WT/CFMC/W/77  
 
15 November 2018  
(18-7202) Page: 1/7 
Sub-Committee on Cotton  Original: English  
 
    DIRECTOR -GENERAL'S CONSULTATIVE FRAMEWORK MECHANISM ON COTTON  
MARKET ENTRY CONSTRA INTS FOR AFRICAN COT TON 
Communication from the International Tra de Centre (ITC) 
The follow ing communication, received on 31  October  2018, is being circulated at the request of 
the ITC. 
 
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1  BACKGROUND  
1.1.  WTO negotiations on trade in relation to cotton fall under the three pillars of Market Access, 
Domestic Support and Export Competition and are addressed under the Committee  on Agriculture 
in Special Session. Two of the pillars are well advanced. That includes duty -free and quota -free 
market access, under which "developed countries and developing countries in a position to do so 
have committed to grant, to the extent provided  for in their respective preferential trade 
arrangements, duty -free and quote -free market access for exports of cotton and cotton -related 
agricultural products from least -developed countries (LDCs) " (WTO). Countries also agreed to 
abolish agricultural expo rt subsidies. However, with regard to domestic cotton policies, more efforts 
are needed.  
1.2.  This paper will not look at these three pillars of cotton -related WTO negotiations. It will instead 
identify and analyse internal as well as external market entry cons traints faced by African cotton 
producers and ginners. These difficulties have their origin in the country(ies) themselves or are 
related to business practices that pose challenges to African cotton producers/ginners.  
1.3.  Sub-Saharan African (SSA) cotton is u sually sold out, of which 86%1 is exported. Hence, there 
have been no difficulties in selling it. That being said, there could be improvements made to market 
and brand it more effectively. That could influence market penetration, prices and engagement in 
long-term client (spinner) relationships that are presently missing but necessary to attract foreign 
investment in fibre value addition.  
1.4.  Below please find a number of identified obstacles that hinder a more effective market entry 
for African cotton as well as recommendations to overcome them.2 
                                                
1 SSA mill use was 230 ton nes against a production of 1,655 ton nes in 2017/18 . 
2 For the purpose of  this short paper, specific differences among the differing cotton systems In Africa 
(the World Bank classified four systems in Africa, namely national monopolies, local monopolies (in concession 
zones), competitive system and concentrated system) could no t be elaborated.  
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  2  MARKET DEVELOPMENTS THAT REQUIRE AFRICAN  STAKEHOLDERS TO REA CT AND 
ADAPT  
2.1  Voluntary standards ( "identity cottons ") are here to stay but presently do not cover 
two thirds of African cotton despite its relatively low envi ronmental footprint  
2.1.  There is a clear movement towards using more and more sustainable (social and 
environmental) cotton. The share of "identity cottons " is rapidly increasing, driven by the final 
consumer demand for more sustainable and traceable textile p roducts. While organic and fair -trade 
cottons remain niche products, Better Cotton Initiative (BCI) and Cotton made in Africa (CmiA), both 
launched in  2005, are successfully expanding market opportunities for more sustainable cottons; 
increasing transparen cy along the value chain to better connect supply and demand. BCI production 
rose to 12% of global production in 2015, and aims to reach 30% of  global production in 2020. 
BCI is growing in importance and is likely to impose its standards at the expense of conventional 
cotton. While not foreseen by BCI, some textile buyers accept to pay a premium for BCI certified 
cotton to showcase their environmental sensitivity and in order to provide a green image.  
2.2.  Approximately one third of all African cotton production  has been certified as sustainable in the 
season 2017/18. While this is higher than the world average, it does not take into account the fact 
that Sub -Saharan African (SSA) African cotton's environmental footprint is much lower than that of 
large mechanise d cotton producing countries. A study by Cotton made in Africa (CmiA) concluded 
that "the carbon footprint of CmiA cotton (1.92  kg CO2 -eq) is significantly better than av erage 
conventional cotton (4.64  kg CO2 -eq)". With regard to the water footprint of Cmi A cotton, the study 
found that it was slightly higher (14.2 cubic metres, 99 green water) than that of conventional cotton 
(13.1 cubic metres, 40% green water). However, due to the fact tha t SSA cotton production is 
rain-fed, "the production of CmiA has no  environmental impact on blue water resources, the 
consumption of which is potentially harmful, while conv entional cotton consumes about five  cubic 
metres of this (blue) water per kilogramme of lint cotton " (M. Nill and K . Wick, 2013).  
2.3.  Despite its better environmental footprint compared to mechanized cotton producers, the latter 
can use BCI certification and the BCI standard as a marketing tool to sell their cotton as "better ", 
while two thirds of the African production cannot.  
2.2  The cotton trade is moving towards instrument -tested cotton (bale by bale) and 
hand -classed cotton is being discounted  
2.4.  African cotton is classed through visual and manual inspections and manual grading is still used 
in African countries. This practice is maintained despite an indust ry-wide trend towards instrument 
testing. Cotton instrument testing has been accepted on a wide -scale basis since the USDA 
implemented instrument classification on 100% of the United States crop in 1991. Major producing 
countries followed and instrument te sting has become the commercial standard. Consequently, the 
trade penalizes all non -instrument -tested cotton, i.e. hand -classed cotton, with a de -facto price 
discount.  
2.5.  While African cotton standards have been developed for West and Central Africa (WCA) und er 
the African Cotton Association (A.C.A.), they are not recognized by the market and steps need to be 
taken to increase instrument testing of bales. That, however, requires a new quality assurance 
system, as presently quality is not very homogeneous as ev en within bales variances can be found.  
2.3  Clear bale -marking required to allow the market price function to work properly, 
bringing demand and supply into equilibrium  
2.6.  Direct trade between African ginners and end -users of lint remains marginal as both find it 
easier and less risky to sell and buy through international merchants, who have the ability to manage 
counterparty and price risks. While a few ginners in ESA have been able to establish close 
relationships with spinners in Asia, most SSA African cotton is sold through international merchants. 
They know that African cotton and especially WCA cotton is very conservatively classed i.e. classers 
often under -class rather  than over -class the cotton. Knowing that and the fact that the type and the 
grade is usually not marked on the bale, some intermediaries sell bales at a higher grade than those 
they have actually bought. If the assumption of "over-classing " turned out to be wrong and spinners WT/CFMC/W/77  
 
