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dissertation entitled

IMPLICATIONS OF OPEN TRADE IN WEST AFRICA
FOR THE BEEF SECTOR: EVIDENCE FROM GHANA,
COTE D'IVOIRE, MALI, AND BURKINA FASO

presented by

Samuel Asuming-Brempong

has been accepted towards fulfillment
of the requirements for

Ph.D. degree in Aqricultural
Economics

fl Major professor fl

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IMPLICATIONS OF OPEN TRADE IN WEST
AFRICA FOR THE BEEF SECTOR: EVIDENCE
FROM GHANA, COTE D’IVOIRE, MALI, AND
BURKINA FASO

by

Samuel Asuming-Brempong

A DISSERTATION

Submitted to
Michigan State University
in partial fulfilment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Agricultural Economics

1999

IMPLICATIONS OF OPEN TRADE IN WEST AFRICA FOR THE BEEF
SECTOR: EVIDENCE FROM GHANA, COTE D’IVOIRE, MALI, AND
BURKINA FASO

by
Samuel Asuming-Brempong

ABSTRACT
This study focused on estimating the magnitude and direction of trade flows

in cattle and beef in the event that more open trade is instituted in the West African
Central Corridor, made up of four countries: Ghana, Cote d’Ivoire, Mali, and Burkina
Faso. The specific objectives were (a) determining the direction of shifts in the
production and consumption of cattle and beef under more open trade in the Central
Corridor; (b) determining what efl‘ect(s) more open trade will have on beef imports
into the sub-region; and (c) determining how exchange rate adjustments and
alternative exchange rate regimes may cause shifis in the production and consumption
of cattle and beef in each country.

The study applied a mathematical programming approach to model trade in
cattle and beef in the West Afiican Central Corridor. Quadratic programming which
maximizes the net social surplus in the Samuelson sense under a competitive market
framework when farmers are risk averse was used. The simulation model allowed a
_ multi-coumry analysis that treated the Central Corridor as ‘one huge market place’
in the context of a spatial equilibrium framework.

The base model was run under three scenarios: (a) all four countries had more

open trade in cattle (i.e., all existing cattle trade barriers removed); (b) all four

countries adopted the same currency (CFA Franc in this case); and (c) all four
countries had more open trade and also adopted a single currency (a combination of
scenarios (a) and (b) above). Subsequently, the recent devaluation of the CFA Franc
and how it has affected the cattle and beef sector was also analyzed.

The model results of the more open trade scenario in the Central
Corridor indicates that there will be increased cattle trade and beef consumption in
the sub-region; while beef imports from outside the region would decline. Under the
single currency scenario, the total volume of trade in live cattle within the Central
Corridor would increase even though both exporting and importing countries might
have different experiences. But in the presence of substantial trade barriers, adopting
a single currency for the sub-region will not automatically lead to expansion in cattle
production and beef consumption. In the case of the single currency with a more open
trade scenario, the analysis showed that there shall be expansion in the cattle sector,
as well as increase in the overall trade flows in cattle, and the consumption of beef
in the Central Corridor.

Welfare analysis using consumer surplus and producer profits, as well as
estimates of government revenue changes, indicates that there would be an overall net
gain for the Central Corridor sub-region under the different trade scenarios, even
though cattle exporting countries would enjoy higher gains; while some countries

would suffer some welfare losses.

Dedicated to:
Madam Hannah Yaa Adoma

my beloved mother

ACKNOWLEDGMENT

I wish to first of all thank the Good God for His mercies and blessings that has
brought me this far in my academic carrier; and my Savior Jesus Christ whose death
and resurrection has given me hope beyond writing a dissertation! Praise His Name.

This dissertation has been produced with the help and assistance of a number
of individuals to whom I am greatly indebted. In particular, I wish to express my
sincere gratitude to my Major Professor and Dissertation Advisor, Professor John M.
Staatz, for his guidance and invaluable comments. I am grateful also to the other
members of my guidance committee, Professors Robert Myers and Richard H.
Bernsten of the Department of Agricultural Economics, and Steven J. Matusz of the
Department of Economics, for their interest in my work and very useful comments on
various drafts of the dissertation. In developing the model for this analysis, I was
privileged to get the assistance of Dr Mbaye Yade, a Visiting Professor at the
Department of Agricultural Economics, Michigan State University (based at the
Institut du Sahel, INSAH, in Mali). I wish to express my sincere thanks for his help.
And to all my colleagues who offered encouragement and support, I say thank you
very much.

I wish to also thank my dear wife Stella who has shared these challenges with
me as she also worked on her Ph.D program in Soil Microbiology; our children who

had to bear with their student-parents, as well as my Pastor-friends of the Great

Commission Church International (GCCI) in Ghana who prayed for my family and
myself continually.

I received funding for my graduate studies from different sources: (a) the
National Agricultural Research Project (N ARP) in conjunction with the World Bank,
under the Council for Scientific and Industrial Research (CSIR) in Ghana; (b) the
Food Security 11 Cooperative Agreement (AEP-5459-A-OO-2041-00) between
Michigan State University and the United States Agency for International
Development (G/EGAD/F SA), through the CFA Franc Devaluation add-on, canied
out jointly with INSAH and funded by the Sahel Regional Programs of the office of
West Africa, Africa Bureau (AF WA); and (c) the Department of Agricultural
Economics at Michigan State University. 1 gratefully acknowledge this funding that
enabled me pursue graduate studies and prepare this dissertation.

Finally, with the usual caveat, any errors that remain in this document are my

sole responsibility.

 

 

 

TABLE OF CONTENTS

LIST OF TABLES ..................................................................................... xi
LIST OF FIGURES ..................................................................................... xiv
CHAPTER I
PROBLEM STATEMENT AND STUDY OBJECTIVES ............................. 1
1.0. Introduction ............................................................................ 1
1.1. Problem Statement and Justification ......................................... 2
1.2. Study Objectives and Hypothesis ............................................. 11
CHAPTER II
CONCEPTUAL FRAMEWORK, THEORETICAL BASIS,
AND MATHEMATICAL MODEL .................................................. 14
2.0. Introduction ............................................................................. 14
2.1. Conceptual Framework ............................................................ 14
2.2. Theoretical Basis of the Mathematical Model .......................... 23
Mathematical Model Derivation .............................................. 23
Accounting for Risk in the Trade Model ................................ 28
Measuring Welfare Changes .................................................. 32
Exchange Rate Determination ................................................ 34
Mathematical Programming in Sectoral Analysis ................... 40
2.3. Mathematical Model ................................................................ 43
2.4. Measuring Consumer and Producer Surpluses ........................... 48
CHAPTER III
CATTLE TRADE AND TRADE RESTRICTIONS IN
THE CENTRAL CORRIDOR .......................................................... 50
3.0. Introduction ............................................................................. 50
3.1. Overview of External Trade of West African Countries ........... 50
3.2 Cattle Trade and Beef Consumption in the Central Corridor ..... 63
3.3 Tariff and Non-tariff Barriers to Cattle Trade in
the Central Corridor ............................................................ 76
Trade Barriers in Cattle Exporting Countries:
Mali and Burkina Faso .......................................................... 78
Trade Barriers in Cattle Importing Countries:
Cote d’Ivoire and Ghana ...................................................... 80
Unofficial Fees Levied on Cattle Traders .............................. 82

-vii-

CHAPTER IV
BEEF CATTLE PRODUCTION AND MARKETING IN

THE CENTRAL CORRIDOR ............................................................ 85
4.0. Introduction ............................................................................... 85
4.1. Trends in some Key Economic Variables in

the Central Corridor ................................................................ 86
4.2. General Overview of Cattle Production Systems in

the Central Corridor ................................................................... 95
4.3. Cattle Production and Marketing in Mali ................................... 99
4.4. Cattle Production and Marketing in Burkina F aso ...................... 105
4.5. Cattle Production and Marketing in Ghana ............................... 113
4.6. Cattle Production and Marketing in Cote d’Ivoire ...................... 119
4.7. A Summary of Cattle Production and Marketing Costs in

the Central Corridor ................................................................ 125

CHAPTER V
DATA, MODEL ANALYSIS, AND DISCUSSION ..................................... 132

5.0. Introduction .............................................................................. 132
5.1. Data and Analytical Procedure ................................................. 133

Production and Consumption regions ..................................... 133

Price Elasticities of Demand ................................................... 138
5.2. Accounting for Risk in the Trade Model ..................................... 141
5.3. Accounting for the Effects of Exchange Rate Changes

in the Trade Model ................................................................. 144
5.4. The Base Model and Scenarios Analyzed .................................. 147
5.4.1. Results and Validation of the Base Model ............................. 148
5.4.2. Results of the More Open Trade Model ................................. 156
5.4.3. Results of the Base Model assuming all Countries in the

Central Corridor use a Single Currency (i.e., CFA Franc) ........ 162

5.4.4. Results of the More Open Trade Model assuming all Countries
in the Central Corridor use a Single Currency (i.e.,CFA Franc)..166

5.5. Welfare Analysis ........................................................................ 170
Consumer surplus Measures ................................................... 170
Measures of Producer profits .................................................. 174
Changes in Government Revenue and Other Transfers ............ 177

5.6. Efi‘ects of CFA Franc Devaluation on Cattle Trade and
Welfare in the Central Corridor ............................................. 180
Effects of the CFA Franc Devaluation on Trade .................... 181
Effects of the CFA Franc Devaluation on Welfare ................. 185

-viii-

CHAPTER VI

SUMMARY AND POLICY IMPLICATIONS ............................................. 190
6.1. Summary ................................................................................. 190
6.2. Policy Implications ................................................................... 197
6.3 Limitations of the Study ........................................................... 200
6.4. Future Research ........................................................................ 201

APPENDICES

APPENDIX A4.1

Cattle Production Cost Estimates for the Central Corridor (1993 Prices) ....203

APPENDIX A5.1.
Nominal Exchange Rates of the Ghana Cedi and CFA Franc Relative to the
US Dollar, and of the Cedi relative to the CFA Franc — 1985 to 1997 ....... 205

APPENDD( A5.2
Optimal Solution Values for the Base Model
(initial existing conditions as in 1993) ................................................... 208

APPENDD( A5.3.
Optimal Solution Values for the Open Trade Model
(based on existing conditions as in 1993) ............................................. 210

APPENDIX A5.4.
Optimal Solution Values for the Base Model (based on existing conditions
as in 1993) assuming all Countries used the Same Currency (i.e. FCFA) ...212

APPENDD( A5.5.
Optimal Solution Values for Open Trade Model (based on existing conditions
as in 1993) assuming all Countries used the Same Currency (i.e. FCFA) .. 214

APPENDIX A5.6.
Sensitivity Analysis: Optimal Solution Values for the Base Model
assuming a 10% increase in the Price Elasticities of Demand

for each Consuming Region/Country ............................................... 216

APPENDIX A5.7.
Sensitivity Analysis: Optimal Solution Values for the Base Model
assuming a 10% decrease in the Price Elasticities of Demand for

each Consuming Region/Country .................................................... 218

—ix-

APPENDDI A5.8.
Consumer Surplus changes under different Trade Scenarios in the
Central Corridor - Estimates based on 1993 figures ........................ 220

APPENDIX A5.9.
Changes in Producer Profits under different Trade Scenarios in the
Central Corridor - Estimates based on 1993 figures ...................... 222

APPENDD( A5.10
Changes in Government Revenues under different Cattle Trade
Scenarios in the Central Corridor ................................................... 224
APPENDD( A5. 1 1.
Optimal Solution Values for the Effect of the CFA Franc Devaluation
(based on existing conditions as in 1993) ........................................ 225

REFERENCES ......................................................................................... 227

-x-

Table

3.1.

3.2.

3.3.

3.4a.

3.4b.

3.5.

3.6.

4.1a.

4.1b.

4.2.

4.3.

4.4.

4.5.

4.6.

LIST OF TABLES

ECOWAS External Trade (1980 - 1994): Value in Million US $ 54

Direction of Trade Matrix — % of Total Exports, 1984 — 1993 ........ 57
Direction of Trade Matrix — % of Total Imports, 1984 - 1993 ......... 59
Importance of Cattle as an Export Commodity in

the Central Corridor ................................................................. 62
Importance of Cattle as an Import Commodity in

the Central Corridor ................................................................ 62
Some Basic Macroeconomic Indicators for the Central Corridor ..... 66

Direct and Indirect Taxes on Cattle Trade in the Central Corridor
(FCFA/Head) — 1993 Estimates) ............................................ 83

Trends in some Key Economic Variables in
Mali and Burkina Faso ............................................................. 90

Trends in some Key Economic Variables in
Ghana and Cote d’Ivoire ........................................................... 91

Important Characteristics of Some Cattle Production Systems in
the Central Corridor .............................................................. 96

Ofiicially Recorded Annual Average Stocks, Slaughter, and Prices
of Cattle in Mali (1985 - 1996) ............................................ 102

Human Population, and Officially Recorded Cattle Stocks
and Slaughter by Zones in Mali — 1993 ................................. 103

Officially Recorded Annual Average Stocks, Slaughter, and Prices
of Cattle in Burkina Faso (1985 - 1996) .............................. 110

Human Population, and Officially Recorded Cattle Stocks

-xi-

and Slaughter by Zones in Burkina Faso — 1993 .................... 111

4.7. Officially Recorded Annual Average Stocks, Slaughter, and Prices

of Cattle in Ghana (1985 - 1996) ......................................... 116

4.8. Human Population, and Officially Recorded Cattle Stocks
' and Slaughter by Zones in Ghana — 1993 .............................. 117
4.9. Officially Recorded Annual Average Stocks, Slaughter, and Prices

of Cattle in Cote d’Ivoire (1985 - 1996) .............................. 122
4.10. Human Population, and Officially Recorded Cattle Stocks

and Slaughter by Zones in Cote d’Ivoire - 1993 ................... 123
4.11. Cattle Production Cost Estimates for the Central Corridor

(based on 1993 Prices) ........................................................ 127
4.12. Elements of Cattle Marketing Cost Estimates for the Central Corridor

(based on 1993 Prices) ........................................................ 129
4.13. Elements of Beef Marketing Cost Estimates for the Central Corridor

(based on 1993 Prices) ........................................................ 130
4.14. Prices of Local Beef in the Central Corridor: 1990 - 1996 .......... 131

5.1. Cattle Producing and Beef Consuming Regions of
the Central Corridor .............................................................. 135

5.2. Estimated Distances (km) between Cattle Producing and
Beef Consuming Centers in the Central Corridor ................ 137

5.3. Beef Price Elasticities of Demand and Initial Model Values for
the Central Corridor (Prices and Quantities are 1993 Figures) .. 140

5.4. Detrended Cattle Off-take, Prices, and Revenues for Countries
in the Central Corridor ........................................................ 143

5.5. Rates of Change in the Cedi and the CFA Franc - 1985 to 1997 ...... 146

5.6. Analysis of Regional Beef and Cattle Trade — The Base Model ..... 150

-xji-

5.7. Analysis of Regional Beef and Cattle Trade — The More Open

Trade Model ........................................................................... 158
5.8. Analysis of Regional Beef and Cattle Trade — Trade Model

(based on 1993 conditions) assuming all Countries use

the same Currency (CFA Franc) .......................................... 163
5.9. Analysis of Regional Beef and Cattle Trade — Trade Model

assuming more open trade with Countries using

the same Currency (CFA Franc) .......................................... 167

5.10. Consumer Surplus Changes under different Trade Scenarios in

the Central Corridor — Estimates based on 1993 Figures ..... 172

5.11. Changes in Producer Profits under different Trade Scenarios in

the Central Corridor — Estimates based on 1993 Figures ..... 175

5.12. Estimated Changes in Government Revenue and Other Transfers

Under Different Trade Scenarios in the Central Corridor ...... 178

5.13 Analysis of Regional Beef and Cattle Trade — Simulating the

Effects of The January 1994 CFA Franc Devaluation ............ 182

5.14. Consumer Surplus (CS), Producer Profits (PP), and Government
Revenue Changes resulting from the January 1994

CFA Franc Devaluation .......................................................

-xiii-

186

~—>

LIST OF FIGURES
Figure

l . l . Beef and Cattle Trade Flows in the Central Corridor of West Africa 3

2. l. Maximizing Net Social Benefit (X + Y) ............................................. 21
3 . 1. ECOWAS: Annual Growth Rates of Exports and Imports ............... 55
3.2. The Central Corridor within the West Africa Sub-region ................. 64
3.3a. Central Corridor Cattle Exports (‘000 Heads) ................................. 68
3.3b. Central Corridor Cattle Imports (‘000 Heads) ................................. 68
3.4a. Central Corridor: Value of Cattle Exports (million US $) ................. 72
3.4a. Central Corridor: Value of Cattle Imports (million US 5) ................. 72

3.5. Imports of Bovine Meat and Products for the Central Corridor (Mt) 74

3.6. Bovine Meat Consumption per Capita in the Central Corridor .......... 75
4.1a. Food Production Index per Capita (1989-91 = 100) ......................... 92
4.1b. Livestock Production Index per Capita (1989-91 = 100) ................. 94

-X1V-

CHAPTER I

Problem Statement and Study Objectives

1.0. Introductibn

Regional economic integration, which featured prominently in debates on
economic issues in the 19705, has again become an important policy issue for Africa
in the 19903. It is viewed as a means of achieving faster and sustained growth, as well
as reducing the dependance of many African economies on their past colonial
masters. Following the economic stagnation in Africa in the 19803, and the recent
global move toward forming free trade areas (e. g., NAFTA, the EU, and ASEAN),
many economists and policy makers have revisited efforts at Afiican regional
economic integration as a facilitator of faster economic growth in Africa (Egg et
01.1991).

Economic integration, a more encompassing term than economic cooperation,
generally refers to arrangements among countries ranging from the creation of free-
trade areas (free flow of resources, goods and services), to full economic unions
(00minon monetary and fiscal policies). This study analyzes the implications of
creating a free-trade zone for cattle among West African countries, which is one
asWet of the ongoing economic integration discussion. The analysis focuses on trade

arrangements that allow free movement of cattle1 among the countries constituting the

 

‘Even though most of the cattle in the sub-region are raised for beef, they are generally dual-purpose
animals. This study concentrates on the beef aspect of the sub-sector.

1

Economic Community of West African States (ECOWAS), while each country sets
its own trade policies with non-members. It also analyzes the effect of alternative
exchange rate arrangements on cattle trade flows in the sub-region.

Historically, cattle have been an important item of trade among ECOWAS
countries, particularly between the Sahelian (semi-arid north) and coastal (humid
south) countries. Trade flows have generally been in a north-south direction, and
movements across coastal countries have been uncommon, except for some beef and
other cattle products in limited quantities. The study covers cattle trade in the “Central
Corridor”2 of West Africa, where the dumping of beef from the European Union has
been high in recent years (Madden, 1993). Fig. 1. shows cattle trade flows as it has
historically existed in the subregion, including beef imports from the European Union
in recent years. The lighter arrows indicate limited trade in processed beef (e.g.,

smoked beef and hide) and other cattle products (e. g. leather).

