Effective Cooperation: A new role for cotton producer co-ops in Mali

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Falling prices and increased privatization had left small-scale cotton producers in Mali facing an uncertain future. In particular, the role of the state-owned cotton company, on which farmers depended for essential services such as inputs and training, had been greatly diminished. In response, a new initiative involving a coalition of partners has helped to build the capacity of producers’ co-operatives to provide services to their own members. It has also helped them to build sustainable partnerships with lending institutions and has increased the participation of women farmers in the running of cotton co-ops. It is now hoped that the programme can be rolled out to the whole of Mali’s cotton sector.
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  x 8. Effective Co-operation  A new role for cotton producer co-ops in Mali Oumar Traoré, a co-operative promoter from Zangena, Fana region during a co- operative discussion, part of Oxfam’s Programme : Empowering Producers to Secure Livelihoods in Cotton Growing Regions in Mali and West Africa ©Aboubacar Traore/Oxfam Falling prices and increased privatization had left small-scale cotton producers in Mali facing an uncertain future. In particular, the role of the state-owned cotton company, on which farmers depended for essential services such as inputs and training, had been greatly diminished. In response, a new initiative involving a coalition of partners has helped to build the capacity of producers’ co -operatives to provide services to their own members. It has also helped them to build sustainable partnerships with lending institutions and has increased the participation of women farmers in the running of cotton co-ops. It is now hoped that the programme can be rolled out to the whole of Mali’s cotton sector.        P  r  o  g  r  a  m  m  e   I  n  s   i  g   h   t  s      8. Effective Co-operation  , Programme Insights, Oxfam GB. April 2011 1 Introduction Mali‟s cotton production grew from 500,000 tonnes a year in 1997 to a record 635,000 tonnes in 2003, making it   the largest cotton producer in Africa at that time. 1  Several hundred thousand people living on 200,000 family farms –  some 40 per cent of the rural population 2   –   depend directly for their livelihoods on cotton production, which often accounts for up to 75 per cent of their cash income. 3  More than 73 per cent of Mali‟s cotton farmers live belo w the poverty line of CFA francs (FCFA) 153,310 ($321). 4  Over 150,000 square kilometres of land in the south of the country are planted with cotton. 5  Typically, the crop is grown on small plots of 2 – 3 hectares in size, along with cereals and the rearing of livestock, using basic ox plough technology and mainly family labour. In Mali, cotton is a rain-fed crop planted in May –  June and harvested from September to December. Cotton prices are set before the growing season; after harvest, the seed cotton is collected by trucks and delivered to the ginning factories of parastatal cotton company Compagnie Malienne pour le Développement des Fibres Textiles (CMDT). 6  The main output of the ginning process is cotton fibre, of which CMDT sells more than 95 per cent onto the world market. 7   Cotton fibre exports account for 25 per cent of Mali‟s total export revenues, while cotton production accounts for 8 per cent of national GDP. However, less than 5 per cent of the raw fibre product is processed locally. Mali‟s economy –  among the poorest in the world –  is thus extremely vulnerable to external price shocks and fluctuations in world cotton prices. Through cotton production, smallholders have been able to access credit, fertilizers, and other inputs. Alongside cotton, they have increased their production of livestock and cereals, particularly maize, and have invested in wells, schools, and health facilities. However, in some parts of Mali‟s cotton basin, soil fertility is in decline, population pressure is rising, and little quality land is available –  factors that have affected yields and prompted migration to more productive areas or to towns. Prices for conventional cotton on world markets have been volatile and in decline, partly due to the impact of trade-distorting subsidies paid by industrialized and emerging countries to their cotton farmers. 8   For three decades, Mali‟s cotton sector had an efficient and coherent structure for the provision of services to smallholders (from the 1960s to the 1990s), but it has been hit by restructuring and by the withdrawal of state support, as well as by repeated crises linked to cotton trading conditions. A boycott of cotton production in Mali in 2000 was a reaction to falling world market prices due to subsidized production in richer countries. Mismanagement at CMDT    8. Effective Co-operation  , Programme Insights, Oxfam GB. January, 2010 2 exacerbated the situation, and the state was left to cover a large budgetary deficit in the sector. In 2005 the government adopted a new pricing mechanism indexed to world market prices, and CMDT began to withdraw from larger rural development projects to focus more on cotton production. However, implementation of the new mechanism led to worsening conditions for cotton producers. To date, the major