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  find out and make a claim, traders honour their contracts and compensate but the image and 
reputation of the African origin is damaged.  
2.7.  Some African exporters have already taken action. Three WCA companies, namely the 
Compagnie malien ne pour la développement du  textile (CMDT, Mali), Société de développement du 
coton du Cameroun (SODECOTON, Cameroon), and Société de développement et des fibres 
textile s (SODEFITEX, Sene gal) have introduced bale markings, clearly indicating  the grade contained 
in the bale to address this. This change results directly from feedback provided by spinning mills on 
the quality through feedback loops created with the support of ITC. This change in bale marking 
policy ensures that cotton delivered to the spinners (by traders) is according to the actual contract 
as spinners can now verify the actual bale content. Moreover, importing spinners can provide 
feedback more easily on the cotton quality received. Also refer to th e success story of CMDT on 
page 5. 
2.4  Hand -picked cotton is traded at a discount compared to machine -picked cotton  
2.8.  Handpicked cotton has higher intrinsic cotton qualities as the handpicking exposes the fibre to 
lower stress levels than machine picked and mechanised harvesting. Notwithsta nding, machine 
picked cotton gained a strong reputation as a cotton of better quality as it contains lower 
contamination levels. While contamination levels might be high for some African (or handpicked) 
cotton origins it is not the case for all origins, an d especially not from most west and central African 
origins. Hence, policy needs to focus at the one hand on regulations to further reducing 
contamination originating at farm and/or gin l evel but also needs to address an  erroneous perception 
that hand -picked cotton origins suffer from a contamination problem. To some extent, this 
perception was created by extensive marketing efforts of machine -harvested cotton countries 
marketing their cotton as clean cotton. Particularly in WCA, the reputation is more cont aminated 
than the actual cotton. Thus, counterbalancing branding efforts from highly mechanised cotton 
origins and building strong quality images of African handpicked cotton could have positive effects 
in the market.  
3  INTERNAL CONSTRAINTS  THAT NEED TO BE O VERCOME  
3.1  Very few links with cotton -consuming spinning mills  
3.1.  Cotton is sold to international merchants without any influence of the producer/ginner on the 
final destination/consumer. Thus, feedback on the cotton quality and characteristics is sporadic and 
cannot help in improving operations. The low domestic transformation of fibre (in many African 
cotton -producing countries no spinning mills are operating) does not allow for a regular feedback on 
quality either.  
3.2  Marketing approaches in WCA that do not match  the practices of their main (Asian) 
markets  
3.2.  In many cases, francophone African cotton companies follow a business model that is not easily 
compatible with the Anglo -Saxon model followed by the cotton trade. This hinders a closer 
involvement in trade as we ll as developing a closer relationship with spinning mills in Asia, which 
consume around 85% of the world's cotton. The following aspects contribute as obstacles:  
• French language versus English as the trading language : 
Most sales directors of francophone c otton companies are not fluent enough in English to 
actively negotiate or promote cotton.  
• Cotton is sold in CFA francs (pegged to the Euro) whereas the US D is used by the cotton trade.  
Therefore, cotton from WCA countries is effectively sold in Euros , i.e. the same currency as 
farmers are paid for their seed cotton and the credits that are obtained to finance the cotton 
crop. This avoids the need for risk management against currency fluctuation. While in the past 
a strong Euro had negative impacts on the re muneration obtained, the  presently relatively 
strong USD  has positive effects.  
In addition, cotton prices are relatively volatile and need price risk management solutions 
adapted to Africa.  WT/CFMC/W/77  
 