1.1. Problem Statement and Justification

Inter-regional trade within the West Afiican sub-region has been limited,
fiveraging less than 10% of total trade, compared to about 70% for Western Europe
“‘1 40%» for NAFTA (Sander, 1996). Traditionally, Ghana, Nigeria, Cote d’Ivoire,
and Senegal have been relatively large trading partners with each other, at least at the

OfiICial level. But in spite of the provisions made under the ECOWAS treaty, there

'The “Central Corridor” is a short-hand term for the four countries situated in the central part of the West
African sub-region: Ghana, Cote d’Ivoire, Mali, and Burkina Faso.

2

B
FASO

        
 

nko
-

e

i

O
- - a
new
Tm

 

 

   

 

 

COTE
D’Ivomra

 

(Exports)

Figure 1.1. Beef and Cattle Trade Flows in the Central Corridor of West Africa.
3

still exists substantial tariff and non-tariff trade barriers that have prevented free
movements of goods and services throughout the region (Egg et 01., ibid.)

Even though trade restrictions may have created selected benefits in some
areas, they also have generated economic inefficiencies in some of the countries in
the sub-region. It is not surprising therefore that a thriving parallel trade (or
black/underground trade) has existed in the region over decades. Moreover, policy
makers in the sub-region have always stressed economic integration in terms of the
production and distribution of industrial products, interpreting it as a component of
national industrialization strategies, and have paid very little attention to trade in

agricultural products, which constitute the bulk of bilateral trade among West African
countries (Badiane, 1991).

Some of the reasons given for the failure to expand trade among West African
countries include: (1) the lack of political will on the part of governments to sacrifice
inemcient domestic production in favor of cheaper imports fiom countries in the sub-
region; (2) balance of payment problems resulting from significant differences in
macroeconornic policies; (3) large differences in economic size and levels of
development such as between coastal and interior states; (4) similarity of products and
high transaction costs; and (4) structural and historical factors emanating from
diffcl‘ent colonial experiences and economic traditions. But at the core of all these
Dibblems is the lack of information on the specifics, such as the magnitude of

expected changes that will be generated in goods and services as a result of economic

integration.

Although West Africa is the most densely populated sub-region in Africa, it

consists of small separate national markets which are limited in terms of size

(population) and purchasing power (low per capita income). Since there exist

similarities in terms of foods consumed across countries in the region, the potential

for market expansion that integration could generate, particularly in the food sector,
is therefore a reasonable justification for integration. Answers to questions regarding
production and consumption changes, as well as payoffs and their distribution, are
thus crucial to arguments about creating a free trade zone in West Africa.

This also brings into focus the issue of alternative currency arrangements
within the sub-region. For example, among the four countries that constitute the
Central Corridor, Ghana is the only one that is not a member of the CFA Franc zone.
Since 1983 Ghana has undertaken exchange rate reform to correct overvaluation of
her currency, the Cedi, as part of a World Bank/IMF sponsored structural
adlollStlnent program. This has resulted in massive devaluations of the Cedi, which
exchanged for the US Dollar at a fixed rate of C2.75/US$1 at the onset of the
reform in 1983, but had declined in value by 99.2% to C345/US$1 in 1990, and by
a f\ll'ther 80% to C1,700/US$1 by 1996. The Cedi-Dollar exchange rate in 1998
was in excess of C2,000 per US$1. These devaluations have occurred in the
Presence of a significant parallel foreign exchange market. On the other hand, the

CFA Franc, which has been pegged to the French Franc, had since 1948 not been

devalued until January 1994, when it experienced a one-time devaluation of 50%
relative to the French Franc.

The differences in the currency regimes that exist in the West African sub-
rcgion between the francophone CFA Franc, on one hand, and other non-CFA Franc
countries, on the other, could substantially affect trade and trading patterns, including
beef and cattle, in the sub-region.

Moreover, even though the ECOWAS treaty advocated , in general terms, more
open trade across borders in the sub-region, each country has both tariff and non-tarifl‘
barriers which negatively affect trade among them. At the official level, most forms
of export taxes and import tariffs on cattle and other livestock products have recently
been removed or substantially reduced by all the countries in the Central Corridor.
However, other forms of taxes still persist, both at the ofiicial and unofi'rcial levels.
These include market taxes, veterinary taxes, sales tax, and various forms of
certification and licensing fees which together constitute substantial transaction cost.
Kulibaba and Holtzman (1990), for example, report the existence of several types of
Merits along the marketing chain for livestock in the central corridor: tips to
government officials (or what they term as payment for licit services), bribery (or
Payment for illicit services), extortion, and fraud. The aggregate of these costs could
be Very substantial, thereby impinging on the benefits that would otherwise have

accrued to free trade in cattle in the subregion. There is thus a significant gap

between what is theoretically desirable at the ofiicial level and what pertains in actual

practice of more open trade in cattle in the sub-region.

The foregoing generates some interesting questions: What would be the

direction of shifts in the production of cattle and consumption of beef under free trade
in the region? What would be the distribution of gains and losses (i.e., who would
be the gainers and losers) when there is more open trade ? What would be the
magnitude of these changes? How would the flow of beef imports to the sub-region
change, and what would be its implication for import substitution in the region ?
Would a common currency or a common exchange rate regime for the sub-region
make any difference to cattle trade flows in the Central Conidor? To inform these
questions, there is need to investigate what would happen to the production of cattle
and consumption of beef in the sub-region if all intra-regional trade restrictions were
removed, and what would be their implications for regional food imports, particularly
beef, under a common currency system.

Much discussion has focused on the benefits that economic integration in the
sub-region would generate for all the ECOWAS countries, but these have tended to
be mainly qualitative or descriptive. Few studies have attempted to quantify the
ma8m°tudes of the consumer/producer trade-offs that freer trade resulting from
econ0mic integration would provide. Empirical analysis that fills this gap will be an
il‘llml'tant input for the on-going discussion, and contribute to the debate on economic
iulceration and its implications for the ECOWAS sub-region. Moreover, it is

important to define clearly the gains and losses resulting from economic integration

to help policy makers decide what might be best for their respective countries in the
face of recent global move towards integration. Also, knowledge of the magnitudes
of the gains and loses will stimulate competition among member countries and
therefore efficiency in the production of food products in which specific countries
have comparative advantage. This will both increase trade in the sub-region and
enhance economic welfare among the ECOWAS countries.

The choice of cattle for this analysis is borne out of two related issues. First,
animal production is a major economic activity in the two Sahelian Countries,
representing about 16% and 10% of Gross Domestic Product (GDP) in Mali and
Burkina Faso, respectively. The World Bank, for example, estimates that about 30%
of exports from Mali and 26% from Burkina F aso are trade in animals. At the same
time, coastal countries in the region, such as Ghana and Cote d’Ivoire, are net
importers of beef and cattle; and this has traditionally created a potentially viable
trade in animals between the Sahelian and coastal countries.

Second, the European Union (EU) in the 19803 and early 19903 followed a
POHCy of dumping beef in West Africa (at prices about 30% to 50% lower than beef
from the West African sub-region) as a way of containing problems with European
8mPluses (Madden, (bid). The exports of beef from the EU to West Africa increased
about 700% in the 19803, which greatly affected the traditional cattle trade in the

region GATT (1993), for example, reports that in 1992/93 about 99% of all non-

African beef imports to West Afiica came from the EU countries. There is need for

assessing how cattle trade in the sub-region has been affected as a result of the EU
beef dumping, as well as the overvaluation of West African currencies, which also
contributed to making imports of beef from Europe relatively cheap.
Traditional trade theories have emphasized gains from trade. However, in the
face of secular decline in the terms of trade of the South (relative to the North) in the
process of trade and grth (Sakar, 1996), recently more emphasis are being placed
on South-South as well as inter-regional trade to promote growth and improvements
in welfare in developing countries. For example, Appleyard et a1. (1989) demonstrate
that while industrial countries improve their terms of trade unambiguously from Free
Trade Arrangements (F TA) with Less Developed Countries (LDCs), LDCs do not
experience unambiguous terms of trade improvement from such arrangements; even
though there is some gain by LDCs over non-members. They further conclude that
“Wide among nations with similar levels of econorrric development generates benefits
“lat are fairly distributed among such countries based on the position of their traded
goods on the continuum of goods and services traded. For example, two deve10ping
0°llntries trading in cattle (such as Burkina Faso as the exporting country and Ghana
‘8 the importer) both benefit through trade, but the distribution of benefits depends
on the size and importance of cattle relative to other commodities exported by
B\tr'ltina Faso, and the size and importance of cattle relative to other commodities that
Ghaunt import.

This assertion is supported by Wooton (1986), who provides a theoretical

 

model to show that LDCs gain by forming a FTA with each other if the volume of
their international trading increases. Hamada and Goto (1996) also extend
Krugman’s (1991) model on optimal tariffs and regional integration to argue that
member countries forming a free-trade area become better off relative to non-
members. Thus, there is growing theoretical support for integration among developing
economies such as those found in the West African sub-region.

Most of the literature on integration in Sub-Saharan Africa notes the failures
of previous attempts at regional economic integration, such as the case of the
Economic Community of West African States (ECOWAS), whose protocol was
Signed in 1975; and the East African Economic Community (EAEC). Mansoor and
Inomi (1991), in a review of integration in Sub-Saharan Africa, stress inherent
structural problems which continue to hinder outright regional integration,
I"L‘vcommending that regional trade liberalization should be pursued as a first step. A
siniilar conclusion was reached by Lipumba and Kasekende (1991) when they
discussed prospects of preferential trade area for Eastern and Southern Africa.

Also, Ariyo and Raheem (1991) analyze trade flows within the ECOWAS sub-
r§gion and conclude that a major obstacle is non-liberalization of trade to member
colmtries in the sub-region, and suggest trade liberalization with harmonization of

pl‘Oduction and investment proposals as one way to address the problem.
Furthermore, in a paper on unrecorded trans-border trade in Sub-Saharan Africa,

Band (1990) makes an argument that such trade greatly influences the economies of

10

 

the respective African countries through their effect on the incomes of participants as
well as loss of revenue to governments, and advocates open markets that encourage
omcial trade as an important step in the economic integration process.
It is evident from the existing literature on regional economic integration (and
therefore open trade in Sub-Saharan Africa) that there exists a wide gap between
recognizing what the potential benefits of integration are, and actually quantifying
such benefits. In part, the reluctance of government to commit to full implementation
of the numerous protocols on integration and liberalization of trade in the West
Afiican sub-region could be attributed to the uncertainties that surround these
expected benefits. This study is therefore an attempt to quantify the magnitudes of
Such gains (or losses as the case may be) to specific countries and economic agents.
The study is limited to the four countries (Ghana, Cote d’Ivoire, Mali and
Burkina Faso). Ghana and Cote d’Ivoire provide a comparison between coastal
Countries in the region, while inclusion of Mali and Burkina Faso allows comparison

between both coastal and interior countries, and between two interior countries.

1-2. Study Objectives and Hypothesis
The main objective of this study is to estimate the magnitude and direction of
We flows in cattle and their associated welfare implications in the event that more
Open trade is instituted in the West African sub-region . This will inform the ongoing

debate on economic integration in West Africa (a goal that has eluded the ECOWAS

ll

comtries since the mid 19703). The specific objectives include:
1 - determine the magnitude and direction of shifts in the production of cattle and
consumption of beef under more open trade based on comparative advantage;
2- estimate changes in the producer and consumer surpluses for the beef sub-sector
in the countries being studied;
3 . determine what effect more open trade will have on beef imports into the sub-
region; and
4. determine how exchange rate adjustments may cause shifts in the production
and consumption of cattle.
The following working hypotheses are formulated to meet the above objectives:
1 . aggregate production of cattle and consumption of beef will increase under
more open trade in the sub-region.
2. consumers in importing countries are likely to experience higher welfare gains
than producers in those countries under more open trade;
3. consumers in exporting countries are likely to experience lower welfare gains
than producers in those countries under more open trade;
4. beef imports to West Africa will decline as open trade in the sub-region
expands; and
5. exchange rate adjustments will shift regional trade in favor of the country or

countries with more flexible exchange rate regimes.

12

The subsequent chapters of the study proceed in the following manner.
Chapter Two discusses the theoretical underpinnings of the study, and subsequently
develops the mathematical model applied. Chapter Three gives an overview of trade
among countries in the West African sub-region, with emphasis on trade in cattle
involving Ghana, Cote d’Ivoire, Mali, and Burkina Faso. The existing trading
arrangements and restrictions are outlined. Chapter Four focuses on the sectoral
analysis of cattle in Ghana, Cote d’Ivoire, Mali, and Burkina F aso, with emphasis on
the production and distribution of cattle and beef in each country. In Chapter Five the
sources of data, as well as the model estimation and its results are discussed. Chapter
Six gives the summary and the policy implications of the study; as well as provide

some direction to future research that will have some relevance to the results of this

study.

13

r-“m

CHAPTER II

Conceptual Framework, Theoretical Basis, and Mathematical Model

2-0. Introduction

This chapter discusses the methods used in the analysis, including the
conceptual framework which lays out the theoretical underpinnings of the simulation
model applied. The discussion draws on elements of international trade theory, the
competitive market framework, and welfare economics to develop a model for
determining the magnitudes of gains and/or losses and their distribution among
economic agents under more open trade. It consists of two sections: (a) the
tl'leoretical basis of the model and the conceptual framework which explains the

methods applied, and (b) the mathematical model simulated.

2- 1. Conceptual Framework
The idea that gains result from trade is an outcome generally accepted by
eGonomists. Adam Smith argued that specialization and economies of size are among
file advantages that accrue to trading nations, based on the concept of absolute
a“vantage (that a nation specializes in producing the good or goods in which its cost
01’ costs were least relative to others).
Subsequent to Adam Smith’s work, David Ricardo observed that trading

countries could still gain even if one of them had absolute advantage in producing all

14

goodS. Using a two-country two-good model (commonly called the Ricardian Trade
model), Ricardo demonstrated that even when one country is disadvantaged in
producing both goods, total output increased and both countries raised their living
standards as long as they engaged in trade, based on the concept of comparative
advantage. Comparative advantage is the concept that a nation specializes and
produces the good in which it requires the least resources relative to other nations,
even if it does not have absolute advantage in producing that good. Thus, in the two
cormtry case, one country produces and exports the good in which it has the greatest
advantage, and the other country produces and exports the good in which it has the
least disadvantage.
Further development of the trade model include the work of Heckscher and
Ohlin, and later Samuelson, who gave an algebric form to their work (sometimes
I"iT-ferred to as the Heckscher-Ohlin-Samuelson synthesis). Based on assumptions of
identical consumer preferences and same technology across countries, with
diflmmws only in factor endowments without factor intensity reversals, they
DOStulated that nations specialize in producing the goods that use their relatively more
abundant factors of production more intensively; with trade equalizing output prices
a11d returns to factors across trading nations.
Several other extensions and variants of the Heckscher-Ohlin-Samuelson
Synthesis have been made, such as the Stolper—Samuelson theorem, which states that

when a tarifl‘ is imposed on a good that is imported, benefits accrue to the factor used

15

r.___..1

most intensively in the domestic production of that good. The Rybczynski’s theorem
says that given that commodity and factor prices as well as technology remain
unchanged, when the quantity of a factor increases, it causes an output increase in the
good that uses the factor more intensively and output decrease in the other good. The
work of Mundell (1957), Markusen (1983), and others, which focused more on inputs
rather than outputs, all have their basis in the Heckscher-0111in-Samuelson synthesis.
Krugrnan (1981), Melvin (1985), and others have used differences in
consumer preferences in a more modern approach to international trade, such as We
between countries at similar stages of development. Issues not considered under the
Classical framework, including increasing returns to scale and imperfect competition,
have been addressed. They conclude, among others, that international trade in many
PrOducts in the modern world is driven more by economies of scale, which leads to
sI’ecialization in an increasingly imperfectly competitive world, than by comparative
aKlvantage.
The foregoing discussion demonstrates that based on classical welfare analysis,
a case has been made for the gains that result from free or more open trade between
cOlllrtries. However, in practice, trade barriers that limit trade still exist between
cOlmtries and across regions. The World Trade Organization (WT O) has a mandate
t0 address these barriers. Tweeten (1992) has listed, among others, efforts to protect
0! promote national security, the infant industry argument, employment, balance of

payments problems, and countervailing power, as some of the major arguments that

16

.r ”.21

countries give as a justification for imposing trade barriers. He points out that the
new welfare economies which emphasizes efficiency (with the assumption that
gainers could adequately compensate losers) also supports removal of trade barriers,
irrespective of how efficiency gains are distributed. The problem, though, has to do
with how compensation can be made when we factor in the issues of power politics
and pressure groups.

The conclusions of classical welfare analysis also provide a tool for modeling
competitive markets. Because, under certain assumptions, competitive markets
maximize social surplus, a programming model that maximizes social surplus can be
used to simulate a competitive market.

The theoretical basis for maximizing social surplus within a competitive
market framework is rooted in the fundamental theorem of welfare economics.
Varian (1992 & 1993), and Quirk and Saposnik (1968) discuss the relationship
between general equilibrium and competitive partial equilibrium. In general
equilibrium models, all the interactions between markets and the flmctioning of the

individual markets in the economy are considered. All prices are variable, and
determined as relative prices; and in equilibrium all markets must clear (i.e. no excess
dGarland or supply). Competitive equilibrium, also called market equilibrium or
wdrasian equilibrium, is the case where demand for each good varies continuously

83 prices vary until equilibrium is reached, such that there is always some set of prices

where supply and demand equate in every market. Thus, whereas general equilibrium

1?

describes the total economy, competitive equilibrium could refer to the markets of
individual commodities, sectors, or the entire economy.

In a pure exchange economy (i.e., only consumers are considered), Warlas’
law states that the value of aggregate excess demand is identically zero (or zero for
all prices). This implies that if there are markets for s commodities, and s-l of the
markets are in equilibrium, then the final market must also be in equilibrium. Warlas’
law supports the existence of competitive equilibrium, which forms the basis of the
fundamental theorems of welfare economics. The First Welfare Theorem states that
a set of competitive markets in equilibrium is Pareto efiicient (i.e. the idea that there
is no other way to make all the agents involved better off). The Second Welfare
morem states that with convex preferences, every Pareto efficient allocation can be
achieved as a competitive equilibrium. If demand flmctions are continuous, and
Warlas’ law is satisfied, then the sufficient conditions for equilibrium to exist are
Ills->0 fulfilled.

Extending the pure exchange economy to include competitive and profit
maximizing firms with convex production sets, we can achieve a set of prices for all

cotnmodities (inputs and outputs) in all markets such that competitive equilibrium
ei'iists (i.e. demand equals supply). In this case, the competitive markets provide a
Way to achieve efficiency in resource allocation, by decentralizing decisions of
Producers and consumers as each agent’s marginal rate of transformation (MRT) and

the marginal rate of substitution (MRS) are equated. The first and second welfare

18

theorems both hold in an economy with production and consumption under these
conditions (V arian, 1993).

