The success of the cotton sector in French-speaking Africa shows the importance of an efficient organization of the sector in terms of price stabilization and rules that allow for predictability and spillover effects on food production and distributed income. French-speaking Africa, the world’s third largest exporter, has acquired market power (cf. Ministère de la coopération, 1995; Cl. Mainguy, 1992).
According to the study by U. Lele (1988), production depends in the long term on producer prices when there are few sectoral policies and the cotton sector is poorly organized (e.g., East Africa and Southern Africa). On the other hand, in West African countries (notably Cameroon and Senegal), supply elasticities are significant with respect to non-price factors. If we compare the performance of these two Franc Zone countries (Cameroon, Senegal) and four non-Franc Zone countries (Nigeria, Kenya, Malawi, Tanzania), we find significant differences in output growth rates over the long term; on the other hand, output and price instabilities (estimated by the coefficients of variation) are not significantly different. Institutional factors play an essential role.
According to numerous studies, notably those confirmed by Boussard and Gérard and Guillaumont and Combes (cf. Benoit-Cattin, Griffon and Guillaumont, 1994), the price elasticities of supply are less significant than price instabilities. Supply responds favorably to the stability of real producer prices.
The effects of the liberalization of the sector
Many African cotton sectors have experienced a heavy administrative burden and a lack of management by the marketing boards. In some cases, such as Tanzania (1986-87), the abolition of the Board has allowed for an efficient alternative system that has resulted in rapid payment to the producer, timely supply of inputs and availability of consumer goods for farmers. In contrast, in the case of Nigeria, the abolition of the Cotton Board was a failure.
Performance is linked to the way the sectors are organized, the effects of research dissemination, supervision, innovations and technological choices. We can consider that the more the commodity chains operate in a deficient or unstable macroeconomic context, and the less they are integrated downstream with textile/clothing industries (as in the case of West African countries), the more efficient the internalization and integration of the commodity chains.
World cotton prices are themselves the result of intervention policies; they are highly volatile and cannot be considered equilibrium prices. The exchange rate is the result of financial factors that have little to do with the purchasing power parity of currencies. According to the work of Claire Mainguy (1992), there is no link between the depreciation of the real effective exchange rate and the increase in market shares during the period 1985-89.
The effects of stabilization policies between Franc Zone countries and non-Franc Zone countries
The effects of exchange rate pegs and stabilizing institutions in the ten Franc Zone countries can be compared with those in African countries outside the Zone. Franc Zone and non-Franc Zone countries experience the same instabilities in world prices and have experienced relatively similar instabilities in nominal producer prices. The standard deviations are very similar over the 1975-1989 period.
On the other hand, there were contrasting trends in real producer prices. In Franc Zone countries, there was a continuous increase in real producer prices between 1975 and 1988, whereas countries outside the Franc Zone experienced strong instability and a tendency to stagnate. The standard deviations show significant differences in export and price instability.
The greater stability of the exchange rate in Franc Zone countries may be considered to have reduced the instability of real producer prices. However, it seems that institutional factors such as a stabilized environment, guaranteed supply and outlets are more explanatory than price and exchange rate variables alone in explaining the success of the cotton sectors in francophone Africa.
The effects of the January 1994 devaluation of the CFAF
Following the devaluation of the CFAF, there was an improvement in the competitiveness and profitability of the exporting and import substitution sectors. As a result of the reflectivity of the devaluation, there was a 27 percent depreciation of the real exchange rate in foreign currency terms, while the terms of trade improved by 2 percent. The effect of the exchange rate on the competitiveness of African Franc Zone countries must take into account the specificities of these economies, which are exporters of “commodities” whose prices are set internationally and which are, except for cocoa in Côte d’Ivoire, “price takers. The effects of price competitiveness have been weak compared to the profitability effects of the exporting sectors.
The improvement in the trade balance was largely the result of an intertemporal shift leading to an inverted J-curve. The mechanical effect of devaluation (to which were added, in the first year of devaluation, the effects of world prices and volume growth) increased the value of agricultural exports while imports fell sharply in the first six months. The immediate effect of the devaluation was to create a positive exchange rate premium for exports and a negative one for imports. The pessimism of the price elasticities was not verified. In the first year of the devaluation, exports increased by 106 percent in CFAF terms despite a small increase in oil exports, while imports fell sharply. Three factors can be broken down: the quantity effect, the mechanical effect of devaluation and the world price effect. The latter represented 4% of GDP for exports in Côte d’Ivoire. The quantity effect amounted to 3.1 percent of GDP in Cameroon.
In the second year of devaluation, the effects of the growth in the value of agricultural exports were less pronounced, while imports recovered strongly, particularly in the WAEMU zone. The mechanical effect of devaluation disappeared, as did the effect of world prices. Only the volume effect remained.
According to calculations by Goreux (1995), the breakdown of the value of all exports between 1993 and 1995 shows that in Cameroon (excluding oil), 22 percent of the increase expressed in CFAF is due to the quantity effect and 15 percent to the world price effect (essentially coffee and cocoa).
Agricultural exports from Franc Zone countries increased by 28% in French francs between 1991-1993 and 1994-1995. The rise in world prices and the devaluation have improved the profitability of the cocoa, coffee, oilseed, cotton and wood sectors. They have stimulated supply.
There has also been import substitution for food and livestock products. There was both a supply response and a shift in demand. Food imports have fallen. Regional flows have also developed (e.g., millet, sorghum and livestock from the Sahel to coastal Africa). Overall, the devaluation of the CFAF has had a positive impact on African agriculture in a favorable international context.
Source : Phillipe Hugon – L’agriculture en Afrique subsaharienne restituée dans son environnement institutionnel