnings from cotton seem clear when compared to national expenditures for healthcare and education. For example, in Burkina Faso 70% of healthcare facilities are public. 33 In 2001/02 the government spent $137.6 million on healthcare in comparison to receiving $105 million in export revenue from cotton. Cotton Generates Positive Externalities There is a correlation between increased cotton production and increased cereals production across West Africa based on developments in the cotton sector over the past 40 years. 34 Through parastatal support of cotton, farmers were able to expand production into cereal crops (such as key food security crops millet, sorghum and maize) and use animal drawn technology in production to eventually integrate crop rotation and livestock activities. 35 Cotton production has proven to be a catalyst for increased grain production in Mali, contrary to popular perception that cash crops have a negative effect on food crop production and food security. Per capita coarse grain production has been much higher in the CMDT cotton zone than other regions. 36 In Burkina Faso, the rotation of cotton and maize has led to improved results for growing maize as it benefits indirectly from the use of fertilizers on cotton. 37 The state cotton support system has had secondary impacts on agricultural development and improvement of rural livelihoods. Cotton production has led to the development of socio-economic infrastructure. Cotton support systems have historically offered an extensive network of support services and infrastructure that extend beyond assistance to the farmer. The wider community in cotton producing regions has access to inputs and extension services, health centers, pharmacies, schools and roads. OECD has demonstrated a correlation between cotton production areas and improved access to social, economic and productive services. For example, in Mali CMDT was responsible for construction of the transportation infrastructure needed to support cotton production but which has benefits for communities in the cotton zones for food crop marketing, helping to lower marketing costs. 38 The CMDT has also assisted producer organizations with the collection and marketing of cereal crops and promoted cattle 4

5 feedlots (using ex-draught oxen). 39 Finally, the CMDT has supported education initiatives and promoted women s income generating activities (such as processing). Cotton: A Critical Development Strategy in West Africa The rapid increase of cotton production over the past two decades is linked to the inception of economic liberalization which began in the early 1980s. Economic liberalization ushered in incentives for farmers to increase production. However, declining prices in international markets paralleled this development. Producers responded by increasing production to simply maintain incomes and purchasing power. 40 Over the past 20 years, West African farmers have increased land allocated to cotton cultivation to preserve production levels from the impacts of falling yields, liberalization and declining international market prices. 41 While at the aggregate level West African producers have expanded land allocated to cotton cultivation, specific local areas allocated to cotton change where farmers have options and farmers responses to market incentives change. For example, for the 2004/2005 season farmers in Burkina Faso reported choosing to plant maize instead of cotton due to low cotton prices. 42 While cotton production has led to the production and support of food crops and cereals, they remain marginal as compared to cotton as a source of income. With many parts of the West Africa unable to diversify beyond cotton and cereals production and limited alternatives to cash crops and other income generating activities, OECD has argued that a long term decline in cotton production in Mali could trigger declines in maize and millet production. These declines could lead not only to declines in farmer incomes, but to declines in the supply of food grains to urban populations with implications for food security and threaten the stability of state budgets. 43 The government of Mali has estimated that a decline in the producer price to 175 CFAF per kg would have the following impacts: a $25.4 million (12.7 billion CFAF) decline in household revenue (not cotton) and a total loss for the national economy of $87.2 million (43.6 billion CFAF). 44 An IFPRI study found that in Benin a 40% decline in farm level prices (price farmer receives for cotton) leads to a 21% decline in income for farmers. A 40% decline in farm level prices also means a 6-7% increase in rural poverty and an increase in the incidence of poverty for cotton farmers from 37% to 57%. This decline is already very real. From the 1998/99 crop season to the 2002/03 crop season farmers in Benin experienced a 24% decline in cotton prices ($0.42 per kilo to $0.32 per kilo). Finally, building on the analysis of ICAC on impact of government measures on world market prices, Oxfam has estimated that US subsidies alone generated a combined loss of $158.4 million in export earnings for Benin, Burkina Faso, Chad and Mali in the 2001/02 and 2002/03 crop cycles. Factors influencing farmers decisions to invest labor and capital in cotton production arise from both concerns of household management and impacts of broader events and policy changes beyond the control of farmers, such as the price and availability of inputs and the price of cotton. 45 Livelihoods in cotton producing regions are sensitive to macro- 5

6 level policy issues as the sustainability of livelihoods is heavily reliant on cotton production. Thus, farmers heavily depend on external actors and structures to assure sustainable livelihood outcomes. With challenges abound, reforms are critical to increase the effectiveness of the cotton sector s role in development The trend of declining world market prices for cotton has had serious impacts on West African economies dependent on export earnings from cotton, on farmer incomes and on the process of agricultural transformation. The huge downturn in international prices in 2001/02 and government actions to reduce the effects of international subsidies on African producers has served as a major shock to the cotton sector in Mali. In general, the profitability of cotton farming has been declining in recent years. Thus, it is important to continue global efforts to eliminate government measures of support to the cotton sector which are trade distorting specifically eliminating trade distorting domestic support to cotton and export subsidies. Cotton production constitutes a critical development strategy. This development aspect of cotton production has been treated too lightly at the expense of millions of livelihoods in West Africa. In thinking about cotton production at the global level the development aspects of cotton should be a central consideration. To this end, bilateral and multilateral aid should focus on enhancing the capacity of the cotton sector in West Africa but not as a substitute for reforms to agricultural subsidy regimes in rich countries. It is clear that cotton producing communities have benefited from strong state support systems. This should be given serious consideration as the liberalization of the cotton sector continues across West Africa. Difficult challenges confront the cotton producing regions in West Africa. Such challenges include: the form liberalization should take in order to address corruption, efficiency and capacity issues, while continuing to support cotton producers; building strong producer organizations; how to create new markets in the context of depressed world market prices; how to introduce soil regeneration as cotton places high demands on soil nutrients and water leading to soil degradation; how to address food security and malnutrition as cotton regions tend to have higher child malnutrition levels in Mali than the national average. 46 There is a need to develop economic opportunities for West African countries to reduce their dependence on agriculture commodity exports like cotton and foster regional trade, processing and diversification. However, in some areas of West Africa there are few if any viable alternatives to cotton and consequently it will take time to develop feasible diversification possibilities. 47 Because of this cotton production remains a critical development strategy to millions of people in West Africa. 6