Maximizing the net social surplus for beef consumption in the West African
central corridor builds on the argument that the competitive equilibrium that results
will yield Pareto efficient allocation in the beef sub-sector. The constrained social
surplus maximization is thus a tool that allows us to use mathematical programming
methods to analyze the market within a competitive market framework. When the
objective function is maximized, the model generates optimal values for all prices
and factors of production and outputs of commodities included in the model at the
POint where the market is in equilibrium. These values represent the production and
consumption levels of the economy modeled, and allow us to compute the consumer

and producer surpluses as welfare indicators. Hence, the model provides a convenient
Way for conducting simulation analysis for a sector of an economy at the country or
reSional level when a competitive market framework is an appropriate representation
‘3 in the case of beef and cattle trade in the central corridor of West Africa.
This study has therefore attempted to model the beef and cattle sector
in the Central Corridor of West Africa using a mathematical programming approach.
It applies a competitive market framework as a tool to determine the magnitudes of
gains from trade and how such gains are distributed among economic agents. The
idea is to consider the Central Corridor of West Afiica as a trading area which

satisfies the competitive market assumption (e. g., homogenous product, and large

19

number of sellers and buyers) with respect to cattle trade. The net social welfare that
is generated from demand for beef at the country or regional level is then maximized
for the case where no trade barriers exist, the common regional currency scenario, etc.
The analysis of this situation was accomplished using a quadratic prograrnnring model
and comparing a base year analysis with results obtained from other different
scenarios.

Note that maximizing the “aggregate profit” of the sector being analyzed is, in
principle, taking the algebraic sum of the profit maximizing problems of the
individual producers in the sector. This implies that the total production generated
by each activity is determined at the level of each producer’s decision on output based
on the individual’s profit function first order conditions. When demand and supply
relations are incorporated into the model we obtain the competitive market
e‘l‘lilibrium which helps us estimate the producer and consumer surpluses (or net
Social benefit). McCarl and Spreen (ibid.) provide a more formal discussion on how
Iniiarimizing net social benefits in the aggregate is analogous to maximizing profits
‘nd utility of individuals.

Graphically, the Net Social Benefit (N SB) can be shown in a simple market

demand and supply framework as in Fig. 2.1.
The Net Social Benefit, NSB, is the sum of X and Y ( Fig. 2.1) which are the

consumer’s and producer’s surpluses, respectively. C represents the total cost

20

 

 

 

Figure 2.1 Maximizing Net Social Benefit (X + Y)

fimction C(Q), and P, and Q, are equilibrium price and quantity, respectively. The
N83 associated with any commodity y can be derived by taking the integral of the
tOtal area under the demand curve from 0 to Q. (we substitute for the price-dependant

demand flmction), and subtracting area C.

21

For a linear demand curve, the procedure is as follows:

Q.

NSBy = {P}, OQy - C(Qy) (1)
0
9,

NSB, = f (a, - byQy) 6Q, - C(Q,) (2)
0

NSBy = ayQy - 101;ij - C(Qy) (3)

Similarly, we can derive the NSB algebraically using Fig. 2 by computing area
X plus area Y (i.e. NSB) as follows (assuming linear demand and supply functions):

NSB = l/2(a - P,)Q, + PcQ, - C (4)
Then for one commodity, y, we get

NSB, = 1/2(ay - l>,)Qy + Pyoy - C(Qy) (5)
Sllbstituting for Py = ay - byQy and simplifying:

NSB, = a,Q, - l/2b,Q’, - C(Q,) (6)

As seen from equations (3) and (6), maximizing the NSB as an objective
1inaction implies maximizing a quadratic function, which justifies the use of quadratic
programming for the analysis. The equilibrium values generated by the model (e.g.
Prices and quantities) also represent the decision variables that determine changes in

production and consumption, as well as welfare.

22

2,2. Theoretical Basis of the Mathematical Model
The theoretical underpinnings for the application of mathematical
programming models for sectoral analysis, and therefore the use of quadratic
programming for modeling beef cattle trade in the West African Cental Corridor, are
presented in this section. Following McCarl and Spreen (1980), prices and quantities
are endogenized under a neo-classical framework and marginal conditions analogous

to conditions for profit maximization derived.

Mathematical Model Derivation
First, let us assume that the sector consists of a large number of economic
agents each seeking to maximize some objective(s). For this analysis, we abstract
fiom all other objectives so that both producers and consumers operate in competitive
markets to maximize profits and utility, respectively. Producers produce some
t“llrrber of homogenous outputs and compete for the same factors of production; each
using a finite set of production processes. Each producer is assumed technically
eflicient, and combines i-owned factors and j-purch ased factors to produce a unit of
each homogenous output, Y. Even though the actions of individual producers and
cOrrsumers have no effect on market prices and quantities under the competitive
fl‘amework, at the aggregate level this assumption is relaxed, making prices and
quantities endogenous to the model. Then assuming inverse demand and supply

functions for the output in the market, market price is given by the functional

23

relationship:

Pd Pd(Y,H); d=l, ........... ,Dproducts,

where P. is market price per unit of output; Y is a m . 1 vector of output from the
sector; and H is a vector of exogenous variables. Assume also an inverse supply
function for purchased inputs:

wj = wj (K, V) ; j = 1, ............ , I purchased inputs,
where W1 is market price per unit of purchased input; K is a j . 1 vector of purchased

factors used by the sector; and V is a vector of exogenous variables. Now we proceed

to define the following terms:

ll refers to the producers; n = 1, .......................... , N;

i refers to own inputs; i = 1, ........................... , l;

j refers to purchased inputs; j = l, .......................... , J;
t l‘efers to the production process, f = 1, .................... , F;

go. is the level of the fth production process utilized by the nth producer;
Y... is the yield of the dth output of the fth production process from the nth
prOducer;
L... is the use of the ith own input in the fth production process by the nth producer;
K,“ is the use of the jth purchased input in the fth production process by the nth
producer;
L. is the endowment of the ith own input for the nth producer;

a". is the quantity of the ith own input required by one unit of the fth production

24

process used by the nth producer;

p”- is the quantity of the jth purchased input required by one unit of the fth

production process used by the nth producer;

6... is the per unit quantity (or yield) of the dth output from the fth production

process used by the nth producer.

Based on the above definitions, we can express the sectoral supply of the dth

commodity as:

F N
Yd = XXI/«1f» (7)

f=1 n=l

Similarly, the sectoral use of the jth purchased input may be expressed as:

F N
K; = 2:sz (8)

f=l n=1

and that for the use of individual owned input, i, expressed as:

F N
Lt : Z Z Lifn (9)

[=1 n=l

If we assume constant returns to scale (CRS) for all producers, then their

“aggregate” profit function can be written as:

25

N F o
HN = £[Z(ZPdefil ' wJKjfn)] (10)

":1 [.1 d-l 1:1
subjectto:

N
2m}, - om gfi) = o; d=1....,D;f=1....,F;n=1....,N; (11)
n=l

-Kjfil + [31,." gfn = O j=1....,J;f=1....,F;n=1....,N; (12)
—Lv.n + am, gfn = O i=1....,1;f=1....,F;n=l....,N; (13)
J F
E 21%:ij _<. VKJ." j=1....,J;n=1....,N; (14a)
j=1 f3]

1 F

2 EL," s Lm. i=1....,I;n=1....,N; (14b)
i=1 f=l

when: VK, is defined as the value of total credit available to producers.

By forming a Lagrangian, L, we can derive the necessary and sufficient
c0nditions for a constrained maximization using Kuhn-Tucker conditions, analogous
to profit maximization of an individual producer (see McCarl and Spreen, ibid )'. This
will yield optimal values for Y*._,, L*,_, , K*,_,, g*_, , and Lagrange multipliers,

which are marginal prices or values. Thus, while individual producer decisions are
determined by their first order conditions of profit maximization, including factor
Sopply and product demand functions in the model make aggregate quantities and

prices endogenous.

26

Now we assume well-behaved continuous linear demand and supply functions

in matrix notation as follows:
Pd = Ad " Bd Y (15)
wj = Cj + M,- K (16)

where A. and C1 are scalars, and B. and MJ are row vectors. Then we can combine
the price dependent product demand and input supply functions into an objective
function that maximizes the Net Social Benefit (N SB) which is the algebraic sum of

producer’s and consumer’s surpluses.

The maximization problem may be expressed as:

MaxNSB = Max{Y’A - l/2Y’BY -KC’ - l/ZK’MK} . (l7)
slilbjectto:
N F
Yd ' ZZYdfn = O (19)
n=lf=l
- Kjfn + Bjfl, gfn 0 (20)
-Lr'fn + arfn gfn : O (21)
J F
221%" — K]. = o (22)
j=l fer
J F
2219" s VKJ. (230)
1:1 121
F
[231% s trimI gfn = 0 (23b)

27

where the term (Y ’A - 1I2Y’BY) is the sum of the areas under the output demand
functions; and the term (KC’ + 1/2K’MK) represent the total cost or the sum of areas
under the output supply functions. Thus, the difference between these two terms is
the sum of consumers’ and producers’ surplus over all markets, which is maximized
at the point of supply and demand equilibrium.
By using Kuhn-Tucker conditions for the constrained maximization problem
as before, we can verify an “aggregate” marginal cost to which each producer equates
product price; and “aggregate” marginal value product to which factor prices are
equated (Samuelson, 1952; Takayama and Judge, 1964; Hazel] and Norton, 1986).
Thus we obtain a sectoral supply curve as the aggregate marginal cost schedule, and
sectoral derived demand curve for purchased inputs as the aggregate marginal value
PI'Oduct schedule. The optimal solution of the model provides values for equilibrium

Prices and quantities of both outputs and inputs.

A ccountlng for Risk in the Trade Model
Any event with more than one outcome involves uncertainty when there is no
foreknowledge of the probabilities of the occurrence of such outcomes. In the cases
Where the probabilities are known, the outcomes involve risk. This distinction
between risk and uncertainty has broken down in recent years as analysts have
realized that everything we know, including probability distributions that characterize

“risk”, we know in a probabilistic sense. Hence, the notion of risk is not clear-cut.

28

In this analysis, the term risk is used to represent the general state of ambiguity within
which economic agents make decisions in the beef and cattle sub-sector.

Farmers generally confront numerous natural hazards such as drought, fire,
or floods, which may destroy both crops and livestock; as well as variability in
outputs, inputs, and prices that affect their incomes. Consequently, agricultural
production, particularly in developing countries, has been recognized as risky due to
the mostly uncontrollable nature of the environment in which production and
distribution take place; and empirical studies show that farmers in general behave in
a risk-averse manner (e. g. Binswanger, 1980). The challenge, however, has been how
to specify “aggregate risk aversion” in a model which represents a constrained
equilibrium when the decision makers (e. g. farmers) usually have a myriad of
objectives.

Three main approaches for incorporating risk in programming models have
been identified in the literature (Wicks, 1978; Hazell and Norton, ibid.). These
include (a) the mean-variance (E, V) criterion, which uses the relationship between
the expected value of that variable and its associated variance or standard deviation;
(b) safety-first models based on what is termed focus-loss (FL) approach, where the
risk-related activity is set at a predetermined level; and (c) flexibility constraint
formulation (FLEX), in which a constraint on some activity is predetermined and
incorporated into the model.

This study applies the more commonly used mean-variance (E, V) method to

29

account for the risk-averse behavior of economic agents in the cattle sub-sector of the
Central Corridor of West Africa. The basic assumption here is that the coeflicient for
aggregate risk aversion for a region or country should be equal to the sum of the
individual risk aversion coefficients (Hazell and Scandizzo, 1974). This may be
expressed as:

2.¢.y.'w. yr = ‘1’ Y' 0 Y
where Y is a vector of the aggregate of cattle numbers supplied (off-take) in each
region; 0 is the aggregate n *n covariance matrix of “activity” revenues with diagonal
elements for all cattle producing regions; and (I) is the aggregate risk aversion
parameter.

Following Hazell and Scandizzo (1977), and Hazel and Norton (ibid.), the
model maximand of the quadratic programming formulation (equation 17) can be

adjusted to account for producer risk-aversion behavior, and expressed as:

Max NSB = Max{Y’A-1/2Y’BY-KC’-1/2K’MK-<I>(Y'QY)"’} (24a)

subject to equations (19) to (24). However, Hazell and Scandizzo (1975), and
supported by Newbery (1976), have argued that when production is risky, competitive
markets may no longer be socially efficient; and that the assumption that farmers
make decisions based on price expectations independent of their anticipations about

yields may be what largely accounts for this outcome (i.e., that competitive markets

30

 

may no longer be socially efficient). Hazell and Scandizzo (1977) then demonstrate
mathematically that when producers have revenue expectations rather than price
expectations, they lead to a market equilibrium in which social welfare is maximized,
based on the assumption that revenue expectations are rational expectations.

The appropriate maximand for a model in which producers act on the basis of

revenue rather than price expectations is:

Max NSB= Max{E[Y’(A-1/2Y’BY)]-KC’- 1/2K’MK- <I>(Y'QY)"2} (24b)

where the term E[Y’(A - 1/2Y’BY)] is the expected sum of the areas under the
demand curves given actual supplies (Y); and KC’ + 1/2K’MK + <I>(Y'QY)”
represent the total cost or the sum of areas under the output supply functions. The
difference between Equations (24a) and (24b) is the expectation on Y in Eqn (24b)
compared to Eqn (24a) such that our maximization problem in the latter incorporates
expected sum of areas under the demand curves given actual supplies,

E [w (A - BY» 6v
compared to the former where we sum the areas under the demand curve given
expected supplies,

[loEm (A - BY)] 5Y
Since the market clearing prices in any one year are given by Py = A - BY, the

vector of unit revenues (R) is R = PY = Y’A - Y’BY. Assuming that producers form

31

their expectations about R" in such a way that at equilibrium

R“ = E[R] = E[Y]A - E[YBY]
then the expected unit revenue E[R] at equilibrium would satisfy the optimality
condition that expected unit revenues must be equal to the marginal cost for each
activity (see Hazell and Norton, ibid ).

The covariance matrix, (I, may be constructed by the use of ordinary least
squares regression analysis that applies time-series data on prices and the number of
cattle supplied by region (and accounting for trend). A common approach for
obtaining the risk-aversion parameter, (I), in a sector model is to first parameterize the
model for difl‘erent values of (I). The different predicted values of the model are
subsequently compared to some base year actuals, so that the parameter which gives

the best predictions is selected (Hazell and Norton, ibid.)

Measuring Welfare Changes

In terms of measuring the changes in welfare of economic agents such as
consumers, the usual approach (at least in theory) is to use the value of that agent’s
objective function, such as the level of utility for consumers and of profit for
producers. However, since consumer utility functions are ordinal measures and
therefore not fully defined to give measurable indicators of welfare, alternative
measures of welfare based on monetary values have been developed. These include

measures based on the concepts of consumer surplus, real income, compensating

32

mat

rchm

indie:

\rlue

below

lama

Incl

WM

“110

HMS

variation, and equivalent variation. In the case of producers in a competitive market,
a change in producer surplus or profits accruing to owned factors may be used as an
indicator of a change in welfare (since purchased factors are paid their marginal
values).

Consumer surplus (CS) may be defined as the area above the price line and
below the demand curve. Using a market demand curve (called the Marshallian
demand curve, which is demand for a commodity as a function of its price for a given
level of income; as opposed to Hicksian demand curve which refers to demand for a
commodity as a function of its price for a constant level of utility), a change in CS is
a monetary value for a change in utility due to price change. CS is therefore a good
measure of welfare when constant marginal utility of money is assumed. Note that the
market demand curve itself is also a measure of the marginal utility of consumption.
prrice and income change occur together, or where there are multiple price changes,
CS is not an accurate measure of welfare change since it is path dependent and
therefore not unique.

Similarly, compensating variation (CV) and equivalent variation (EV), which
are based on expenditure functions (minimum income required to reach a given level
of utility at a given price), even though more appealing since they are not path
dependent and therefore give unique measures of combined price and income
changes, have one important drawback. They each rely on a specific level of utility

(CV is specific to initial utility level while EV is specific to final utility level) so that

33

when utility changes as a result of an income-price change, their measure does not
really reflect changes in welfare (Sadoulet and de Janvry, 1995). Also, real income
(defined as the ratio of nominal income to a price index) is simple and a useful
measure of welfare when changes are small or product substitu ion is minimal. On
the other hand, measures of real income are sensitive to the type of price index used.

All the welfare indicators discussed above provide values that are close to each
other, as demonstrated by Sadoulet and de J anvry (ibid. ). For this study, therefore,
the use of CS as a measure of welfare is appropriate since the proportion of consumer
income spent on beef is small relative to total income in all the four countries
considered, so that measurement errors in CS are likely to be small. The rationale is
that beef price changes will not affect a consumer’s total income significantly, and
any welfare changes due to price change could be attributed to substitution effect
rather than income effect.
Exchange Rate Determination

One other issue this study attempts to address is how exchange rate changes
in the countries concerned will aflect the flow of beef across countries and regions;
and subsequently its impact on beef consumption and beef imports to the sub-region.
The exchange rate literature shows that the basic index of a country’s competitiveness
is the real exchange rate (defined as the ratio of the foreign price index converted at
the nominal exchange rate to the domestic price index), which reflects the changes in

the domestic price of tradeable goods relative to the price of non-tradeable goods in

34

the whole economy. However, since this analysis is sectoral (rather than a general
equilibrium model) and does not incorporate all sectors of the economy, incentive to
import or export in the beef sector is assumed to be determined by the effective
exchange rate (BER) relative to the beef sector.

The EER, defined per commodity as the exchange rate after accounting for
distortions due to export taxes and import tariffs, determines the effective prices at
which importers and exporters carry on financial transactions within particular sectors
or for specified commodities. For example, an export tax t,I reduces the price received
by the exporter of a commodity i because the price of the foreign currency becomes
E(1-t,d), where E is the prevailing nominal exchange rate. Similarly, an importer of
a commodity with an import tariff t... levied on it pays more for the commodity since
the price of the relevant foreign currency becomes E(l+tm,). For any commodity i
then, the BER takes account of both import and export taxes associated with it, and
it is computed as:

EER = E(1+t...-td) (25)

In order to derive the effective exchange rate, the major question hinges on
how the nominal exchange rate, E, is determined. Particularly for a country like
Ghana with floating dual exchange rates (inter-bank rate and forex rate), it is
important to establish the elements that influence the determination of the nominal
exchange rate.

Following Dombusch (1976) and Hirnarios (1987), we combine a money

35

 

 

market equilibrium framework and a goods market analysis (elements of both
monetarist and neo-Keynesian thinking) to derive the rate of change of the relevant
nominal exchange rate for each country.

The demand for real money balances is specified as a function of real income
and domestic interest rate:

M/P = Y“exp"‘“)
where M is nominal money supply, P is the general price level, Y is real income, i is
domestic real interest rate, a is income elasticity of demand for money, and B is price
elasticity of demand. Thus, in logarithmic form we have

LnM - LnP = aLnY - [3i
which gives a rate of change in the variables as

m - p = cry - Bi’ (26)

In equilibrium the demand for real money balances is equal to the real money
supply. Domestic money market equilibrium then determines the domestic interest
rate (i). In this case (’) indicates the rate of change in the domestic interest rate.

