Performance of Zambia’s Cotton Sector under Partial Reforms
295
system, developed originally by Clark, is more traditional. It relies largely on the company’s employees for input distribution, credit repayment, and output collection. Unlike Dunavant, Cargill signs contracts with farmers and maintains detailed farmer data on input delivery, credit extension and recovery, and cotton sales.2 Dunavant, as the dominant ginner holding a market share of 50– 60 percent, acts as a price leader, announcing a minimum preplanting price to farmers for seed cotton, which may be adjusted during the buying season. Cargill normally follows Dunavant’s pricing, whereas smaller ginners frequently pay higher prices than Dunavant.3 Governmental intervention in the cotton market has been minimal since 1994. During the first crisis (1999/2000), the need for cooperation and regulation emerged in the sector, but until 2002 the government adopted a hands-off policy. The exception to this stance was the establishment of the Cotton Development Trust (CDT) in 1999 as a technical agency to undertake research and provide training and extension services. In 2002, the Cotton Outgrower Credit Fund (COCF) was established in close collaboration with the Zambia Cotton Ginners’ Association (ZCGA), an institution representing the sector’s ginners. The objective of the COCF was to finance smaller ginners to encourage them to participate in the input credit system. The responsibility for the Fund’s management was given to the CDT. It was later expanded and turned into a revolving fund in 2005. The Fund has not been operational since 2007 because of lack of resources. The initiative was partially successful in bringing smaller companies into the outgrower scheme, and some smaller ginners now participate in the input credit system. Its impact was limited, however, because the CDT was unable to develop effective eligibility criteria for the allocation of COCF,4 and the area financed under this Fund remained at about 3 percent of the total area under cotton production. Another government initiative was the preparation of the Cotton Act in 2002/03, with the objective of creating a legal and regulatory environment that would facilitate better cooperation and coordination among the main players in the sector and avoid a repeat of the input credit system disruption and the collapse of production experienced in 1999 and 2000. The Act was prepared without consultation with farmers and ginners. It proposed a Cotton Board as a regulatory body with overarching responsibilities. After going through several revisions, it was signed into law in 2005, but implementation was postponed as a result of strong opposition from stakeholders to the heavy regulatory and policing role