Africa: From Fiber to Fabric - Improving the Competitiveness of Continental Cotton

analysis

Washington, D.C. — Like all cash crops in Africa, cotton has a history riddled with success and failure. From production to processing, cotton is highly politicized. Underlying the politics is a crop typically grown by smallholder farmers that is a major contributor to the livelihoods of many east and southern Africans. With those producers and the complex value chain they supply in mind, the United States Agency for International Development (USAID), through its Nairobi-based Regional Agricultural Trade Expansion Support (RATES) project, has undertaken several key initiatives since 2003 to improve the local, regional, and international competitiveness of the cotton and textile sectors.

From the onset, the private sector drove the project, and the results have been staggering. Regional trade of cotton and textiles in eastern and southern Africa rose from $253 million in 2001 to $325 million in 2005, thanks in part to a cotton and textile trade portal, www.cottonafrica.com, developed by the USAID-funded RATES project. The portal's focus is the supply of regionally produced lint, yarn, and fabric to the textile, weaving, knitting, and apparel sectors. To that end, the portal boasts more than 770 registered traders and $435 million in business transactions has been posted since 2004.

As is the case with all technology, the organization behind it makes it a success.

Trade Federation for Cotton Formed in 2005, the African Cotton and Textile Industries Federation (ACTIF) is a regional trade body established by the private sector with assistance from the RATES project. The Federation represents the sub-Saharan Africa cotton value chain in the global marketplace. As a federation of businesses, its goal is simple: to increase business linkages, trade, and investment.

Within weeks of its inception, ACTIF became the principal African cotton and textile organization involved in the renewal of a key piece of U.S.

legislation linked to trade in Africa: the African Growth and Opportunity Act (AGOA). At question was not the renewal of AGOA, but rather the inclusion of language relevant to ACTIF members. A high priority was to maintain momentum of the apparel sector by ensuring that fabric suppliers were retained in the AGOA renewal, while promoting the inclusion of textile products as eligible for duty-free entry.

Recognizing the importance of these concepts and other textile-related aspects of the AGOA legislation, ACTIF members drafted an AGOA white paper. The paper contained five key elements linked to growth of the African cotton and textile sectors, presenting a unified African position based on the interests of the textile and apparel sectors.

ACTIF's position was presented to the U.S. Congress in the summer of 2006, which negotiated and debated it throughout the summer and fall.

When the legislation was signed into law, three of ACTIF's five recommendations were included - a notable step in the process of protecting and improving AGOA.

Organic Cotton For ACTIF though, the proof of its success in policy facilitation and trade promotion is increased investment. One subsector where investment has taken off has been organic cotton and textile production. Across Uganda, Tanzania, Mauritius, and Kenya, significant investments have been made from farms to factories. In northern Uganda, Dunavant Uganda Ltd. is helping to improve livelihoods of more than 40,000 vulnerable cotton farmers in 300 villages through the promotion of organic cotton.

This activity, which is one of the largest group organic certification schemes in Africa, will allow the cotton farmers of northern Uganda to earn 30% more per bale than conventional cotton. From the organic cotton processing side, Kampala-based Phenix Logistics Uganda Ltd., has witnessed 100% growth in its organic business. As the only mill spinning certified organic cotton in east Africa, it has developed export markets in Kenya, Tanzania, Mauritius, Ethiopia, and the United States. Given significant infrastructure investments underway at its factory, it is poised to meet future demand by Europe and Japan.

Preferential Trade Agreements Such successes have not led ACTIF to scale back its activities. It is instead moving ahead with an ambitious and strategic agenda. Having proven itself as adept at influencing international trade policy, its next target is the European Union. As trade agreements between the European Union and Africa are set to expire at the end of 2007, ACTIF is working with its members to develop a unified position on cotton and textiles for new Economic Partnership Arrangements between the European Union and African countries. As with the AGOA white paper, the definition of the origin of cotton/textile products is important. ACTIF plans to submit a white paper on rules of origin to the European Union that will reflect a unified and balanced position between the interests of the textile and apparel sectors.

GMO Cotton ACTIF also recognizes that without a sustainable cotton supply, preferential trade arrangements mean little. As such, it is engaged in several activities to promote sustainable cotton production. One component of ACTIF's production enhancement agenda is Genetically Modified Organism (GMO) cotton. Although there is little debate over increased yields of GMO cotton, everything else surrounding GMO cotton is contentious. Even if the cost of field trials can be overcome, the most significant hurdle on the adoption of GMO crops is government approval. To overcome these barriers, ACTIF is working with the governments of each ACTIF member country to promote a technology-driven approach to the GMO option and to assist where required in the GMO policy formulation process.

Analogous to improving on-farm production practices is supporting textile manufacturers within ACTIF member states through the identification of investment and financing opportunities. As www.cottonafrica.com has branded itself as the principal way to link suppliers to buyers of African cotton and textiles, ACTIF decided that another Web portal was required to promote investment and financing. To that end, www.actifafrica.com was created. As the official web site for the federation, www.actifafrica.com will house information on investment and financing opportunities for African and non-African firms. Applying the same supplier and buyer networking principles as www.cottonafrica.com, the site will also promote the purchase of second-hand textile equipment by ACTIF members from sellers in the United States and the European Union. The site will also feature a section promoting firm-to-firm links between ACTIF members and non-African investors. This aspect of the web site will seek to overcome one of most common barriers to trade between Africa and developed countries, and within Africa itself: the lack of information about viable investment opportunities.

Knowledge and innovation are shared across ACTIF countries and with business partners outside of Africa via the promotion of business-to-business partnerships. Through these relationships, based on mutual trust between suppliers and buyers, and aided by a motivated and responsive industry federation, Africa's cotton and textile sectors will continue to flourish-from fiber to fabric. -

Matthew Edwardsen (medwardsen@chemoincs.com) is the manager of the Chemonics Environmental Services Practice Area. Barry Fisher (bfisher@ratescenter.org) is the Cotton/Textile Specialist on the RATES project. They are both employees of Chemonics International. For all ACTIF inquiries please contact the ACTIF Chairman, Jaswinder Bedi, at jas@bedi.com. Chemonics is a global consulting firm promoting economic growth and higher living standards in developing countries.

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