Cotton Market Competiton in Tanzania: A Competititon Assessment Framework

The broad objective of this paper is to examine performance of the cotton sector with a view to identifying competition issues that need to be dealt with under the Tanzania Fair Competition Act and issues that may likely require policy interventions. The guidelines set out in the Competition Assessment Framework (DFID, 2008) were used throughout to ensure that the findings are focused to competition issues within the relevant market. Most of the information used in this study was gathered from village focus groups, structured interviews with producers and cotton ginners. Data were analyzed qualitatively through corroboration of facts. The relevant market was found to be seed cotton procurement in the Western Cotton Growing Areas (WCGA). Anticompetitive actions such as horizontal and vertical integrations were very commonly practiced. The introduction of contract farming is seen as a way to cement the vertical integration which if not checked may worsen competition for seed cotton even further. We finally conclude our study by pointing out that the Fair Competition Act, 2010 must become an instrument for generating optimal outcomes by directly influencing the market structure for seed cotton such as controlling of “informal mergers”. Policy coherence, consistency and complementarity are thus important, as there is need for the competition policy to be an integral part of overall national policy framework. In order to improve seed cotton market competitiveness we point out several specific recommendations all around five key market competition areas: licensing and regulations, marketing of inputs and production, cotton quality issues, producer price setting, and government intervention and support.