constraint faced by the sector has been exchange rate losses against the euro and the US dollar. These repeated crises led to a government review of how agricultural services were provided, including access to credit for small-scale cotton producers, as part of a wider restructuring of the sector. Until the late 1990s, CMDT provided extension services that promoted increased organization, literacy, and production skills amongst small farmers, as well as developing rural infrastructure and providing rural employment. It provided training and extension services for cotton production and marketing as part of an integrated cotton system, with all the costs borne within the cotton sector itself. Access to services such as credit and input supplies (both for cotton and for other types of agriculture) was guaranteed by cotton cultivation as part of a vertically integrated value chain. CMDT‟s extension system was based on a network of agents working with villages grouped into Rural Promotion and Extension Zones (ZAER) and answering to a district head; the district head led a multi-disciplinary team that included agricultural statisticians, logistics staff, promoters for women farmers, animal husbandry advisers, and others. 9 In all, CMDT agents had regular contact with nearly 200,000 small producers, an arrangement corresponding roughly to one agent for every 130 producers. 10   However, structural adjustment negotiations between Mali‟s government and the World Bank led to the introduction in 2001 of the Cotton Sector Development Policy (  Lettre de Politique de  Développement du Secteur Coton- LPDSC), which stipulated the downsizing of the CMDT and proposed plan for its privatization. The policy also called for liberalization of seed cotton and cottonseed oil markets, as well as an increased role for producer organizations (POs) in the management of the sector. In response, as part of a restructuring of its agricultural extension services, the government introduced initiatives combining free services (a classic model of producer training and extension services provided with no recovery of costs from beneficiaries) and a co-financing system (testing a model with partial recovery of costs). Both these models, however, have shown limitations in terms of efficiency, sustainability, and scale, with benefits for producers falling short of what was anticipated.    8. Effective Co-operation  , Programme Insights, Oxfam GB. April 2011 3 Privatization, combined with these other factors, has had a serious impact on cotton production in Mali in recent years. From being the largest cotton producer in sub-Saharan Africa in 2006, it fell to fourth largest in 2008. Cotton‟s proportion of the country‟s exports declined from 25 per cent to 14 per cent over the same period, while Mali‟s share of the world cotton market shrank from 3 per cent to 1 per cent. Producers meanwhile saw their income from cotton fall by up to 65 per cent. 11   Privatization and the changing role of producers Mali‟s government has traditionally been heavily involved in the cotton sector through its major shareholding in CMDT, providing farmers with subsidized inputs and covering a significant overall deficit in the sector. However, since privatization and the partial liberalization of the sector began in 2001, the company‟s role has decreased. Input subsidies stopped in 2002 – 03 and the scope for price support was drastically reduced by the new price mechanism introduced in 2005. As part of the reform process, village-level POs (village associations) were expected to assume a new status as formal co-operatives and to take on new functions. The 2001 Co-operative Law laid the legal basis for this change in their role, turning village co-operatives into economic enterprises and permitting them to engage in business activities, guarantee loans from financial institutions, offer advisory services to producers, and supply members with agricultural equipment and inputs. These POs are now known as Sociétés Coopératives de Producteurs de Coton (SCPC –  Co-operative Societies of Cotton Producers). Since 2005 the sector has seen the formation of 7,177 SCPCs, compared with 4,400 village associations in 2004. However, while operating at village level, the SCPCs do not necessarily involve all the producers of a given village. Some major initiatives have been launched to support producer groups. For example, from 2001 to 2004, the World Bank-led Programme of Support for Agricultural Services and Producer Organizations (PASAOP) 12   spent FCFA 947m on „demand - led‟ training tailored to the specific needs of producers. This provided training for 10,000 members/leaders of POs, as well as supporting technical training events and advice services nationally. 13  Similarly, the Support Project for Cotton Zone Production Systems 14  had a budget of more than FCFA 500m over three years, and provided direct support in the form of vocational education to all 7,177 POs. However, both these initiatives lapsed due to a lack of financing. Others succumbed for the same reason, or because the results they achieved did not justify their continuation. Failed initiatives included the first Centre of Service Provision, financed in large part by the cotton marketing system under a project run by the French
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