allAfrica.com: Mali: Fears Over Privatising Cotton (Page 1 of 2)

After years of delays the Mali national cotton company, Malian Company for Textile Development (CMDT), is on the verge of privatisation with bids for tender just sent out, but the World Bank which backs the privatisation is worried none of the right conditions are in place to make it work.

"The point of privatisation was to create a better-managed cotton sector... so that Mali could start to compete with the likes of India or Brazil... but this will not happen... I am very, very pessimistic about the privatisation process," said Olivier Durand, agricultural specialist for the World Bank in Mali.

The World Bank and IMF have been pushing privatisation since the 1990s but it has been delayed because the CMDT and cotton farmers were not yet organised into well-functioning cooperatives that could bear its brunt, and had not yet maintained their equipment or fields well enough for investors, according to non-governmental organisation Oxfam International (OI).

In light of this, financial institutions such as the World Bank and International Monetary Fund say privatisation is the only solution.

Mali is one of the biggest cotton producers in sub-Saharan Africa, contributing to the livelihoods of up to 4 million Malians and making up a quarter of the country's total exports.

National cotton company in trouble

Mali produced 600,000 tonnes of cotton in 1998 but now produces under half that, according to official statistics. Grown on up to 200,000 small family farms in the Sikasso, Koulikoro, Segou and Kayes regions, 80 percent of Mali's cotton farmers live in poverty, according to a 2007 OI report.

In recent years the sector has been facing serious difficulties with the national fixed price falling with world prices - from US$0.50 per kg in 2004 to US$0.39 in 2007, mounting fertiliser prices of up to 80 percent in a year, poorly-maintained equipment, inefficient management of the national cotton company, and declining yields, according to Fagnanama Koné, head of the Malian Mission for Cotton Sector Restructuring (MRSC).

In Mali the cotton industry relies on credit, with investors underwriting a cotton harvest or 'campaign' ahead of time through the CMDT, so that producers can buy fertilisers and pesticides. The CMDT markets and gins the cotton, helps to transport it, trains producers, and fixes the price before the harvest begins. Farmers are allotted approximately 40 percent of the net gain.

But because of the current conditions, combined with the difficulties of competing with a heavily subsidised United States market, producers no longer have any money to pay back the credits the CMDT has given them, according to Siaka Diakite, secretary-general of the national workers union. This has left the CMDT with a debt of US$65 million.

"The CMDT cannot afford to keep producers afloat any longer. It can't repay its debts and has become a big burden on the national budget," said Fagnanaman Koné.

Impact on farmers

Because of these debts, after the October 2007 harvest the CMDT was unable to pay many of its producers at all. "After the harvest we expected to be paid within two weeks as usual, but six months later we still haven't received anything," Soumana Sylla-Diba, a cotton producer in Fana, 120km north east of Bamako, told IRIN.

Farmers are abandoning the sector in droves - 56,816 producers out of a total of 1.7 million who are registered with the CMDT have left since 2005, according to Oumar Traoré who has been with the company for 17 years.

"I am starting to grow other things, like corn and millet, instead - the cost of fertilisers is just as high, but it's better than growing cotton," Sylla-Diba, told IRIN,

Pro-privatisation

"The goal of privatisation is to limit the financial risks to the state, improve the management and profitability of the sector and encourage investors to buy into it." Koné told IRIN,

Once privatised, producers will be able to walk away with a larger percentage of the profits from their cotton, Durand said, putting them in a stronger position if global prices go up, and once privatised, producers will have to manage their business more efficiently because they will be accountable to investors.

But at the same time, Durand recognises none of the conditions for privatisation to go smoothly are yet in place. Producers have not organised themselves into well-functioning cooperatives and have not been able to maintain their equipment to an adequate standard to attract investors.

"We are in a vicious cycle where banks are starting to pull out of their investments in the CMDT, resulting in no credits for farmers, which means producers cannot maintain their equipment, so they reap low yields. This then reduces further the chances of investors wanting to buy in," said Durand.

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