We assume domestic assets are substitutes of foreign assets (both denominated
in domestic and foreign currencies). Then expected changes in the domestic interest
rate on assets relative to the interest rate abroad will be proportional to expected rate
of change in the domestic currency (assuming perfect capital mobility):

i = i* + B (27)

where i" is foreign interest rate and B is the expected rate of change in the domestic

36

currency. For example, a devaluation of the domestic currency will increase the
interest rate on assets denominated in terms of domestic currency over interest rate
abroad.

In the long run the economy converges to an equilibrium. The long-run
equilibrium exchange rate, F, may therefore be distinguished from the current
nominal rate, E, so that the expectation formation about the change in the domestic
currency is proportional to the difference between the current and the long run
exchange rates. This may be represented as

B = 1t(F - E)
where n is coefficient of adjustment. Taking logs of the above expression we get

LnB = Lmt + LnF - Lnrt + LnE
so that in terms of rates of change we have

b = f - e (28)
Combining equations (26), (27), and (28) we have

m - P = “y - Ni” +(f-¢)} (29)

But the general price level, P, is a weighted average of the domestic prices of
tradeables and non-tradeables. This may be expressed as

P = cPIn + (l - c)PT
where c and (l - c) are weights equal to the expenditure shares of non-tradeable and

tradeable goods, respectively. Thus, the rate of change in the general price level is
given by

37

P 61).. + (1 - c)PT (30)

Furthermore, the rate of change in the domestic prices of tradeables, p7, can
be derived so as to account for the per unit transaction cost, V, involved in currency
exchange as follows (we abstract from transport cost and tariffs since these are
already accounted for in the BER calculation):

PT = (l + V)EPT' (31)
where V may be interpreted as the markup for a unit cost of smuggling equal to the
exchange rate premium, and (*) indicates foreign country . Then, in terms of rates of
change (by expanding and taking logs of equation 31), we have

P1 = 2(6 + PT') + V (32)
so that the rate of change in the general price level is

P = PP. + (1 - c){2(e + PT') + V} (33)
Substituting (33) into (29) we get

m = PP. + (1 - c)[2(e + P?) + V + 01y - Ni” + (f- 6)}l (34)
In the long rrm, f = 0 and i = i“ as exchange rates stabilize and interest rates

equalize across borders. Re-arranging, and solving for the rate of change in the

cru'rent Forex exchange rate, we get

e={C(P.+Bi’-2P~r'-v-ay)+2PT'+v+ay-Bi’ -m}/{2+D-BC-2°} (35)

Equation (35) gives the rate of change in the nominal exchange rate, so that

38

using the current forex rate for the analysis and combining equations (25) and (34),
the adjusted efl‘ective exchange rate (EER_) operative in a country with a flexible
exchange rate regime (such as in Ghana) may now be expressed as:

BER, = (1+C)E(1+t...s-'txs);
or

EER,

E(1+e)(1+t_,-t,,) (36)

Under a fixed exchange rate regime, the nominal exchange rate, E, is
exogenously determined. The EER applicable therefore is equivalent to equation (25)
adjusted for the rate of change, v, in the cross-border exchange rate transaction cost:

EERx = E (1 + v)(1 + tn, - t,,) (37)
where v is the rate of change of the exchange rate premium (official rate minus the
parallel rate). We should note here, though, that v does not account for all transaction
coats, such as bank charges on currency transfers; nor does it cover the risk associated
with cash transactions, which is common among cattle traders in West Afiica. Thus,
v may underestimate the rate of change in the cross-border exchange rate transaction
cost and could be considered the lower limit of the actual v.

In this study, the BER concept shall be applied to determine the efl‘ects of
exchange rate changes on trade flows, production of cattle, and consumption levels
of beef in the central corridor. This shall be done at both levels of purchased inputs
used and demand for beef through the use of simulation analysis within the

framework of the trade model.

39

Mathematical Programming in Sectoral Analysis

Mathematical programming models have been successfully applied to simulate
the efi’ects of new policies upon a sector of an economy (see Blitzer et al., 1975).
More recently, they have been used to analyze the effects of trade policy changes on
specific sectors across countries (e.g., McCarl et a1. , 1980; Worley et al. , 1991). Two
levels of analysis are pursued in this study: (1) a quadratic programming approach,
which measures the effects of more open trade relative to a base year; and (2)
measures of Consumer and Producer Surpluses to examine potential changes in
welfare.

In recent years, programming models have been used extensively to address
many types of policy questions, including international trade, effects of governments’
commodity policies, output supply response, input demand analysis, and project
appraisal and evaluation. The basic approach has been to validate the model for a
base period, and then use it to simulate adjustments and responses of economic agents
to policy changes (McCarl and Spreen, ibid.).

Sectoral analysis based on mathematical programming has examined the
eflects of various policies on foreign trade in both developed and developing
countries. For example, Cappi et al. ( 1978) discuss trade volume restrictions within
agricultural production and trade in the context of economic integration in Central

America; while Duloy and Norton ( 1979) explore comparative advantage implications

4O

for Mexican agriculture. Similarly, Meister et al. ( 197 8) study changes in agricultural
export levels using a quadratic programming model; and Rodriguez and Fajardo
(1979) analyze sectoral response to changes in the prices of agricultural exports and
imports. More recently, Worley et al. (1991) have applied mathematical
programming to examine the implications of Canada - U.S. free trade agreement for
red meat and grain in both countries. The available volume of literature thus indicates
that in simulating the potential sectoral impacts of new economic policies,
mathematical programming models have proved very useful as evidenced in the
review by Blitzer et al. (1975).

This study applies a quadratic programming formulation to the beef cattle sub-
sector in West Afiica within a competitive framework. The aggregate model consists
of small competitive units whose collective activities are assumed to influence prices
and quantities, thereby making them endogenously determined. Hence, at the
individual farm or frrm level, the standard formulation implies that producers
maximize profits subject to resource constraints. Even though there may be other
objectives, we abstract from them so as to keep the analysis simple.

However, in the aggregate, by substituting factor-supply and product-demand
price—dependant functions, we transform the objective function from individual profit
and utility maximization problems into aggregate producer’s and consumer’s surplus
measures. That is, by using market demand and market supply price-dependant

functions we incorporate the underlying individual maximization problems into a

41

single market model which can be analyzed. These surpluses in effect represent the
“net social surplus” resulting from the respective economic activities. No formal
supply and demand frmctions are necessary since these are endogenously determined
within the model, based on output demand, factor supply, and production
possibilities.

In the present study, local beef, imported beef, and cattle are considered, so
that the quadratic programming model is essentially a simulation model of the cattle
industry within a competitive framework, allowing changes in the objective function
(e. g., changes in government policies or some external shock) with endogenous
adjustment by economic agents. The net social benefit, which is the net social payofl;
is defined here then in the Samuelson tradition as the sum of the separate payoffs
from each activity considered less the total costs of all the activities.

A base year solution is obtained using the base year data, which is 1993 in this
case (1993 is chosen to allow comparison between pre-devaluation and post-
devaluation experiences of the Francophone countries). The model is considered to
have converged if (a) the results from the model accurately replicate the respective
country/region’s production, consumption, and trade levels for the base year; (b) the
prices and quantities demanded for beef in the base year were replicated; (c) numbers
of cattle produced in the base year were reproduced for each country/region; and (d)
the base period solution was sensitive to beef demand elasticities (McCarl and

Spreen, ibid.). Once the model is validated, the expected policy changes are then

42

incorporated. The optimal solution provides estimates of consumer and producer
surpluses, prices, quantities of beef produced, consumed, and traded; as well as herd

of cattle produced and traded; which are then compared with the base period.

2.3. Mathematical Model

The quadratic programming applied in this analysis maximizes a non-linear
objective function (a polynomial of the second degree) subject to a set of linear
constraints, with all the variables defined for non-negative values. This is a special
case of the general non-linear programming models with well-developed solution
methods that overcome the existence of multiple local maxirna and minima which are
often associated with non-linear models. By using a quadratic objective function, the
model also avoids the assumption of perfect elasticity of supply and demand for
commodities which is inherent in the linear objective functions when linear
programming methodology is applied to economic problems.

A major advantage of applying mathematical programming to analyze trade
flows is that it permits both the analysis of a single commodity in a multi-
country/region context, and the incorporation of multiple commodities and multiple
regions/countries in a single model, while at the same time preserving the theoretical
elements inherent in real trade models. For this quadratic programming model, in
which net social benefits are maximized within a competitive market framework, the

decision variables include regional/country levels of cattle production, beef

43

consumption, shipments, and imports which are determined within the model. Each
region/country defined has a linear demand function for beef incorporated into the
model, while the total number of hectares of available pastoral land per
region/country, the maximum number of cattle a hectare of pastoral land can support,

and other accounting rows constitute the constraints.

The maximization problem is specified as:

D

Q;-
Max NSB = z: pf 25 Q,” - 2: Q,‘*C.F*C,P - mm)”
1' 0 3

4
- 2 Z: :th*D.sjt*Tt
S J

- 2 Z errMCgMCszF (38)
j s

44

Subject to the following constraints:

focf = 1.”; j=l, ............ , J (39a)
2X3} = Q,”; 1:1, ............ ,J (39b)
1

2219, = 2X5]; j=l, ............ ,J (40a)
s t s

22th = EX”; 3:], ............ , S (40b)
1 t J'

1,3,4,“st s As; s=l, ............ , S (41a)
Rfa=Qf 5 L3; s=l, ............ , S (41b)
12,“st 5 K3; s=l, ............ , S (410)

PjD, QB, Pf, Q, X. 2 o

.9!’

The variables in the model are interpreted as follows:

NSB

aggregate consumer and producer surplus measures for beef in a region
or country

demand/consuming region/country

supply/producing region/country

mode of transport: t1 = truck; t2 = trek, t3 = train; t4 = plane
equilibrium quantity of beef demanded in country/region j
represents the price-dependent demand function for beef in
region/country j; (where P,” = a1 - ij,D )

head of cattle supplied from producing country/region s ifs = African
region/country; or

quantity of beef supplied from abroad if s = world market.

cattle shipments from supply region/country s to demand
region/country j by mode of transport t if s = African region/country;
or

45

mum)!”

quantity of beef shipments from abroad if s = world market.

distance in kilometers from supply region/country s to demand
region/countryj by mode of transport t, where t = 1, 2, 3, 4
conversion factor of per head cattle to ton beef

cost of production per ton beef from supply region/country 3

unit cost per kilometer for mode of transport t, where t = 1, 2, 3, 4
marketing cost per ton beef (sum of transformation cost and distribution
cost) in demand/consuming region/country j

marketing cost per head of cattle in supply/producing country 3

land (hectares) requirement for cattle production in supply/producing
country s

labor (man days) requirement for cattle production in supply/producing
country 3

capital requirement for cattle production in supply/producing country
3

land (hectares) endowment for cattle production in supply/producing
country s

labor (man days) endowment for cattle production in supply/producing
country s

capital endowment for cattle production in supply/producing country
s

= expression that accounts for risk-averse behavior of producers (see

equation (24b)

The objective function (Equation (3 8)) measures the sum of the total area

under the demand curve for beef for each country/region considered, less the costs

representing the determinants of the aggregate supply function for each activity:

Objective function = Consumer Utility - Production Cost - Transportation

Cost - Transformation/Marketing Cost;

subject to:

cattle off-take numbers at supply centers, land, labor, and capital

requirements for production, and factor endowments.

46

At the optimal solution, we can estimate the net social benefit change relative
to the base period as a change in welfare measure. As described below, the welfare
measures accruing to economic agents in each country/region are estimated using
parameters generated within the objective function for each optimal solution.

Equations (3 9) to (41) represent the constraints which give form to the model.

For example, Equations (3 9a) and (3 9b) state that the sum of the total number of
cattle produced and transformed into beef in all countries/regions plus all beefimports
should equal the total quantity of beef demanded in all countries/regions. Similarly,
Equations (40a) and (40b) ensure that shipments of cattle and beef by all modes of
transport are equalized between production and demand or consuming centers.
Equations (41a), (4 lb), and (41c) represent land, labor, and capital constraints,
respectively, in all producing countries/regions.

Since price equates marginal cost in the set of competitive markets in the trade
model, for these markets the implicit aggregate supply functions define costs of
production that include both the explicit costs of production and the opportunity cost
of owned resources. As multiple regions/countries compete to produce the same
commodity, less favorable areas with higher production costs are brought into
production as output expands. The result is an upward sloping stepped supply
function which is implicit in a sector model with multiple production centers (see
Hazel and Norton, ibid.).

The optimal solution of the model gives estimates of beef cattle numbers per

47

country/region; and also provides information on the transportation network among
supply and demand centers. The analysis is based on a long run-scenario, allowing

time for changes in government policies to take effect.

2.4. Measuring Consumer and Producer Surpluses

The quadratic programming model provides a measure of aggregate consumer
surplus (the model sums up all the consumer surplus measures from demand for beef
from both domestic and regional sources, as well as imports from the European
Union). Hence, an explicit measure of the consumer surplus (as a measure of
consumer welfare) for each demand country/region is warranted. This is
accomplished using the formula below, which is derived from equation (6), with price
and quantity parameters endogenously determined within the quadratic programming
model (the model generates beef prices and quantity parameters within the objective

function for each optimal solution).

AC8. = 2m. -1/2b.Q.‘)Q.' - P.‘Q.‘ (42)

where ACSj is the aggregate consumer surplus for country/region j ; P' and Q' are
optimal prices and quantities, respectively, for beef from each source i demanded in
the respective consuming country/region; and a and b are the intercept and slope

parameters, respectively, for each demand function.

48

Similarly, since we assume a long-run phenomenon in which case producers
can adjust all inputs, supply from each producing country/region is limited by the
total land available and other endowments. The usual approach in measuring the
producer surplus in each country/region is to estimate the shadow price of available
land (or the return to the owned factor which is land in this case). This is
endogenously determined by the model; and changes in the producer surplus relative
to the base year model can be quantified as a measure of changes in producer welfare.
In the case of the Central Corridor, estimates of producer profits were used as
indicators of producer gains since pastoral lands are mostly communally owned and
have no functioning markets, or at best existing land markets are only rudimentary.

In addition, estimates of the changes in government revenue were made to give
some indication of what effect changes in the patterns of cattle trade in the Central
Corridor could have on government budgets for the different countries. These
estimates were computed using the cattle export or import figures and the relevant
taxes, as well as quantities of beef imports and the respective tariffs of each importing
country. Similarly, estimates of other transfers, such as tips and bribes cattle traders

pay along the trade routes, were computed.

49

CHAPTER III

Cattle Trade and Trade Restrictions in the Central Corridor

3.0 Introduction

In this chapter a short overview of the patterns of trade in West Africa within
the sub-region and with the rest of the world, including beef and cattle trade, is
presented. A more detailed account of the evolution of beef and cattle trade in the
Central Corridor is then pursued, with a focus on the trade policy dimensions of each
country; particularly during the period of structural adjustment initiatives beginning
in the early 19805. Both tariff and non-tariff restrictions that have affected cattle

trade in the central corridor are also discussed.

3.1 Overview of External Trade of West African Countries

Recorded intra-regional trade within ECOWAS (comprising all the 16
countries in the West African sub-region) has historically been low relative to their
trade with the European Union (EU) and the rest of the world (ROW). It is common
knowledge, however, that a significant volume of intra-regional trade goes on across
all the borders in the sub-region which are unrecorded.

Kornfeld (1990) finds that intra-ECOWAS exports represented about 4% of
the total exports from the sub-region in 1975, and it declined further to 3% in 1980

before recovering slightly to 3.5% in 1985. Hewitt and Koning (1996) attribute the

50

 

dependance of African countries on the EU for most of their export revenue
(estimated at 75% between 1990 and 1992) partly to their former colonial ties to
member states of the EU that has allowed them to enjoy preferential access into the
EU market since the European Union was created in 1957 (then called the European
Economic Community). It was also partly due to successive Lorne Conventions
starting 1975 that gave special privileges to a group of countries (now made up of 70
Afiican, Carribean, and Pacific countries, called ACP states).

A fundamental problem that has adversely affected most Afiican governments
in their desire for more recognition and involvement in the international economic
system is the smallness of their econonries and their low levels of trade. Moreover,
most economies in Africa have persistently been in bad shape, making their
participation in international trade and cormnerce only peripheral. For example, even
though some twenty-seven mainly Afiican countries (including all ECOWAS
countries) derived 75% of their total export revenues from EU countries between
1990 and 1992, the total exports from Africa (excluding South Africa) represented
only 4 % and 3 % of EU imports in 1990 and 1992, respectively ( Hewitt and Koning,
ibid.).

Also, growth in trade (the average annual percentage changes in the value of
exports and import) for the period 1980 - 1990 increased 8% for Western Europe to
Western Europe, 8% for North America to North America, 7% between Western

Europe and North America, and 11% between Western Europe and Asia. On the

51

 

 

 

 

other hand, trade among African countries grew by only 3% during the same period,
and declined by -0.5% and -6% between Africa and Western Europe and between
Africa and North America, respectively (Sander, 1996). The impact of African trade
on the world economy thus continue to be negligible, making regionalism (as in the
case of the European Union or the North America Free Trade Agreement, NAFTA)
and economic cooperation increasingly relevant in the emancipation efforts of Sub-
Saharan Africa.

Balassa (1976) distinguishes between economic cooperation and integration
in the context of regionalism world wide. He argues that economic cooperation is of
limited scope and concerns concerted efforts by participating countries to lessen or
eliminate discrimination in certain areas of common interest. On the other hand,
integration is a process that has a goal of abolishing all forms of discrimination among
participating countries in terms of local and foreign goods, services, and factors of
production.

There are at least four stages of the integration process which constitute a kind
of non-binding sequence. The first is a free trade area involving removal of barriers
to trade in goods and services among participating countries while each country
maintains its national tariffs in respect of non-member countries. Second, we have the
customs union whereby the national tariffs of member countries are harmonized into
a common tariff against non-member countries. Third, a common market is created

by liberalizing the circulation of factors of production within the customs union.

52

Finally, a fourth stage of economic union is reached when the remaining economic
policies within the common market are harmonized. This stage then leads naturally
to formalizing total economic integration under a supranational authority.

In the context of the West African sub-region, an interesting observation is that
the CFA Franc Zone countries have inverted some of the order as outlined by Balassa.
This is mainly because these countries reached independence with a monetary union
already in place, whereas in most cases (e. g., Europe) the monetary union is reached
only after many other steps in economic integration.

In its quest for economic integration, ECOWAS has sought to pursue more the
issues which characterize the first stage of the integration process, namely, the
creation of a free trade area in West Africa as a first step. Unfortrmately, the available
evidence suggests that not much progress has been made at both the global and intra-
regional trade levels in more than two decades since 1975.

In terms of ECOWAS trade with the rest of the world, Table 3.1 and Figure
3.1 both indicate that the overall growth rate of imports and exports by ECOWAS
countries between 1985 and 1994 has been erratic. Except for 1990 and 1992, when
both exports and imports showed simultaneous positive growths, they were either
negative or mixed in all other years between 1985 and 1994; suggesting that more
needs to be done among countries in the sub-region to promote external trade.