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  • WCA cotton sold in kg as against lb used by the trade.  
While this  is mainly a mechanical exercise, cultural customs need to be overcome in order to 
internalize the requirements of the trading community.  
• Cotton sales contracts are based on the Règlement Général Européen (RGE) as opposed to 
the International Cotton Associ ation (ICA) bylaws and rules . 
While the RGE used by WCA cotton companies and merchants that are members of the 
Association Française Cotonnière (AFCOT) are in the French language3, the ICA bylaws and 
rules used by non -francophone cotton companies and spinn ers in Asia are in English. 
Differences not only refer to the language but to details of arbitration and mediation, among 
others.  
• Cost & Freight demand versus FOB offer : 
Finally, WCA cotton companies sell their cotton on a FOB basis at a port in West or Central 
Africa only, i.e. they do not cover the sea shipment to the port of destination. That way 
additional L/C charges and delays in receiving the final payment are avoided. This, however, 
is against the purchasing policy of most spinning mills that requ est delivery at the port of 
destination (CFR terms).  
3.3  The business model of small ginners in various Eastern and Southern African 
countries hinder more direct engagement with spinners.  
3.3.  Small, atomised ginners as can be found in Tanzania, Malawi, Uganda and to some extent in 
Zambia and Zimbabwe do not have the trade finance in place to directly market their cotton and 
engage on long -term relationships with spinners. Under the customary business model, short -term 
finance is obtained from banks to finance the b uying of seed -cotton. Once ginned, the lint is sold 
quickly to traders, often ex -gin. With the revenue obtained new seed -cotton is bought. Therefore, 
ginners find it difficult to engage in more direct sales relationships as they have no access to 
competiti ve trade finance. Faced with substantially higher interest rates as e.g. international 
merchants, higher margin of direct sales are equalled out by higher capital costs. In addition, ginners 
do not have price risk management knowledge and tools at hand.  
4  COTTON -RELATED POLICIE S TO INCREASE FIBRE AND SEED -COTTON VALU E ADDITION 
IN AFRICA  
4.1  Stimulating artisanal cotton consumption while increasing farmer resilience against 
shocks  
4.1.  A first step to increase fibre value -addition in Africa is to promote handloom devel opment, 
including among farmers. While Ethiopia and a number of West and Central African countries have 
a vibrant handloom sector, most East and Southern African countries have not. Thus, creating an 
understanding of fibre value addition and supplying basi c fabrics for domestic use is the first step 
towards creating a textile industry.  
4.2.  Additionally, providing farmers with the opportunity to add value to their cotton by engaging 
them in hand -spinning and weaving operations creates resilience against price a nd weather shocks 
as farmers will be able to compensate income losses due to bad prices or lower harvests with 
additional income from selling cotton -based products. Moreover, these additional earnings will be 
available during the entire year. Farmers will therefore not -so-easily switch to another crop in case 
the price or output during the previous season was below their expectations. That contributes to 
long-term stability in the cotton sector in the respective countries, improved quality and 
predictabilit y for ginners and the textile industry as well as the government for eventual support 
measures.  
4.3.  ITC pilot activities in Zambia have shown that empowering cotton farmers to add value to their 
own cotton enables farmers to build resilience to shocks as it di versifies farmers' income earning 
opportunities. In addition, this could also contribute to a more stable and sustainable engagement 
in cotton farming, including higher yields. In the past, cotton farmers have often moved out of cotton 
                                                
