Poverty Effects of Expansion and Policies in Cotton Economies in Rural Mozambique: An Economy-wide Approach

Abstract

This paper uses a Regional Computable General Equilibrium (CGE) model calibrated with a Social Accounting Matrix (SAM) for the Mozambique Zambezi Valley cotton concession sub-region to examine the economy-wide impacts and relative changes in the levels of income poverty of grower and non-grower household groups, following exogenous shocks, such as contract faming specific capital expansion, technology improvements, changes in world prices, and Government policies. Simulation results indicate that productivity gains have a broad-based income growth and poverty reduction potential, even greater than increased cotton world prices; because sustained increases in world prices are unlikely, this result is encouraging. While employment linkages are relatively weak in these economies when compared to tobacco growing areas, income diversification strategies by non-grower households, particularly through non-farm selfemployment and food crop marketing, ensure that they are not left behind when interventions are focused on cotton growers. Even when impacts are limited among growers, any expansion in cotton production results in some positive effects to nongrowers. The implied potential of interventions focused on increasing cotton productivity present a great opportunity for concession firms and policy makers to design strategies that are beneficial to both grower farmers, firms and the population at large. This will require public-private coordination efforts stressing better research and extension, the use of high yielding seed varieties, and emphasis on quality. Although results indicate limited negative effects of high import prices for inputs, measures aimed at reducing the costs of importation and transportation are highly encouraged as they can help minimize or counterbalance any negative effects from factors outside the control of domestic agents. While current poverty impacts of cotton cropping are relatively small, there is high potential for significant broad based gains under a more productive system.