Both exports and imports, for example, declined by more than 40% in each

case between 1980 and 1985, amounting to almost 4 billion US dollars in loss revenue

53

 

 

Table 3.1. ECOWAS External Trade (1980 - 1994): Value in Million US Dollars

Year
1980
1985
1987
1988
1989
1990
1991
1992
1993

1994

Exports % Gr Rt

33556
18883
14329
13493
14724
20347
19181
19925
16141

19006

-44

-24

—19

18

Imports % Gr Rt

25968
15172
11483
12270
11971
13833
16920
18440
15491

15443

~42

-16

.03

Tr Balance
7588
371 1
2846
1223
2753
6514
2281
1485

650

3563

Source: lntemational Trade Statistics Yearbook. 1995.Vol ll. United Nations.

54

 

960th Rat

Figure 3.1. ECOWAS: Annual Growth Rates of Exports and
lnporte

 

 

30

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1985 1987 1988 1989 1990 1991 1992 1993 1994
Years: 1985 - 1994

 

|% Growth Rate ofErports |% Growth Rate of Impors

 

 

 

Source: Based on figures in Table 3.1

55

to the
Man
for El

CCOIH

1988
coun
the y

1981

the 1
“P1
Vere
EC(

“’01

“ii

and

fast

to the subregion. By 1994 the trade balance for the subregion was less than half the
balance which accrued in 1980. It is instructive to note also that the total trade figures
for ECOWAS depend heavily on how Nigeria performs, due to the relative size of its
economy and also because Nigeria is a major exporter of petroleum.

Exports from individual ECOWAS countries and their destinations for 1984,
1988, and 1993 are presented in Table 3.2. In general, more than 50% of each
country’s exports have gone primarily to the European Union (EU) countries in all
the years under review, except Cape Verde (46%), Ghana (47%), and Mali (49%) in
1984; and Cape Verde (44%) and Nigeria (44%) in 1988.

ECOWAS countries exports to Sub-Saharan Africa (SSA), which also includes
the ECOWAS countries themselves, averaged only about 2% to 4% of their total
exports in both 1984 and 1988 except in the case of a few countries such as Cape
Verde and Togo. One can thus conclude that during the 1980s and early 19903,
ECOWAS official export trade has been skewed towards the EU and the rest of the
world with only a minimal component of intra-regional trade taking place in the sub-
region.

An important caveat, though, is that a substantial level of unrecorded trade has
persisted across the borders of these countries for decades. For example, Burfisher
and Missiaen (1990) find that intra-regional trade among West African countries grew
faster than its trade with the rest of the world during the period 1970 to 1981.

Regional exports that occurred within the SSA sub-continent between 1984

56

To

EU

RC

Table 3.2. Direction of Trade Matrix - $6 of Total Exports, 1984 - 1993

1984 1988 1 993
Exporters SSA EU NAmerica ROW SSA EU NAmerica ROW SSA EU NAmeriee ROW
Benin 1 94 0.3 5 4 72 16 8 - - - -
Burk Faso 2 65 0.2 32 4 81 2 14 - - - -
CapeVerde 27 46 o 23 o 44 o 55 - - - -
Cote d'lvoire 4 63 21 13 2 78 13 7 - - - -
Gambia 0 51 2 47 0.2 63 1 36 - - - -
Ghana 2 47 12 39 0 54 26 20 - - - ..
Guinea 4 59 30 7 5 64 29 2 — - - -
GuBissau 1 84 8 8 2 87 4 9 - - - -
Liberia 3 71 20 7 o 69 12 19 - - - -
Mali 4 49 1 46 1 56 4 39 - - - -
Mauritania 18 55 0.3 26 2 54 4 40 - - - -
Niger 1 97 0.3 2 4 95 1 o - - - . -
Nigeria 1 61 21 17 o 44 47 8 - - - -
Senegal 1 1 75 1 1 2 5 80 2 14 22 4O 3 34
SierraLeone 2 56 9 33 0 7o 26 4 - - - -
T090 12 56 1 32 10 52 13 26 - - - -
38A 3 43 1 9 36 3 53 23 22 1 1 24 12 53
EU 3 54 1 1 32 2 59 9 29 2 57 8 33
mm 2 18 37 44 1 19 36 45 1 17 36 46
ROW 2 24 26 49 1 25 23 50 1 23 24 52
Source:

African Deveiopment Indicators 1997. The Wortd Bank.
New. SSA = Sub-Saharan Africa; EU = European Union; ROW = Rest of the world.

- Not Available.

57

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am

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and 1993 were also rather low (less than 3% in 1984 and 1988 and about 10% in
1993). In contrast, regional exports within the EU were more than 50% of the total
EU exports for each of the years under review. However, SSA exports as a whole
seem to be shifting from the EU and North America towards the rest of the world
where over 50% of total exports from SSA went in 1993 (compared to 36% and 22%
in 1984 and 1988, respectfully).

A somewhat similar picture painted by the export sector emerges when
ECOWAS imports are examined (Table 3.3) for the same period (1984, 1988, and
1993). Except a few ECOWAS countries that had more than 10% of their imports
from SSA in 1984 (Burkina Faso, 39%; Sierra Leone, 34%; Cote d’Ivoire, 20%; and
Benin 11%), the average imports of individual countries were only 2% to 3% of their
respective total imports for the year. For example, imports from SSA as a whole in
1984 by Nigeria and Ghana which are major players in West Afiican trade
represented only 0.6% and 1% of their total imports, respectively; and total imports
into SSA that came from other SSA countries amounted to only 4% of the total import
volume into SSA for that year. On the other hand, most imports into ECOWAS
countries in 1984 came from the EU, averaging some 50% of the total imports into
each respective country.

By 1988, ECOWAS imports from SSA had declined sharply for all countries,
and the average was only 1% to 2% of each individual country imports (except

Senegal, 12%). The decline of imports from the SSA sub-continent into ECOWAS

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59

countries persisted in 1993 as well, implying that in the overall, intra-regional trade
among ECOWAS countries as well as in SSA took a downward turn in the 19805 and
early 19905.

Balassa (1979) and Lewis (1980) both argue that export growth is a major
factor in the growth of developing economies, and that trade among less developed
countries could have greater potential for supporting broad economic growth than
does world trade in general. Krugrnan (1991) further asserts that transportation and
communication costs induce countries to naturally trade more with their neighbors,
so that freeing intra-regional trade among such neighbors has less welfare cost than
otherwise suggested. The decline therefore in SSA interregional trade, and trade
among ECOWAS members in particular during the 19805 and early 19905, could have
negative impact on growth and development in the region, and should engage the
attention of both researchers and policy makers.

Arguably, livestock is the most important agricultural commodity in intra-
regional trade in West Africa, mainly consisting of live animals in cattle, sheep, goats,
horses, donkeys, and camels. While Sahelian countries in the region (Mali, Burkina
Faso, Mauritania, and Niger) are net livestock exporters, their coastal counterparts
(e.g. Cote d’Ivoire, Ghana, Nigeria, etc) are net livestock importers. The livestock
situation has created a natural complementarity in production and consumption
between the Sahelian and coastal countries in the sub-region; and the trade patterns

are also influenced by drought and changing economic and political conditions, as

60

well as the importance of livestock trade to national economies (Burfisher and
Missiaen, ibid.). Underlying the official trade is a substantial unofficial and therefore
unrecorded component. Much of the north-south trade occurs because of the
prevalence of livestock diseases in the humid coastal countries (particularly
trypanosorniasis), which raises the opportunity cost of livestock production in the
coastal countries compared to the Sahelian countries.

Trade in cattle dominates livestock trade in West Africa, and constitutes the
most important item of agricultural trade in the Central Corridor. Estimates based on
FAO data (Table 48) indicate that in the early to mid-19905, cattle exports constituted
about 17% of total merchandise exports, and 24% of agricultural exports in Mali.

In Burkina Faso, cattle exports accounted for 9% and 12% of total
merchandise exports and agricultural exports, respectively. The importance of cattle
trade to the economies of these Sahelian countries is therefore obvious. Cote d’Ivoire
and Ghana are typically net importers of cattle in the Central Corridor, with trade in
cattle representing some 13% of Cote d’Ivoire’s agricultural imports in the early to
mid 19905 (Table 4b). One should note that Sahelian cattle are not exported to Ghana
and Cote d’Ivoire only but to all the West African coast from Senegal to Nigeria;
neither are Mali and Burkina Faso the only cattle exporters -— Niger and Mauritania

also export to the coastal countries.

61

Table 3.4a. Importance of Cattle as an Export Commodity in the Central

Corridor
Ave. Annual
Total
Exports
1993-95
USS’OOO
Mali 352,867
Burkina 143,333
Faso
Ghana 1,255,066
Cote 3,074,333
d’Ivoire

Ave. Annual Ave. Annual
Agric Exports Cattle Exports

1993-95
US$’000

249,367

104,633

350,967
1,816,233

1993-95

USS’OOO

60,667
13,300

% Cattle
Exports to
Total
Exports

l7
9

% Cattle
Exports
to Agric.
Exports

24
13

Source: Food and Agriculture Organization (FAO) Trade Yearbook, 1995.

Table 3.4b. Importance of Cattle as an Import Commodity in the Central

Corridor
Ave. Annual
Total
Imports
1993-95
USS’OOO
Mali 564,933
Burkina 509,333
Faso
Ghana 1,665,233
Cote 2,310,333
d’lvoire

Ave. Annual Ave. Annual
Agric Imports

1993-95
USS’OOO

100,933

95,467

203,500
379,700

Cattle Imports

1993-95
US$’000

32

0

na

50,000

% Cattle
Imports to
Total
Imports

na

% Cattle
Imports

to Agric.
Imports

na

13

Source: Food and Agriculture Organization (FAO) Trade Yearbook, 1995.

 

3.2. Cattle Trade and Beef Consumption in the Central Corridor

The sixteen countries that constitute the ECOWAS subregion stretching from
Mauritania in the west to Nigeria in the east, present a complex mix of socio-
economic and political experiences. The geographical construct has a string of
landlocked countries (mainly Sahelian) on one hand, and a number of coastal
countries on the other; while their colonial experiences have resulted in a
francophone-anglophone sub-groupings. While about a third of Africa’s over 700
million inhabitants (based on 1995 estimates) are located in the West Africa
subregion, there are large diversities in country sizes by population and resource
endowments. For example, Nigeria’s population of over 1 10 million is more than the
population of all the other fifteen countries combined (about 96 million). Figure 3.2
shows a map of West Africa highlighting the Central Corridor of Mali, Burkina Faso,
Ghana, and Cote d’Ivoire.

The Central Corridor countries also show marked similarities and differences
based on their location and level of economic development. Mali and Burkina Faso,
which fall within the Sahelian zone, have lower per capita incomes (250 and 230 US
dollars for Mali and Burkina Faso, respectively) compared to the coastal countries of
Ghana (per capita income of 390 US dollars) and Cote d’Ivoire (per capita income of
660 US dollars) based on 1995 estimates (Table 3.5). There is also a higher

concentration of people in the coastal countries, which have historically provided

larger markets for cattle from the less populated Sahelian countries.

63

 

 

Ilhd Bundli-

Iabr Rou-
lahnd qud O
Scale “I

 
 
  
  
 
 
  
 
  

zu
1——-+——

 

 

 

BlRKlNAFASO I I

H“

\Vii

 

 

 

 

Fig. 3.2. The Central Corridor within the West Africa Sub-region.

C0.

$61
$111

C1]

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FAO (1995) estimates that while more than 80% of the population in the
interior countries are engaged in agriculture (Mali is 84.1%, and Burkina Faso is
92.4%), the population involved in agriculture is much less for the coastal countries
(Ghana is 56%, and Cote d’Ivoire is 57.1%). Higher per capita incomes and more
urbanization in the coastal countries have generally helped to expand market for
Sahelian cattle and increased demand for beef. Consumer prices, however, have been
more stable since 1980 in all the three countries which belong to the CFA Franc zone
(Mali, Burkina Faso, and Cote d’Ivoire) compared to Ghana, which has experienced
high levels of inflation during the same period (Table 3.5).

Historically, the livestock trade within West Africa, and cattle trade in
particular, had flourished while almost ‘isolated’ from world market conditions. An
important advantage of Sahelian producers has been the export of live animals to the
coast where the ‘total’ animal is preferred because of other uses beside the meat it
provides (such as edible offal). The major market for Burkina Faso throughout the
19505 and early 19605, for example, was Ghana. However, the Ghanaian market
seemed to have dried up by the middle of the 19705, as the Ghanaian economy
suffered severe setbacks, and also drought conditions diminished Sahelian cattle
exports to the coastal countries. From the late 19605 Cote d’Ivoire became the largest
market for Sahelian cattle (aided strongly by the railway line opened between
Ouagadougou and Abidjan in the mid- 19505), as shown in figures 3.3a and 3.3b; even

though other markets also expanded in the subregion (e. g., Southern Nigeria as a

65

Tabl

Mal

Bur

Fay

Cot

d’lt

Sour:

 

Table 3.5. Some Basic Macroeconomic Indicators for the Central Corridor.

‘Population Real GDP Growth "GNP per Consumer Prices
1995 Rate (%) Capita 1995 (Annual %Change)

Mil. Gr.Rt(%) 1980-89 1990-97 USS %GrRt 1980-89 1990-97

Mali 10 2.6 1.8 3.1 250 0.2 3.8 5.0
Burkina 10 2.2 3.4 3.4 230 1.5 4.9 5.1

Faso

Ghana 17 2.4 1.8 4.3 390 -1.2 44.3 31.1

Cote 14 3.0 1.6 2.5 660 -1.9 5.8 7.1
d’Ivoire

‘ populationgrowth rate is the estimate for 1995 t0 2010.
” real GNP per capita growth rate is for 1970 to 1995.

Source: International Monetary Fund, May 1998. World Economic Outlook, and The World Bank,
1997. World Development Indicators.

66

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and
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result of oil boom).

Figures for cattle exports from Mali and Burkina Faso, and also for cattle
imports to Cote d’Ivoire and Ghana may be understated since there exists unofficial
and therefore unrecorded trade across the national borders in the subregion.
Nevertheless, the official reporting presents a clear pattern of trade flows in cattle in
the Central Corridor. Whereas only the cattle-surplus interior countries of Mali and
Burkina Faso have been exporting cattle (Figure 3a), the coastal countries, on the
other hand, are the major importers of cattle, at least until the 19805 and 19905.

Figure 3.3b shows cattle imports also for Mali and Burkina Faso, which is
mainly attributed to cattle coming from Niger and Mauritania that are then trans-
shipped to the coastal markets. Since the 19705, there actually has existed some
provision for Malian and Ni gerien cattle to transit through Burkina Faso to the coastal
markets after payment of transit taxes of about 500 CFAF (Herman 1983). This
transit-tax has since been abolished. We should note also that trans-shipment
occurring between Mali and Burkina Faso, particularly along the eastern border of
Burkina Faso, has been largely due to market proximity (including markets in Ghana)
and transportation advantages offered by the Ouagadougou-Abidjan railway line.
Unfortunately, official records on exports do not always distinguish between trans-
shipments and cattle that originate from the exporting countries.

Malian cattle exports declined in both drought years of 1968-1974 and

67

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68

 

 

1983-1985; but whereas it recovered in the 19705 after the drought, the numbers
failed to build up in the 19805. The export expansion in the 19705 may be explained
by declining purchasing power in Mali resulting from the drought, and a
corresponding high demand and therefore high prices in coastal markets fueled in part
by the Nigerian oil boom. In addition, there was a massive de-stocking by Sahelian
cattle herders due to drought and reduced grazing capacity, as well as a decline in
terms of trade for cattle.

During the early 19805, low demand in coastal markets as the Nigerian oil
boom evaporated and Ghana also experienced economic decline due to external
shocks, as well as overvaluation of the CFA franc hindered the recovery of cattle
exports. The situation had been exacerbated earlier (from about mid-1975) by
Argentina which, looking for alternative markets for beef after it lost its preferential
access to the UK when the UK joined the EU, began heavy exports of beef to the
West African coast. Prospects for increasing cattle trade in the subregion
subsequently has fiuther been dampened by the dumping of beef from the European
Union (EU) in the mid to late 19805 and early 19905.

In the case of Burkina Faso, cattle exports after the 1968-1974 drought never
recovered but declined consistently (except for a few years in the mid- and late-
19705) until the early 19905, when they began to gradually build up again. As its
major market in Ghana dried out by the mid 19705, most of the exports of cattle from

Burkina Faso (already depleted by the drought years) went to Cote d’Ivoire, where

69

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of ca

belie

count
d’lvo;
thattl
impor
relatii
inpn

2035

Me

 

 

the market was also on the decline. Figure 3.3b shows Ivorian imports of cattle
peaking in the early 19705 and declining thereafter; and also Ghana’s official imports
of cattle drying up by the close of the 19705 (even though cattle imports to Ghana are
believed to have continued in the 19805 and 19905 through unofficial channels).

By the mid to late-19805, it had become obvious that cattle from the Sahelian
countries faced stiff competition in their traditional export markets of Ghana and Cote
d’Ivoire from subsidized beef from the European Union in particular; to the extent
that the coastal countries had substituted substantial portions of their Sahelian cattle
imports with cheaper European beef imports. The 50% devaluation of the CFA Franc
relative to the French Franc in January 1994 therefore had as one of its objectives the
improvement of the terms of trade in favor of Sahelian cattle so as to recapture these
coastal markets.

Post devaluation studies of the beef sub-sector indicate that Sahelian countries
have recaptured most of the coastal markets, particularly Ghana and Cote d’Ivoire
(Yade et al., 1998). The share of cattle exports from Mali and Burkina Faso to the
coastal countries increased about twice the numbers that were exported before the
devaluation. However, even though post-devaluation cattle trade improved in the sub-
region, higher prices of meat resulting from the devaluation seemed to have caused
beef consumption to substantially decline among low-income households, especially
in the cattle exporting countries (Reardon, et al., 1998).

Revenues from cattle exports have historically been very important to Mali and

70

Bu
Fa:

wit

to t

val

the

1113

lat

8&1

De:

 

Burkina Faso. As presented in Figure 3.4a, the inflow of dollars to Mali and Burkina
Faso has followed the pattern of changes in live animal exports from both countries;
with the revenue accruing to Mali more erratic than that for Burkina Faso, which has
been relatively low but stable. Similarly, the cattle import bill for Cote d’Ivoire
increased rapidly from the mid-19705, but declined sharply at the beginning of the
19805 when imports fell as demand declined in the coastal markets (Figure 3.4b). In
the case of Ghana, the decline in her cattle imports which started in the 19605 never
recovered, so that by the beginning of the 19805 her cattle imports bill had dwindled
to only a trickle. Also, subsequent to the CFA Franc devaluation in 1994, the dollar
value of imports to these coastal countries declined on per head basis even though the
physical volume of imports increased.