3 An English version ("European Cotton Rules") was also adopted by the Belgian Cotton Association.  
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  if the price or the crop output in the previous season was below their expectations. This has led to 
an erroneous in -and-out of the cotton sector. As a result, yield increasing programmes and training 
did not bear fruit, as farmers had no opportunity to apply learnings. As Te rry Townsend pointed out 
"despite all the spending and all the efforts, all well -conceived and executed, yields in Sub -Saharan 
Africa did not rise during the past decade " (T. Townsend, 2017).  
4.4.  In order for the above to be successful, a sector -wide approach is required that encompasses 
all relevant stakeholders at public and private sector level as outlined in the Zambia case.  
4.2  Attracting investors into fibre value addition  
4.5.  Cotton marketing and branding is closely related to attracting investors into fibre va lue 
addition. The necessary condition to attract foreign investment relates to the economic and political 
stability of the host country as well as the input costs for spinning and textile production such as 
electricity, water, labour, land, etc.  
4.6.  However, s tability and low input costs are not sufficient to attract investors. The sufficient 
condition relates to the need to develop the trust and loyalty of a potential investor. In every 
likelihood, a potential investor would be an existing textile enterprise, likely operating in Asia, who 
is presently using African cotton. Thus, existing potential investors are at arm's length away, but 
most of them are unknown to African governments and cotton companies. The reason is that cotton 
is not promoted among spinning  factories and no relationship exists with existing users and thus 
potential future investors.  
4.7.  ITC supported first steps in that direction by promoting African cotton in target markets. This 
had positive effects on cotton quality by establishing feedback loops and partnerships with spinners. 
A better knowledge of each other, the intrinsic cotton quality available and the way of operations 
will lead to a better understanding and ultimately trust among the parties. Trust and loyalty will help 
attract foreign  investors into spinning operations in Sub Saharan Africa.  
4.8.  Moreover, one other aspect that is often overlooked needs attention and solutions, namely the 
need of spinning mills of continuous and regular supply during the entire year versus a local offer 
that is only available during a limited period of time. Thus, using only local origin cotton poses price 
risk management challenges as cotton would need to be stocked over a relative long period of time 
in commercial terms. An alternative solution could be to  engage in pan -African collaboration between 
northern and southern hemisphere producers to ensure a more or less regular cotton supply. That 
would require liberal trade regimes between the hosting country and the supplying country. In 
addition, quality par ameters of the cotton would need to be harmonized in order to ensure a 
homogenous yarn supply during the entire year.  
Success Story: Changing the reputation of cotton from Mali  
 
4.9.  A decade ago, the quality of the cotton from Mali had an unfavourable reputati on and the 
national cotton company (CMDT) was considered an unreliable shipper, which translated into a price 
discount versus the other WCA origins.  
4.10.   Considerable efforts were undertaken to improve the quality of cotton and the logistics 
efficiency and ITC  assisted CMDT in effectively promoting their cotton. The export -focused promotion 
programme presented transparent information to cotton consuming spinning mills, differentiated 
Malian cotton against other origins and increased demand, particularly in Bang ladesh, the largest 
importer of lint.  
4.11.   ITC facilitated visits of cotton producers/ginners to Asia, including Bangladesh and customers 
from Asia to West Africa. This was an eye -opener for Bangladeshi customers, who realized that the 
so-called top quality sol d by merchants was in fact a lower quality. CMDT then decided to clearly 
mark the quality type name on the bales, despite the merchants' counter -arguments.  
4.12.   As a result of these efforts, Mali has been able to reverse its reputation and change its market 
positioning. CMDT is now recognized by the international cotton merchants as being the most reliable 
and efficient shipper in Africa. There is a strong demand for Mali cotton in Bangladesh, where it WT/CFMC/W/77  
 