7 Endnotes 1 Statistics from National Geographic, Cotton Cultivation in Burkina Faso A 30 Year Success Story, prepared for Scaling up Poverty Reduction: A Global Learning Process and Conference, Shangai, China, May 25-27, 2004, World Bank, p Données de la DNSI. 7 africa' Poverty line in Benin means earn less than 600 a year. 8 OECD, 2005, million households produce cotton in West Africa and up to 16 million people are involved in cotton production. 9 OECD, Economic and Social Importance of Cotton Production and Trade in West Africa: Role of Cotton in Regional Development, Trade and Livelihoods, January 2005, p IDS, Sustinability Amidst Diversity, 9 11 Peter Ton, Cotton Production and Rural Livelihoods in West Africa, 2001, p Nichols Minot and Lisa Daniels, Impact of Global Cotton Markets on Rural Poverty in Benin, IFPRI, November Cotton Cultivation in Burkina Faso, p. 12. See also Tefft, p Nicholas Minot and Lisa Daniels, Impact of Global Cotton Markets on Rural Poverty in Benin, IFPRI, November Thomas J. Bassett, Price Formation and Power Relations in the Cotton Value Chains of Mali, Burkina Faos and Cote d Ivoire, Report Prepared for Oxfam America, Cotton Cultivation in Burkina Faso, p Ibid. 18 Expenditure data is from World Bank, African Development Indicators, 2005 and Peter Ton, Cotton production and rural livelihoods in West Africa. Costs related to livestock are not included. 19 Jim Tefft and Valerie Kelly, Understanding and Reducing Child Malnutrition in Mali: Interim Research Finds for the Project on Linkages between Child Nutrition and Agricultural Growth, Michigan State University, December 2004, p Rapport Senté et Pauvreté, Figures reflect poverty levels from OECD, Cotton Cultivation in Burkina Faso, p Minot and Daniels, Ton, Kebe et al 1998 in Tefft, p OECD, Cotto Cultivation in Burkina Faso, p Ibid. 29 Tefft, p Ibid. 31 Cotton Cultivation in Burkina Faso: A 30 Year Success Story, p Ibid, p World Bank, African Development Indicators, See OECD, OECD, James Tefft, Mali s While Revolution: Smallholder Cotton from 1960 to 2003, Conference Paper No. 4, InWEnt, IFPRI, NEPAD, CTA conference Successes in African Agricultre, December 2003, p OECD, Tefft, p This example is drawn from OECD, p OECD, Economic and Social Importance of Cotton, p OECD, p

8 42 OECD, P See OECD, Government of Mali, September, IDS, p For problem of the prevalence of malnutrition in cotton regions of Mali, see Jim Tefft and Valerie Kelly, Understanding and Reducing Child Malnutrition in Mali: Interim Research Finds for the Project on Linkages between Child Nutrition and Agricultural Growth, Michigan State University, December OECD has argued this. See Economic and Social Importance of Cotton Production and Trade in West Africa,

9 No Fluff, Just Cotton: The Socio-Economic Importance of Cotton in West Africa Indicators on health and education in rural Burkina Faso Net primary enrollment: 91% Net secondary enrollment: 21% Adult literacy rate: 13% Youth literacy rate: 19% 50% of children under the age of 5 are underweight 20% have access to sanitation facilities Costs and income earned from growing 4.75 hectares of cotton in Mali (following recommendations) Income Yield: 5,280 pounds Gross income: $US 872 Cost 24 sacks of Fertilizer: $US 567 Pesticides: $US 136 Sprayer: $US 54 Total Costs: * $US 758 Gross income: $US 872 Total Cost: $US 757 Net Income: $US 114 Source: Ibrahim Coulibaly, Assoc. of Professional Producers Typical expenses of producing cotton and income earned per hectare in Burkina Faso ton Income Yield 947 Gross Income $382 Cost Seeds $ 4.80 Fertilizer $ Insecticide $ Total Costs $ Gross Income $382 Total Costs $139 Net Income $243 Source: Thomas J. Bassett for Oxfam, 2005 Average Monthly Expenditures of $23 Mean monthly expenditure: $23 (11,393 CFAF) monthly share on health: 28% monthly share on education: 8% Clothing and food: 19% Loan Repayments: 20% Production factors: 5% Total annual Expenditures: $276 Cotton Share of GDP and Export Earnings Country Benin Burkina Faso Mali Share of Agricultural Exports (2002) 72.6% (61.9%) 70.6% (53.6%) 62.1% (58.8%) Share in Total Exports (2002) 37.6% (34.6%) 51.4% (32.4%) 25% (38%) Sources: OECD, 2005; World Bank Development Indicators 2004 and FAO Stat, FAO. 1

10 Value of cotton exports compared to health care and education expenditure 2001/ Estimated value of cotton exports 2001/02 in comparison to Debt services Millions of Millions Benin Burkina Faso Chad Mali 0 Estimated value of cotton export Health care expenditure Education expenditure Benin Burkina Faso Chad Mali Estimated value of cotton exports Debt Service 2