Both Ghana and Cote d’Ivoire substituted their dwindling cattle imports from
the Sahel with beef imports from other parts of the world (meat prices on the world
market were low during most of the 1970s); initially mostly from South America, and
later from the EU at subsidized prices. Buoyant cocoa prices during the 19705
enabled Cote d’Ivoire to expand meat imports which continued into the early 1990;
while low EU beef prices in Ghana facilitated the increases in her beef imports in the
early 19905 (see Figure 3.5).

The per capita consumption of beef in the Central Corridor seemed to have

peaked in the early 19705 when it reached almost 6 kg/person/year (Figure 3.6).

71

 

Figure 3.4a. Central Corridor: Value of Cattle Exporte(million 1.188)

N-LO

 

Value of Cattle Exporta (U88)
0 n a or on 3 "' '7 "

1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996

Years: 1%1-19%

 

[+MAU +81R<MFA50J

 

Figure 3.4b. Central Corridor: Value of Cattle Imports (million U83)

Value of Cattle Imports (U38)
0 - re re a or a ~r on re

 

area

1970
1972
1974
1976
1978
1980
1982

56%“?

PF

1

Yeann 1961-1997

 

I—l—GHANA +oonsorv0RE—x—MALI +13th FASO]

 

Source: FAO Agrostat Database.

72

 

Thereafter it stabilized around 4 kg/person/year throughout the 1970s and 19805 until

about 1994, when it fell below the 4 kg/person/year average. This seems to suggest
that there exists a great potential for the market for beef in the sub-region, assuming
that per capita incomes within the sub-region increase significantly.

The expected increases in per capita incomes in the region will depend to a
large extent on the strength of the recoveries experienced by the econonries of the
coastal countries, particularly Ghana and Cote d’Ivoire, whose per capita incomes and
therefore purchasing power have been on the decline since the19705 (Table 3.5).

Considering the per capita beef consumption of individual countries, the
ofl'rcial figures categorize the four countries into high (Mali and Cote d’Ivoire) and
low (Ghana and Burkina Faso) beef consuming countries (see Figure 3.6). The per
capita beef consumption in Mali has been the highest in the sub—region, peaking at
about 8.8 kg/person/year in the late 19605 and declining thereafter to about the level
of the sub-regional average (5.8 kg/person/year) before recovering gradually
throughout the 19805 into the 19905. Per capita beef consumption in Cote d’Ivoire has
been more erratic over the years, increasing rapidly from below the sub-regional
average in the early 19605 to peak at about 8 kg/person/year in the early 19705, and
then remaining above the sub-regional average until the early 19905 when it fell to
just about 3 kg/person/year.

As noted earlier, the devaluation of the CFA Franc seemed to have

adversely afl'ected the low-income populations in both the Sahelian cattle exporting

73

 

and coastal cattle importing countries. Beef consumption in the sub-region fell to
about halftheir pre—devaluation levels, particularly among poor households who could
not afl’ord the higher beef prices following the devaluation, even though high-income
households maintained their beef consumption levels. Most households moved away

from beef towards processed fish (e. g. smoked and dried fish) which was relatively

cheaper ( ibid.).

Figure 3.5. Imported Bovine Meat and Productsforthe Central
Corridor (MT)

imports of Bovine Meat
Products (MT)

.:§§§§§§§§§

 

~§§eaaaaaaaaasa~§§
a-v-v-v-v-v-e-a-v-e-e-I-v-I-v-a-Fv-

Yeas: 1%1 -1997

 

+G-lANA +CIITEUVGE +MAU
+BIRKM FASO —+—AGS_(IJ.NTRB

 

 

 

Source: FAO Agrostat Database.

74

 

In both Burkina Faso and Ghana per capita beef consumption has been below
the sub-regional average. Consumption in Burkina increased fi'om about 3 .2
kg/person/year in the early 19605 to a peak of 5 kg/person/year in about 1969-70, then
declined to about 2.5 kg/person/year in the early 19705 before rising gradually during

the 19705 and 19805 to the level of the sub-regional average.

Figure 3.6. Bovine neat Consunption per Capita in the Central
Corridor

..a
O

KgICapitaer

o-srowaarauarco

 

886%

r

1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996

Years: 1961 - 1997

 

L—O—G'IAM +oonso~one +MALI +BLRKNA FASO+AG3_WI

 

Source: FAO Agrostst Database

75

Ghana, however, shows a consistent decline in per capita beef consumption
from a peak of about 4.2 kg/person/year in 1961 to a low 1.5 kg/person/year in the
late 19705 and 19805. Beef consumption per capita recovered somewhat in the early
19905 to about 3.1 kg/person/year but has since declined again. The prospects and
potential for beef market expansion in the coastal markets of the West African
Corridor therefore remain high, particularly in the face of a fast increasing population
of the sub-region.

It is instructive to note, though, that the main animal protein substitute for beef,
particularly in the coastal countries, is fish. The relative price of beef and fish will
therefore be a major factor in determining the future demand for beef in the countries

of the Central Corridor.

3.3 Tariff and Non-tariff Barriers to Cattle Trade in the Central Corridor
Historically, all four countries in the Central Corridor have pursued policies
that offered protection for domestic livestock, including cattle, with the objective of
improving domestic productivity and overall stock numbers, among others. However,
most of these tarifl’ and non-tariff barriers have been removed in recent years by all
the countries in the subregion in response to recent protocols and memoranda of
understanding among them. Part of this is also due to renewed interest among
governments in the sub-region to promote intra-regional trade in cattle as a way of

promoting regional cooperation; and as a fall-out from general trade liberalization

76

efl’orts in these countries.

Besides tariff (or a direct tax on imports) which most countries the world over
have used as an instrument of protection (and whose use has declined considerably
in recent years under multilateral trade liberalization), there exist other instruments
or devices which countries apply to limit trade in some commodities. These devices
include import quotas, voluntary export restraints (VERs), international commodity
agreements, cartels, export subsidies, border tax adjustments, and administrative as
well as technical regulations.

Whereas the use and application of some of these instruments are very visible
(e.g., quotas), others are very pervasive forms of protection (e.g., administrative and
technical regulations). Countries in the Central Corridor have used both tariffs and
non-tarifl‘ instruments to affect cattle trade in the sub-region until recently. Under the
current global and regional trade environment, border tax adjustments (i.e., indirect
taxes shifted to consumers in the frnal price of goods and services) together with
administrative and technical regulations are the most important barriers to intra-
regional trade in cattle in the sub-region. Also important are road barriers and other
unofl'rcial taxes levied on cattle traders along all the routes from the Sahelian

countries to the coastal countries.

77

Trade Barriers in Cattle Exporting Countries: Mali and Burkina Faso

Mali and Burkina Faso, being cattle exporting countries in the Central
Corridor, have historically derived substantial portions of their trade revenues from
both cattle exports and taxes levied on these exports. They have therefore used a
combination of direct export taxes and various forms of regulatory requirements at
the official level to raise revenue from trade in cattle with their neighbors.

Since the late 19605 when the cattle market declined sharply in Ghana, Cote
d’Ivoire has been the most important market for cattle from both Mali and Burkina
Faso. Very few cattle flow into the Ivorian and Ghanaian markets fi'om neighboring
countries except from Mali and Burkina F aso. In general, even though Mali and
Burkina Faso have both eliminated direct export taxes on livestock, other taxes and
fees still remain, which constitute substantial barriers to ‘free trade’ in cattle in the
sub-region. These include market taxes, business taxes, licensing fees on animal
health requirements, and unofficial fees (or tips and bribes).

Both Malian and Burkinabe cattle exporters pay what the authorities refer to
as market presentation tax (or sales tax as referred to by some local authorities). In
1993, which is the base year for this study, the market presentation tax ranged
between 100 CFA Francs and 200 CFA Francs per head for cattle depending on the
location (or 150 CFA Francs on the average) in both countries (Metzel, et al, 1994).
Also in Burkina Faso, cattle traders must pay for the right to export their herd, and

this is computed as 5.6% of the value of the herd (or 3,025 CFA Francs per head of

78

cattle). Even though these taxes by themselves (including those discussed later) may
not be large enough to be considered a significant barrier to trade, when aggregated
they constitute about 12% to 14% of the average cattle prices in the coastal markets.

Then there is the business tax which is nothing more than a type of income tax
exporters pay because there is no format for assessing the net income of these traders
for tax purposes. In Mali, the business tax is in the form of a licence called patente
which may be valid for three months to a year, or in some cases purchased to cover
a specified number of animals. In practice, the patente is transferable, so that large
traders are able to sub-contract their patentes to small-scale operators who are unable
to purchase the patente up front (the annual cost of patente could run into several
hundred thousand CFA francs). Sub-contracting a patente per head of cattle in Mali
in 1993 amounted to 1,500 CFA Francs. The business tax takes a slightly different
form in Burkina Faso, where it is called business turnover tax (taxe sur le chrflre
d 'aflaims). The 1993 business turnover tax in Burkina Faso (e. g., Pouytenga market)
was 2,000 CFA Francs per head of cattle.

Health certification for live animal shipments across borders is an important
government responsibility as a way of preventing the spread of infectious livestock
diseases. The governments of Mali and Burkina Faso therefore require cattle
exporters to obtain health passes from appropriate authorities for the animals they sell
both in the domestic market and abroad. Besides, traders are required to ensure

vaccination of their animals against such diseases as rinderpest, pen-pneumonia,

79

anthrax, foot and mouth disease, pasteurelloses, and trypanosomiasis.

Whereas most of these vaccinations are subsidized and therefore cost little to
the trader (e.g., in Mali in 1993, the cost per head of cattle for rinderpest and peri-
pneumonia vaccination was 34 CFA Francs; and for trypanosorrriasis it was 20 CFA
Francs), the transaction cost could be very substantial. For example, cattle traders in
Burkina Faso are required to obtain a documentation on their cattle (and other
livestock) referred to as “livestock passport” which contains detailed information on
herd composition, veterinary services obtained and the posts to visit along the way,
as well as the traders itinerary. Even though the “livestock passport” is obtained at no
oficial cost to the trader, the issuing Livestock Service agent requires a verification
for (a) formal permission to export livestock (the authorization d ’exportation du
betail), (b) proof of the nationality of the animals (certificat d 'origine), (c) payment
of business taxes, or the patente, and (d) payment of health tax (taxe de visite
sanitaire). The process of acquiring the “livestock passport” can therefore involve

substantial transaction cost.

Trade Barriers in Cattle Importing Countries: Cote d ’Ivoire and Ghana

Taxes on livestock in the beef cattle importing countries of Cote d’Ivoire and
Ghana mirror those of the Sahelian cattle exporting countries discussed above.
Traders in these coastal countries also pay market taxes, business taxes, licensing fees

on animal health requirements, and unofficial fees (or tips and bribes). Market taxes

80

in Abidjan stock markets, for example, included 150 CFA Francs per head market
presentation tax, 1,000 CFA Francs per head municipal tax, and 1,100 CFA Francs
per head stockyard tax in 1993. Cattle importers in Ghana also paid a market
presentation tax of C 100 per head, sales tax of C100 per head, and stockde tax of
C1,200 per head for the same period.

Business tax in Cote d’Ivoire is similar to what pertains in Mali, where traders
pay the transferable patente valid for three months to a year; and in Ghana it is
referred to as “income tax on capital” on long-distance livestock trade, computed as
3.6% of the value of the entire herd. Again in 1993, the patente was 95 CF A Francs
per head in Cote d’Ivoire, while in Ghana the “income tax on capital” was C3,800 per
head (or 2,400 CFA Francs at the Forex Bureau exchange rate).

In terms of animal health requirements, Cote d’Ivoire conducts veterinary
inspections of imported animals and verifies vaccination certification or gives
vaccinations where necessary at minimal fees. Ghana, on the other hand, has since
1985 imposed stringent quarantine requirements on imported cattle (though this has
somewhat eased in recent years) following an outbreak of foot and mouth disease
which the Ghanaian authorities attributed to diseased Sahelian cattle imported into the
country.

Importers of cattle have to apply to the Animal Health Department of the
Minisz of Food and Agriculture, Ghana, for permission to import, and are required

to send their animals to the department’s quarantine posts at the countries borders for

81

inspection, which could take several days. The transaction cost involved in terms of
time and expense is obviously a deterrent, which might explain why official records

show very few or no cattle imports to Ghana in the late 19805 and early 19905.

Unoflicial Fees Levied on Cattle Traders

Livestock traders in general in the Central Corridor are fi'equently subjected
to informal ‘taxes’ (or tips and bribes) on both sides of the international borders by
government officials and law-enforcement agencies (custom officials, army, and
police), which substantially raise the consumer price of beef and other meat products.
Such unofficial fees levied on cattle traders are particularly prevalent at the numerous
custom posts at the borders and police check points along the cattle trade routes,
mainly because traders are more vulnerable since delays on the road for non-payment
could result in death of animals and substantial losses. In addition, cattle traders often
have to pay tips to officials at government agencies to facilitate prompt issuance of
permits and other documents necessary for export of cattle.

Estimates of bribes paid by traders between a market in the interior of Mali
(e.g., Fatoma, near Mopti) and say Abidjan in Cote d’Ivoire, and between Pouytenga
in Burkina Faso and Abidjan average between 3,000 CFA Francs to 4,000 CFA
Francs per head, distributed evenly among the officials in the countries concerned
(Metzel et a1, ibid.; Holtzman and Kulibaba, 1992). The corresponding figure for

Ghana for a trip between Pouytenga and Accra in 1993 was estimated at €105,600

82

per truck or about €3,200 per head (or 1,441 CFA Francs per head). Table 3.6

provides estimates of non-tariff barriers to cattle trade in the Central Corridor.

Table 3.6. Direct and Indirect Taxes on Cattle Trade in the Central Corridor
(F CFA/Head - 1993 Estimates)

Exp/Imp. Market Business Veterinary Unofficial

Permit Taxes Taxes Fees Fees
Mali 3000 150 1500 234 3500
Burkina 3025 150 2000 200 3500
Faso
Ghana“ na 1500 2400 270 1441
Cote na 2250 95 500 3500
d’Ivoire

'Ghana Cedis have been converted into FCFA at the 1993 Nominal Exchange Rate of
FCFAl per C2.22.

Source: Computed from data provided in Metzel et al.(ibid.), Vol 111, 1994.

83

On the average, the total amount paid in taxes and/or bribes per head of cattle
in each of the countries of the Central Corridor (based on 1993 prices) were 8,384
CFA Francs in Mali, 8,875 CFA Francs in Burkina Faso, 5,61 l CFA Francs in Ghana,
and 6,345 CFA Francs in Cote d’Ivoire. Considering that cattle prices averaged
110,585 CFA Francs per head in Cote d’Ivoire and 103,416 CFA Francs per head in
Ghana in 1993, these taxes and/or bribes constituted about 14% of the price of cattle

sold in Cote d’Ivoire and 13% of those sold in Ghana.

84

CHAPTER IV

Beef Cattle Production and Marketing in the Central Corridor

4.0. Introduction

Agro-climatic conditions in the Sahel make it a natural choice for livestock
production and development, compared to the more humid and mostly tse-tse infested
coastal regions of the Central Corridor. Besides cotton, which is a major cash crop in
the Sahel region, livestock production, including cattle, sheep and goats, camels,
donkeys, poultry, etc, predominate agricultural activities in the Sahel. On the other
hand, crop production (mainly tree crops such as cocoa and coffee) is the mainstay
of agriculture in the coastal countries. This natural distribution of the livestock-crop
mix in the sub-region underscores why the Sahelian countries are a cattle exporting
region and the coastal countries are deficient in cattle, making cattle historically the
most important item of intra-regional trade in the sub-region.

The objective of this chapter is to present an overview of cattle production and
marketing in the four countries that constitute the Central Corridor — Mali, Burkina
Faso, Ghana, and Cote d’lvoire. We begin with a brief overview of the basic

macroeconomic trends in these countries.

85

4.1 Trends in some Key Economic Variables in the Central Corridor.

The land-locked Sahelian countries of Mali and Burkina Faso are ranked
among the poorest in the world — Burkina Faso was 169"I out of 174 countries, and
barely ahead of Mali - according to the rankings in the UNDP’s 1995 Human
Development Index. As indicated earlier, the estimated per capita GNP for the two
countries in 1995 were US$230 and US$250 for Burkina Faso and Mali, respectively.
The most important agricultural export products in both countries are cotton and
livestock (including livestock products) both of which account for more than 60% of
export revenue in each country (World Bank, 1996).

By contrast, the coastal countries in the central corridor are ranked higher in
terms of economic development. Cote d’Ivoire is considered a lower middle-income
country with a per capita GNP of US$660 in 1995 (this figure was in excess of
US$1,000 in the early 19805). Ghana, until economic decline in the 19705, was
considered to have a much higher standard of living than most countries in West
Africa; and had a per capita GNP of US$390 in 1995. Both Cote d’Ivoire and Ghana
are among the world’s leading exporters of cocoa, coffee, and timber; and agricultural
exports account for well over 40% of export revenue for each country.

All four countries have embarked on structural adjustment programs with the
support of both the International Monetary Fund (IMF) and the World Bank during
the 19805 and 19905. Mali has embarked on economic and sectoral reforms under a

structural adjustment program since 1988 with the objective of improving

86

competitiveness of the economy and creating conditions for long term economic
growth. Following the devaluation of the CFA franc by 50% against the French franc,
Mali implemented a second reform program covering the period 1994 to 1996 which
focused more on trade reforms (e.g., general changes in tariffs and improvements in
producer incentives). These reforms have paid off in terms of improved
macroeconomic performance.

Similarly, Burkina Faso has embarked on a more sustained reform program
since 1991, with substantial trade reforms beginning in 1993. The elimination of the
requirement for export authorization for all products except cereals, removal of price
controls on locally produced goods (except rice), cancellation of regulation of profit
margins for imported goods, and termination of the functions of the Agricultural
Product Price Stabilization Fund in price stabilization policy, all worked to improve
efliciency and competitiveness in the Burkinabe economy (World Bank, 1996).

In the case of Cote d’Ivoire, adjustment policies before 1987 were only
partially successful in reducing the main internal and external imbalances due to
instability in international commodity prices (e.g., for cocoa and coffee) and
fluctuations in the value of the CFA franc against the dollar, which depreciated and
then appreciated again. But in 1990 the government undertook a medium-term reform
program with the support of the Bank and IMF, whose success was in doubt until the
50% depreciation of the CFA franc against the French fianc. A recession which had

deepened in 1993 was quickly reversed, and domestic inflation, which reached 26%

87

in 1994 declined to some 11% in 1995, while government deficit declined
substantially.

Subsequent to the devaluation, the Ivorian government embarked on sectoral
reforms in trade, agriculture, and transport in 1994 and 1995 which enhanced
efficiency and competition in the economy as well as create new investment
opportunities. Market and trade liberalization were implemented for most
commodities including rice and livestock, and major reforms undertaken in the cocoa
and cofl’ee sectors. Fiscal reform, tariff reform and elimination of non-tariff barriers,
and price liberalization were among measures implemented by the Ivorian government
to stimulate international competitiveness and private sector development (World
Bank, ibid.).