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  started replacing cotton from Uzbekistan. Cotton from Mali n ow fetches a price premium over the 
other WCA origins (for the same staple length and equivalent type).  
4.13.   Building on this reversed positive image, Mali could now also start attracting foreign 
investment, subject to fulfilling also the necessary condition me ntioned above.  
4.3  Investing into cotton by -products  
4.14.   Cotton by -products in general have a growing market in Africa and are potentially an 
important complementary source of revenue for cotton growers. However, cotton by -products have 
not received much attention so far. The potential of cotton by -products is f ar from being fully 
exploited and the respective markets are not well developed in SSA.  
4.15.   Cottonseed is a source of many useful products such as:  
• Cottonseed oil, which competes with other vegetable oils, is typically used for human 
consumption (sometimes fo r soap manufacturing and other industrial uses such as plastics 
and pharmaceuticals);  
• Cottonseed hulls are either used to generate energy for the processing facility or are blended 
with meal for animal feed and less often as fertilizer;  
• Cottonseed cake, wh ich competes with other meals, is typically used as animal feed;  
• Linters are a source of cellulose used in various products, including yarn,  plastics, and filling 
material;  
• Cottonseed is sometimes also used unprocessed, directly for animal feed.  
4.16.   Apart from  cottonseeds, which are a by -product of the ginning process, cotton stalks 
constitute another important and under -utilized by -product of cotton production. Cotton stalks can 
be used for boiler energy fuel (briquettes, pellets), compost, particleboards, pre paration of pulp and 
craft paper, hard boards, etc. Edible mushrooms can be grown on cotton stalks too.  
4.17.   There is a strong demand for edible oil in Africa but none of the countries is self -sufficient in 
edible oil production. The use of expeller -press metho d for oil extraction limits volume and quality 
of cottonseed oil. Cottonseed oil and other edible oils produced locally are facing a huge competition 
from imported palm oil. Cottonseed oil is healthier as it consists of 70% unsaturated fatty acids, 
whereas  palm oil is highly saturated in fatty acids.  
4.18.   There is plenty of scope for value addition to cotton by -products. By -products have the 
potential to compete with lint as sources of income to numerous stakeholders and to significantly 
contribute to the overal l cotton subsector profitability and contribution to income generation, 
employment and poverty reduction.  
4.19.   The relative value of cotton by -products to the price of lint has increased, and the upward 
trend is likely to continue as demand for edible oil and l ivestock & poultry feeds is growing in Africa, 
exceeding domestic production.  
4.20.   To develop the cotton by -product value chain in Africa, there is need for:  
• identification and promotion of value addition activities, including processing and marketing 
of cotton seed by -products;  
• capacity building and knowledge sharing / raising awarenes s on the potential of cotton 
by-products for value addition;  
• clear national policy guidance on the development of both the edible oil and meal production 
industry with a conducive tax regime;  
• policy incentives to encourage investment in or adoption of technologies to add value to cotton 
stalks.  
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  SOURCES  
M Nill and K Wick, The Carbon and Water Footprint of Cotton made in Africa, Assessment and Water Footprint of 
Cotton  made in Africa as compared with average conventional cotton, Aid b y Trade Foundation, Version II,  2013 
Terry Townsend, Dead Aid: Sub -Saharan Africa, Cotton Association of India, C otton Statistics and News, 2016 -17 
No. 49 7th March 2017 . 
 
D Tschirley, C. P oulton, P. Labaste, Organization and Performance of Cotton Sectors in Africa, Learning form 
Experience, Agricultural and Rural Development, The World Bank, Washington D.C., 2009 . 
 
Disclaimer:  Views expressed in this article are the contributors' and do not  necessarily coincide with those of  ITC, 
UN or WTO. Designations employed do not imply the expression of any opinion on the part of ITC concerning the 
legal status of any county, territory, city or area, or of its authorities or its boundaries; or the endo rsement of 
any firm or product.  
 
Author: Matthias Knappe, Senior Officer and Programme Manager, Fibres, Textiles and Clothing, International 
Trade Centre (ITC).  Contact: mailto:knappe@intracen.org . 
 
 
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