Since 1983 Ghana has undertaken far-reaching reforms under an economic
reform/structural adjustment program which was supported by both the Bank and the
IMF. After a decade of sustained adjustment, fiscal imbalances re—emerged in the
early 19905 during the run-up to the country’s elections, raising new concerns about
macroeconomic stability. Subsequently, Ghana began another three-year structural
adjustment program in 1995 with IMF support, but initially missed several targets
(e.g., money supply growth could not be adequately restrained, and inflation in 1995
averaged about 60%).

Private sector reforms and an ambitious divestiture pro gram to scale down

government’s direct role in the economy while promoting private sector participation

88

have potential to improve general economic efficiency. A major initiative of the
Ghana government since the mid-19905 has been a more outward economic
orientation with emphasis on regional cooperation, export growth, and removal of
trade barriers as a way to improve economic growth. Tables 4.1a and 4.1b present
trends in some economic variables of countries in the Central Corridor.

Figures presented in Table 4. la indicate that agriculture is a major contributor
to the Gross Domestic Product (GDP) in both Mali and Burkina Faso. However,
while the share of agriculture in Malian GDP has declined from more than 60% in
1975 to a little over 40% in the 19805 and 19905, agriculture has accounted for about
a third of the GDP of Burkina Faso through the 19705 to the 19905. Gold has in recent
years become an important commodity for Mali, and contributed substantially to
export revenue. Also, agricultural growth has been remarkable for Mali, increasing
from 1.1% in 1975 to 8.5% in 1995; whereas agriculture grew only modestly in
Burkina Faso from 1.2% in 1975 to 4.1% in 1995, with a negative growth of -0.2%
in 1994.

In both countries, livestock and livestock products follow after cotton as the
major agricultural exports and most important sources of export revenue, emphasizing
the importance of livestock to these econonries. For example, live stock exports, which
accounted for only a quarter of Burkina Faso’s food import bill in 1985, increased to
cover about three-quarters of her food import bill in the 19905; and in Mali revenues

from livestock exports were usually enough to underwrite all food import bills on

89

Table 4.1a. Trends in some key Economic Variables in Mali and Burkina Faso

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MALI 1975 1985 1994 1995 1996 1997
GDP (billion USS) 0.8 1.1 1.9 2.5 2.7 2.5
Tot. Exports(mil USS) - 176 333 470 434 562
Cotton Exp. (mil USS) - 78 150 261 264 276
‘Livestock Exp.(mil USS) - - 82 85

Food Imp. (mil USS) - 141 79 91 113 109
Terms of Trade(l987=100) - 107 84 90 - -
Agric. as % ofGDP 61.0 47.3 40.2 44.0 48.1 49.2
Agric: % annual growth rate 1.1 5.1 7.5 8.1 1.2 2.8
Burkina Faso 1975 1985 1994 1995 1996 1997
GDP (billion USS) 0.8 1.4 1.9 2.4 2.5 2.4
Tot. Exports(mil uss) - 136 226 287 231 251
Cotton Exp. (mil USS) - 30 59 94 97 128
*Livestock Exp.(mil uss) - 14 57 64 65 57
Food Imp. (mil USS) - 59 68 86 88 70
Terms ofTrade(1985=100) - 100 133 145 - -
Agric. as % ofGDP 34.3 37.9 33.0 32.9 34.8 32.1
”Agric: % annual growth 1.2 3.5 -0.2 4.1 7.4 0.7

rate

 

 

 

 

 

 

 

 

*Livestock includes live animals and other livestock products (e.g., hides). Figures
for Mali are from FAO Trade Yearbook 1995.
"Growth rate for 1975 refers to 1975-84; and that for 1985 refers to 1985-94.

Source: World Bank. Trends in Developing Countries. 1996; World Development

Indicators, 1998.

90

 

Table 4.1b. Trends in some key Economic Variables in Ghana and Cote d’Ivoire.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ghana 1975 1985 1994 1995 1996 1997
GDP (billion US$) 2.8 6.3 5.4 6.3 6.3 6.8
Tot. Exports(mi1 US$) - 633 1,236 1,431 1,571 1,511
Cocoa Exp. (mil US$) - 412 320 390 552 464
1"Livestock Exp.(mil US$) na na na na na na
Food Imp. (mil US$) - 40 45 56 64 64
Terms of Trade(l987=100) - 90 74 79 - -
Agric. as “/6 of GDP 47.7 44.9 46.4 46.3 44.4 47.4
Agric: % annual growth 1.2 1.9 2.6 4.20 4.0 2.2
rate

Cote d’Ivoire 1975 1985 1994 1995 1996 1997
GDP (billion US$) 3.9 7.0 7.4 9.8 10.7 10.3
Tot. Export5(mil US$) 1,239 2,761 2,867 3,890 4,245 4,015
Cocoa Exp. (mil US$) - 887 951 1,320 1,408 1,203
I"Livestock Exp.(mil US$) na na na na na na
Food Imp. (mil US$) - 273 317 514 563 604
Terms of Trade(1987=100) 102 125 71 78 - -
Agric. as % ofGDP 34.4 29.8 36.0 35.0 27.6 27.3
I""Agr'ic: % annual growth 2.2 1.9 2.1 5.5 1.4 4.7
rate

 

 

 

 

 

 

*Livestock includes live animals and other livestock products (e.g., hides).
”Growth rate for 1975 refers to 1975-84; and that for 1985 refers to 1985-94.
na implies none or negligible.

Source: World Bank. Trends in Developing Countries. 1996; and World Development
Indicators, 1998.

91

annual basis. But whereas the external terms of trade have been favorable to Burkina
Faso by about 45% increase between 1985 and 1995, it has deteriorated in the case
of Mali, where it declined substantially during the same period. The decline in the
terms of trade for Mali may be attributed to the shifting export pattern in Mali in favor
of non-traditional commodities such as gold, whose price on the world market has
been on the decline in recent years. All the same, GDP has shown modest growth in

both countries at about the same level in the 20-year period between 1975 and 1995.

Figure 4.1a. Food Production Index per Capita (1989-91 = 100)

 

140

 

 

 

 

 

 

 

130
120
g 4/
a: 100 _ VVA‘I’IJKK V I - _
g - -' V \v 'M"
[In
90 0' Y
80 l T f T T l l T T T T

 

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Years: 1985 - 1996

 

+ Mali + BFaso + Ghana -x-— CD’Ivoire

 

 

 

Source: FAO Agrostat Database

92

Based on the GDP, Cote d’Ivoire is the largest economy in the Central
Corridor, with Ghana about two-thirds of its size (Table 4.1b). By comparison, the
economies of Mali and Burkina Faso are each only a quarter of that of C0te d’Ivoire
and a third of that of Ghana. Agricultural growth has been modest for both Ghana and
Cote d’Ivoire during the twenty-year period between 1975 and 1995, with the highest
growth occurring in 1995 for the two countries at 4.2% and 5.5% for Ghana and Cote
d’Ivoire, respectively. And while agn'culture accounts for almost half of Ghana’s
GDP annually, it contributes about a third to the GDP of Cote d’Ivoire.

Even though Ghana’s food imports in value terms was only about a tenth of
that of Cote d’Ivoire in 1995, food imports continue to grow in both countries,
attesting to the potential markets in the two countries. The two countries are not
exporters of livestock except negligible levels of livestock products (e. g., hides); but
as has been indicated earlier, both countries import live animals as well as frozen
meat.

A comparison of the trends in per capita food and livestock production in the
Central Corridor indicates that both have remained relatively stable during the mid
1980s to 1990s in all four countries except Ghana (Figures 4.1a & 4.1b). Ghana
shows considerable increase in per capita food production during the period,
particularly in the 19908, but a declining trend for per capita livestock production.
Cote d’Ivoire also shows more increase in food production relative to livestock

production from 1994 onwards. The trend analysis suggests that the coastal countries

93

F1919 4.1b. madam Index pereapna

 

 

 

 

 

 

(1989-91:100)
120
$3110
§1m “<39é\ A
/ .4" ‘
3
E 90
a /
80
§ 1
.3 70
...l
m T l T ‘1 l T l l l l l l

 

 

1% 1% 1%7 1%8 1% 1% 191 1% 1% 194 1% 1%
YEAFG 1%-1%

 

+Wi—a—BFao—a—G‘ma—x—03hn'le

 

 

 

Source: FAO Agrostat Database.

94

may be paying more attention to food crops rather than livestock production, which
could make them more dependant on livestock and meat imports to satisfy domestic

demand.

4.2. General Overview of major Cattle Production Systems in the Central
Corridor

In Table 4.2, the general characteristics of some livestock production systems
in the Central Corridor are provided. In practice, there exist several types of
production systems, ranging fi'om traditional transhumant systems in the Sahel where
the herd production unit moves seasonally in search of pasture; to more intensive peri-
urban types around large urban centers such as Bamako or Accra, in which case the
animals are fed high-value commercial feeds and fodder, and are raised primarily as
dairy cattle.

This study focuses on ‘beef cattle production in the Central Corridor, and
therefore systems that are more common and more representative of ‘beef‘ cattle
production in the various countries in terms of their contribution to aggregate
production are discussed. We should note here that most cattle in the Central
Corridor, particularly in the Sahelian Countries, are raised as dual-purpose animals.
The herds are managed for both daily and beef, and some are also used as draft
animals. Cattle in this study therefore refers to all cattle that are eventually sold on
the market for slaughter since most cattle production systems do not differentiate
cattle types.

95

Table 4.2. Important Characteristics of some Cattle Production Systems in
the Central Corridor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location Breed Rainfall(mm) Management Feed Source
MALI
Mopti Zebu 300 Transhumant Open range,
Agro-pastoral Flood plain
Sikasso Zebu 1000 Sedentary Village Pasture,
Crop byproducts
Commercial feeds
BURKINA FASO
Dori Zebu 450 Transhumant Village Pasture,
Agro-pastoral Crop byproducts
Commercial feeds
Yako Zebu 600 Sedentary Village Pasture,
Agro-pastoral Crop byproducts
Commercial feeds
Pouytenga Zebu 600 Fattening Crop byproducts
Commercial feeds
GHANA
Kpong-Tamale WASH*/ 1500 Sedentary Village Pasture,
Sanga Crop byproducts
Accra Plains Zebu 1000 Sedentary Village Pasture,
cross Commercial feeds
COTE D’IVOIRE
Kohorgo-Ferke Zebu 1000 Sedentary Village Pasture,
cross/ Commercial feeds
Baoule

 

 

I’WASH means West African Short Horn

Source: Metzel et al. 1994.

96

In the transhumant systems of livestock production as practiced in the Mopti

and Nara regions of Mali, as well as the cattle producing areas of Dori in Burkina

Faso, many of the herders follow the seasons and the availability of grazing grounds

for their cattle. This system is typical of cattle production in the semi-arid zone of the

Sahel, but due to intense competition with food and cash crop production, and the

fragile nature of the environment, there are serious questions about the sustainability
of the system.

The transhumant systems (including agro-pastoral systems in which herders
income are derived from both livestock and cropping activities) are therefore
classified under sedentary production systems in this study since more herders

continue to cultivate the land as common in Mopti and Nara areas in Mali. That is,

even though the transhumant, agro-pastoral, and sedentary systems represent different
methods of cattle raising in the Central Corridor in terms of management practices,
their underlying cost structures are similar. Cost estimates for the three systems are
merefore aggregated.

The livestock production system in which herders raise their animals in a
sl)<=<>ified location without moving them over long distances with seasonal changes is
what is referred to as the sedentary system. Cattle owners in the sedentary system

Wpicany cultivate a variety of rainfed crops (cereals, pulses, tubers, etc), and

s‘rpplement range pasture grazing with crop residues and byproducts from their farms.

97

Due to the smallness of family herds, cattle owners usually group their animals
together and employ hired labor for herding, even though family labor is also
extensively used. The animals are more carefully controlled through the use of
corrals, sheds, and pens so as to protect them from harsh weather conditions such as
heavy rains, and also due to the proximity of crops; and farmers often provide
veterinary services against animal diseases and parasites. Commercial feed, notably
cotton seed and cotton seed cake, bran, molasses, etc, are sometimes provided for the
animals depending on location and availability of feed.
An important consideration of the sedentary system of cattle production in the
Central Corridor has been the keeping of animals for animal traction purposes. In
most cases, farmers train and use select animals among the herd as drafl animals,
which afier a few years of work are typically sold for slaughter. Such drafi animals
may be provided more purchased feed than the rest of the herd to boost their draft
Power, even though they are usually kept together with the rest of the herd.
Another system of cattle production which has continued to gain importance
in the Central Corridor in recent years but directed specifically to dairy cattle
Production is the Peri- Urban production system. Increased urbanization in large
Sahelian towns such as Bamako in Mali has brought in its wake increased demand for
fi‘eSII milk and other dairy products. The peri-urban systems are basically dairying
enterprises that have developed to meet this increasing urban demand for dairy

products, and are highly intensive systems which depend mainly on commercial

98

feeds. The favorable sub-humid micro-climate of the Accra plains in Ghana has also
facilitated the establishment of viable peri-urban systems to feed the Accra-Tema
metropolis. Because these peri-urban systems are location specific, and more focused
on dairy rather than cattle for beef which is the subject of this study, they are not

included in the analysis as separate production systems.

4.3- Cattle Production and Marketing in Mali
Mali extends from the fringes of the Sahara desert in the north to the Guinean
zone in the south covering an area of some 1,240,000 krnz. The northern portion,
which lies in the Sahelian zone and constitutes about a quarter of the country, has
traditionally been the main livestock production region; and the southern portion that
lies in the Sudanian and Guinean zones (also about a quarter of the country) has
adequate rainfall (about 1,300 mm between June and October) for crop production
agri culture. However, in recent years, cattle production in Mali seemed to have
Shified more to the north east (around Mopti) and south east (around Sikasso) as
persistent drought caused northern herders to de-stock their cattle while the more

faVorable south built up stocks.

Also, the Niger river flows for about 1,700 km from west to east within Mali,
and together with its tributary the Bani river, regularly overflowed its bank during the

rainy season (until it was dammed) to form a large interior delta that extended from

99

Segou in the southwest to Timbuktou in the northeast. This delta area provides large
areas for irrigated agriculture and pasture during the dry season.

Cattle production in Mali has traditionally been by semi-nomadic herders who
have followed seasonal north-south movements based on rainfall and availability of
pasture. However, this transhumant system has gradually changed over time due to
population increases and competition fiom crop farmers in traditional nomadic zones;
and more and more herdsmen and their families have become fully or partially
sedentarized over time.

The commercialization of the traditional system where cattle herders and their
families lived off the milk of their animals or exchanged some for food and seldom
sold their animals except for ceremonies was precipitated by two fundamental

Changes in the country. The first change was increased urbanization as the French
colonial government administration established and expanded, increasing the demand
for meat by urban dwellers. The second factor was that cattle owners were obliged
to sell some of their cattle each year to meet their tax obligations, which the colonial
government assessed per head. Thus, the foundation was laid for commercial cattle
production in Mali.

In recent years, the Malian government has sought to reduce its intervention
m the livestock sector as part of the structural adjustment program (Programme

d 'A diustment Structure] A gricole II, 1 992) and to promote private sector participation.

100

The two government institutions, DNE (Direction Nationale d 'Elevage, which has
been responsible for animal production and health) and OMBEVI (Ofice Malien du
Betail et de la Viande, in charge of marketing and transformation) now play the role
of service providers to the private sector to make them more competitive in the
production and marketing of livestock and other livestock products.

For the purposes of this study, important cattle producing areas in Mali have

been classified into two zones: Zone Centre-Est — covering Sikasso, Koulikoro,
Segou, and Mopti areas; and Zone Nord — which includes Tombouctou, Gao, and
surrounding areas. A third zone, Zone Ouest — including Kayes and western Mali add
on to the first two zones to cover the entire country as the cattle consumption zones
for Mali.

The available statistics indicate that Malian cattle stocks increased by an
average of 2.8% annually between 1985 and 1990, while annual local slaughter and
exports both declined, on the average, by -3 .2% and -3 .5%, respectively. In the 19905,

however, stock increases has been marginal, only 0.2% annually between 1991 and
1 996; while slaughter and exports recovered, increasing annually by 0.8% and 3.6%,
lV381>ectively (Table 4.3). The change between the 19803 and 1990s may be attributed
to the dumping of beef in the coastal markets by the European Union in the 19808
V"IIiCh made Sahelian cattle uncompetitive; but the situation changed when the EU
reduced its subsidy by about 30% and Cote d’Ivoire also set up a compensatory tariff

syStem against beef imports, as well as the 50% devaluation of the CFA franc in

101

Ta- ble 4.3. Officially Recorded Annual Average Stock, Slaughter, and Prices of
Cattle in Mali (1985 - 1996)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

r Year Stock Slaughter Exports Cattle Price“
(Numbers) (Numbers) (Numbers) (FCFA/head)
1985 4,344,000 196,209 224,000 50,000 '
1986 4,475,000 158,888 207,000 74,000
1987 4,589,000 146,606 180,000 80,000
1988 4,703,000 145,1 1 1 195,000 77,000
1989 4,826,000 136,847 190,000 76,000
1990 4,996,000 160694 185,000 80,000
1991 5,092,132 168,828 190,000 84,000
1992 5,226,893 193,370 195,000 70,000
1993 5,380,281 185,102 188,000 63,000
1994 5,540,633 186,743 235,000 80,000
1995 5,471,000 129,561 210,000 98,000
1996 5,036,817 148,833 222,000 110,000
Average Annual
Growth Rates
1955-1990 2.8% -3.2% -3.5%
1991-1996 0.2% 0.8% 3.6%
1985-1996 1.4% -1.4% 0.4%

 

 

 

 

 

T AVerage Prices quoted at Nioro (a cattle production region) for Zebu cattle.

Sources: Recueil des Statistiques du Secteur Rural Malien. Ministere du
Developpment Rural et de l’Eau. Republique du Mali. March 1998.
OMBEVI, Statistique du Betail et de la Viande, Rapports Annuels.

102

 

January 1994 that improved the competitiveness of Sahelian cattle.

The distribution of cattle stocks based on 1993 figures also show that about
7 l % were found in the Central-East Zone (which includes both Sikasso and Mopti
regions), and only 14% or 15% each found in the North and West zones (Table 4.4).
The Central-East Zone also slaughtered about 90% of cattle in Mali, compared to 4%
to 6% in the other zones. This indicates that the importance of cattle in Mali has
shifted from the traditional north to the central and eastern provinces, mainly due to

favorable conditions in these zones especially during periods of drought.
Cattle marketing in Mali, and livestock marketing in general, involves
a complex network that effectively links the farmer or herder in rural Mall to the

consumers in urban centers. Cattle flow has traditionally followed a north-south

Table 4.4 Human Population, and Officially Recorded Cattle Stock and
Slaughter by Zones in Mali - 1993

 

Pop. Stock Stock Slaughter Slaughter Cattle Price
(Mil) (Num.) (%) (Num.) (%) FCFA/ head

 

 

Zone 6.55 3,817,920 71 % 133,823 90 % 85,000
Centre-
Est
Zone 0.89 746,876 14 % 8,329 6 % 60,000
Nord

 

 

 

 

 

 

 

 

 

 

 

Zone 1.21 815,485 15 °/o 6,047 4 % 78,000
Quest

so\Irce: Recueil des Statistiques du Secteur Rural Molten. Ministere du
Developpment Rural et de l’Eau. Republique du Mali. March 1998.

 

103

direction, with cattle traders and intermediaries assembling cattle in small lots over
a large area in the cattle producing areas, and moving them (usually by trekking) to
the large urban consuming areas in the south (both within Mali and in the neighboring
countries). The marketing chain starts with numerous small markets scattered all
across the production zones, where exchange of cattle occurs among herders, local
butchers, and intermediaries. Two important nodes in the marketing chain are the
marches de collecte, where cattle trade occurs between herders, herders and
tI’aders/interrnediaries, and between traders; and the marches de groupement, which
trade cattle mainly for slaughter or for export. These markets are mostly weekly
markets and under government control to facilitate veterinary inspection/certification
and for tax purposes.
Sahelian cattle markets in general, and particularly Malian cattle markets, may
exbibit some level of seasonal variation in activity. This, however, is not universal
across the country but influenced by specific types of migration tied to the lengths and
iIntensities of the rainy and dry seasons. For example, activities in most cattle markets
in Mali are greatest just after the rainy season ends, when the animals are in their best
CoIldition (especially if rainfall has been deficient), and least during the rainy season
itself because herders move their cattle frequently to find fresh pasture. But in Mopti
area markets, activity is greatest at the end of the dry season, when cattle and their

o“"Ilers are concentrated in the interior delta area (Stryker, 1973).

104

Trekking cattle is the main mode of transporting cattle from the interior
collection markets in the north and north-eastem Mali to the urban markets in the
south and for export. Together with cattle that cross the borders from Mauritania,
most of the cattle from the west pass through the Kati market (near Bamako) and are
sold for slaughter or continue on to coastal markets. Cattle coming from the northeast
trek down to Bamako and Sikasso as slaughter cattle or en route to Cote d’Ivoire by
crossing the borders to Kohorgo, or Bobo-Dioulasso in Burkina Faso to be shipped
southwards by rail. Most of the cattle from the east of the Niger Delta (e.g.,
N ’Gouma, Kona, F atoma near Mopti) trek across the border to Burkina Faso from
where they are shipped by train to Cote d’Ivoire, or trek across the borders to Glmna
and Togo, or even to Nigeria. In recent years, however, fewer cattle use the route
across Mali’s eastern border mainly due to the decline in the Ghanaian market.
Trekking cattle in Mali is usually done along specified routes, covering an
average of about 25 to 30 kilometers per day depending on the size of the herd, and
may incur some losses due to diseases and weight loss of animals. However, n'ucking
and/ or shipment by rail from Burkina F aso is gradually replacing trekking for

exported cattle from Mali to the coastal countries.

4'4- Cattle Production and Marketing in Burkina Faso
Burkina Faso is a landlocked country covering an area of 274,200 km2 within

the Sahelian (15%), Sudanian (43%) and Guinean (42%) zones of West Africa. The

105

annual rainfall ranges between 600 mm in the Sahelian zone of the north to 1,300 mm
in the Guinean zone in the southwest; rainfall being mostly erratic and irregular, and
concentrated within a four to five month period between May and October.
Agriculture is the mainstay of the Burkinabe economy, and livestock, which was the
country’s major export earner in the 19608 and early 19708, has since been overtaken
by cotton as the country’s most important export commodity. Nevertheless, livestock
and livestock products continue to play a major role in the economy, accounting for
about 22% of total export revenue in 1995 (see Table 4. la), besides being an
important source of government revenue through the various cattle and other livestock
trade related taxes and fees.

Livestock production in Burkina Faso varies across the country in terms of the
production system adopted in each production zone. However, all the various systems
could more or less be classified under the sedentary system of production based on
their cost structures. Moreover, environmental degradation and population pressure
have limited cattle production under the traditional transhumant system in the north
of the country in recent years. Also, biological, climatic, and economic factors have
all afi‘ected the traditional approach to cattle production, particularly in the Sahel, and

motivated most herders to become less mobile and more dependent on crop
pI’Oduction agriculture.

In the north and northwest, extensive cattle production systems are more

PreValent and rangelands communally owned, leading sometimes to overstocking and

106

overgrazing with little incentive on the part of herders to adopt responsible rangeland
management practices (World Bank, 1975). The nature of rangelands as an ‘open
pool resource’, coupled with competition fiom crop production agriculture even in
these Sahelian grasslands, has increasingly become a major constraint to livestock
production under the transhumant system in this area. The larger Zebu breeds are
predominant in this zone, even though the Zebu-Taurin crosses are also common in
certain pockets in the zone. Herman (1983) notes that the Burkinabe government and
donor agencies interested in livestock agreed in the early 19808 that the future of
livestock development depended critically on improved range management to increase
the carrying capacity per hectare.

The central and southern parts of Burkina Faso have predominantly sedentary
system of cattle production, with a few more intensive systems for fattening animals
for the market such as found at Pouytenga near Ouagadougou. The zebu-taurin cross
and the smaller taurin which are more resistant to trypanosomiasis, are more common
in the region (trypanosomiasis and onchocerciasis are endemic in some zones in the
region and constitute a major constraint to cattle production). Pasture and locally
available crop by-products form the bulk of feed for cattle in Burkina Faso.

Government action in recent years has been more towards livestock productivity

improvement, with livestock health as one of the major activities.

107

This study divides Blukina Faso into four main zones for the purposes of cattle
production and beef consumption in the country as follows (see Diebre and Pavy,
1996):

Zone Amenagee — includes 12 administrative provinces with Ouagadougou-
Pouytenga as the reference area —— Sissili, Sanguie, Boulkiemde, Passore,
Oubritenga, Bazega, Ganzourgou, Kourittenga, Kadiogo, Boulgou,
Zoundweogo, and Nahouri.

Zone Cotonnt'ere — includes 8 administrative provinces with Bobo Dioulasso as the
reference area — Kossi, Sourou, Mouhoun, Kenedougou, Houet, Comoe,
Poni, and Bougouriba.

Zone Sahelienne — includes 8 administrative provinces with Dori as the reference
area — Seno, Ganga, Namentenga, Sanmatenga, Barn, Oudalan, Soum, and
Yatenga.

Zone Est — includes 2 administrative provinces with Fada-Ngourma as the reference

area — Gourma and Tapoa.

Burkinabe livestock data show that cattle stock numbers, slaughter, as well as
exports, all increased in the 19808 and 19908, with the highest overall increase of
about 23% between 1985 and 1996 being cattle exports (Table 4.5). However, the
large shifts in the export numbers suggest that official statistics did not capture many

of the exports prior to 1990, especially given the decline in slaughter. Caution is

108

therefore needed in using the growth rate figures.

In terms of production, cattle stock numbers seem to be fairly evenly
distributed among the three main production zones — Zone Amenagee (which includes
Ouagadougou metropolis), Zone Sahelienne (including Dori and surrounding areas),
and Zone Cotonniere (which includes Bobo Diolasso); with more than 80% of cattle
slaughter occurring in Zone Amenagee and Zone Cotonniere (Table 4.6).

Cattle and beef marketing in Burkina Faso is composed of a complex network
of small and large markets scattered across the country similar to what pertains in
Mali. There are three market types within the network: (a) collection or primary
markets, (b) regroupment or redistribution markets, and (c) terminal or slaughter
markets. The animals usually enter the marketing chain through the small collection
markets where sellers are mainly herders, and buyers include mostly herders and
traders, with butchers playing a minor role. In the redistribution markets, sellers are
predominantly traders who buy from collection markets and sell to other traders that
serve the terminal markets, as well as to butchers; while cattle that reach the terminal
markets are either slaughtered or exported (some after some fattening).

In all the cattle markets in Burkina Faso trading takes place at a
designated place in the open, usually under the control of government agencies
responsible for maintaining the marketplace and collecting taxes. Animal purchases
are made per head or in groups (but not by weight), so the price is always quoted on

per head basis; and brokers or intermediaries negotiate the price for the seller who

109

Table 4. 5. Officially Recorded Annual Average Stock, Slaughter, and Prices of
Cattle in Burkina Faso (1985 - 1996)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Stock Slaughter Exports Transit" Cattle Price“
(Numbers) (Numbers) (Numbers) Cattle (F CF A/head)
1985 3,045,000 168,020 39,700 na 75,000
1986 3,106,000 77,925 41,000 na 102,000
1987 2,754,000 62,179 24,308 29,492 120,000
1988 2,809,000 105,506 20,463 48,364 108,000
1989 3,860,000 105,373 32,372 56,979 105,000
1990 3,93 7,200 1 17,460 88,712 14,881 120,000
1991 4,015,600 139,924 92,029 4,815 128,000
1992 4,095,900 149,282 92,422 2,295 105,000
1993 4,177,500 161,476 101,558 935 84,600
1994 4,260,900 131,705 173,023 1,956 125,000
1995 4,345,900 1 12,435 147,929 945 149,400
1996 4,432,900 126,043 150,351 352 163,400
Average
Annual

Growth Rates

1935 '1990 6.4 % 1.4 % 35.8 %
1991-1996 2.0% 2.2% 11.9%

1985 - 1996 4.0 % 1.8 % 22.8 %

 

 

 

 

Note: Large changes in officially recorded export numbers suggest official statistics
did not capture many of the exports prior to 1990.

" Refer to officially recorded cattle exported from neighboring countries such as Mali
and Niger through Burkina Faso.

” 1993 to 1996 refer to annual average prices quoted at Pouytenga; 1985 to 1992 are
estimates based on prices in Mali.

Sources: Les Statistiques de L ’Elevage au Burkina Faso. 1996, Ouagadougou.B.F.

Annuaire Statistique du Burkina Faso, 1994. INSD, Ouagadougou, B. Faso.

110

Table 4. 6 Human Population, and Officially Recorded Cattle Stock and
Slaughter by Zones' 1n Burkina F aso - 1993

 

 

 

 

 

 

 

 

 

 

 

 

 

Pop. Stock Stock Slaughter Slaughter Price
(Mil) (Num.) (%) (Num.) (%) FCFA/ head
Zone 3.09 1,357,000 32 % 86,273 54 % 80,564
Amena-
gee
Zone 2.45 1,155,000 28 % 50,213 31 % 82,310
Coton-
niere
Zone 2.27 1,245,000 30 % 16,847 10 % 85,839
Saheli-
enne
Zone 0.55 420,000 10 % 8,143 5 % 90,500
Est

 

Sources: Les Statistiques de L ’Elevage au Burkina Faso. I996, Ouagadougou.B.F.
Annuaire Statistique du Burkina Faso, I994. INSD, Ouagadougou, B. Faso.

lll

retains the right to approve any price and authorize sale. Bargaining takes place
openly between buyers and sellers, making information flow easy in each market,
though information does not necessarily flow freely between one market and another.

Again, as in the case of Mali, trekking is the most predominant means of
transporting cattle to marketing centers throughout Burkina Faso. Herders usually trek
their cattle to nearby collection market a few kilometers from their bases, and may
sell only a few cattle at a time. Cattle traders may buy cattle in singles or in small
groups from various collection markets until a “commercial” herd is assembled for
shipment to redistribution and/ or terminal markets either for slaughter or for export
to coastal countries. In recent years, most of the cattle from Burkina Faso are exported
by rail and truck fi'om Ouagadougou and Bobo-Dioulasso to Cote d’Ivoire; or by truck
to Ghana. Fewer cattle officially enter Ghana due to stringent quarantine procedures,
and it is believed that most of the cattle from Burkina Faso and Mali trek across the
Ghana borders illegally to avoid official scrutiny, and then are shipped south to
Kumasi and Accra by trucks. (Ghana has banned trekking livestock across the
country).

The strategic position of Burkina Faso in the Sahel region bordering all six
countries — Mali and Niger to the north and north west; and Cote d’Ivoire, Ghana,
Togo, and Benin to the south and south east — makes it a natural transit center for
cattle trade in the sub-region. As has already been noted, Malian cattle, particularly

from the eastern provinces, as well as cattle from Niger in limited numbers, have

112

regularly trekked through Burkina F aso for transshipment to the coastal countries

including Cote d’Ivoire, Ghana, Togo, Benin, and even Nigeria.

4.5. Cattle Production and Marketing in Ghana

The total area of Ghana is about 238,540 kmz, divided into three main
vegetational zones that determine the livestock production patterns in the country.
These include the Guinea savannah zone in the north, which covers more than half
(52%) of Ghana’s land area, the Forest belt that covers the middle to most of the
south of the country and represents about 34% of the total land area, and the semi-arid
coastal zone that stretches from the area around Cape Coast to the Togo border
covering some 14% of Ghana’s land area. Most of the cattle produced in Ghana are
of the indigenous West African Short Horn (WASH) type which show considerable
resistance to trypanosorniasis, even though the Zebu-WASH cross (called Sanga) are
also common.

Most of Ghana’s cattle come from the Guinea savannah zone, where
production is concentrated around Kpong-Tamale, even though cattle and other
livestock are raised throughout the zone. The sedentary production system is the most
common practice, and most cattle farmers commonly produce cereals also (mainly
sorghum and millet and/or maize). Herders generally keep their cattle in kraals to
protect them from harsh environmental conditions and thieves, and also keep the

animals from straying into nearby food crop farms.

113

There exists great potential in the coastal belt for increased cattle production
due to the favorable climatic conditions of the area that reduce the incidence of
trypanosomiasis, and its proximity to urban centers. Most of the cattle raised in this
zone are primarily dairy cattle which are later sold for slaughter, even though a
considerable percentage of the herd is raised as beef cattle. A few peri-urban dairy
enterprises have emerged in this zone in recent years to feed the expanding urban
centers in the area, and these systems are generally very intensive. Nevertheless, most
of the herders can be classified under the sedentary production system which is the
more common practice.

In the forest belt, high humidity and high rainfall create conditions for common
tropical diseases such as trypanosonriasis, which is a major constraint to cattle
production. Few cattle thrive well in this zone, even though recent efforts by the
government and other agencies aimed at controlling these tropical diseases seem to
increase the cattle population in the zone, particularly around Ejura in the Ashanti
region and Afram Plains in the Eastern region. For example, interviews with farmers
and extension agents in the Ashanti region revealed that in recent years, most cereal
farmers (mainly maize) invested their proceeds in cattle after selling their crops. The
animals are fattened and then sold at the beginning of the planting season for much-
needed cash.

This study identifies two main cattle production zones in Ghana:

114

Northern Zone — includes 3 administrative regions with Kpong Tamale-Tamale as
the reference area - Northern, Upper East, and Upper West regions.

South-East Zone -- includes 3 administrative regions with Accra Plains as the
reference area — Greater Accra, Eastern, and Volta regions. A third zone,

Cartral- West Zone — which also includes 4 administrative regions with Kumasi as
the reference area - Ashanti, Central, Western, and Brong Ahafo regions, has
been identified so that together the three zones constitute the beef demand or

consumption zones in Ghana.

The data presented in Table 4.7 show that in Ghana, cattle stock numbers
increased twice as much as the slaughter numbers in the mid- to late-19808, but this
trend in growth reversed in the 19908. The increase in slaughter numbers may be
attributed to more cattle imports from the Sahel region, particularly Burkina Faso, in
response to the CFA franc devaluation; and also increases in the off-take of local
cattle, whose prices might have been given a boost because demand increased for all
cattle types (imported animals are larger animals which are priced higher than
smaller local animals), coupled with a reduction in European beef imports. Also, the
data (Table 4.8) show that while the Northern Zone is the major center of cattle
production in Ghana, accounting for about 75% of the total cattle stock, the Central-
West Zone (that includes the Kumasi metropolis) and South-East Zone (including the

Accra-Tema metropolis) are the most important consumption centers.

115

Table 4. 7. Officially Recorded Annual Average Stock, Slaughter, and Prices of

Cattle in Ghana (1985 - 1996)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Stock Slaughter‘ Imports" Cattle Price‘
(Numbers) (Numbers) (Numbers) C/head F CFA/head
1985 1,064,778 92,073 1,268 15,865 130,976
1986 1,134,870 70,957 1,200 27,503 90,953
1987 1,170,805 71,123 1,000 53,806 100,284
1988 1,125,812 93,333 1,000 70,823 105,118
1989 1,136,421 98,815 1,000 94,500 115,644
1990 1,144,787 88,918 299 180,000 152,486
1991 1,194,633 97,916 1,992 210,000 162,291
1992 1,159,431 95,306 3,286 230,000 ' 145,931
1993 1,168,640 105,938 7,192 230,000 103,416
1994 1,217,077 121,874 47,176 280,000 157,361
11995 1,112,106 109,145 31,541 340,000 143,819
1996 1,247,861 108,006 37,201 450,000 141,115
Average
Annual
Growth
Rates
1985 - 1990 1.5 % 0.9 % - 18.4 %
1991-1996 1.7 % 3.7 % 215.1%
1985 - 1996 1.6 % 2.4 % 108.9 %

 

' Slaughter figures include imported animals

" FAO Figures — 1985 to 1989; Les Statistiques de l’Elevage au Burkina Faso (1996) — 1990

to 1996.

° FAO Figures — 1985 to 1989; Estimated from field data: 1990 - 1996.

 

Sources: Livestock Planning and Information Unit (LPIU), and Veterinary Services Division
of the Ministry of Food and Agriculture, Accra, Ghana.

116

Table 4.8. Human Population, and Officially Recorded Cattle Stock and
Slaughter by Zones in Ghana - 1993

 

Pop. Stock Stock Slaughter“ Slaughter Price“

(Mil.) (Numbers) (%) (Numbers) (%) C/head
24,142 23 % 180,000

 

Northern 3.25 876,781 75 %

Zone
Central- 7.41 73,327 6 %

 

46,755 44 % 230,000

West Zone
South-East 5.73 218,523 19 %

 

35,039 33 % 230,000

 

 

 

 

 

 

Zone

 

 

 

I"Slaughter figures include domestic production and imports

1" Prices are estimates fiom field data.
Sources: Computed from figures obtained from the Livestock Planning and

Information Unit (LPIU), and Veterinary Services Division of the Ministry of
Food and Agriculture, Accra, Ghana.

117

The marketing of cattle has had along history in Ghana, linking back to the
nineteenth century north-south West African trade routes that exchanged livestock for
forest products. Traditionally, cattle had flowed freely from the cattle-surplus regions
of the Sahel on hoof across the borders to Kumasi, and then further down south to
Accra-Tema and Cape Coast or Secondi-Takoradi.

The first break with this traditional system occurred in 1968, when the Ghana
government passed the Alien Compliance Act, which effectively removed all
foreigners fiom a wide range of commercial activities including the cattle trade. Cattle
marketing suffered as a result of the implementation of this Act, and the government
subsequently established the Cattle Development Board (which later became the now-
defunct Meat Marketing Board). The functions of the Board, among others, were to
purchase, handle, and transport all cattle imported for consumption in Ghana; and to
arrange payments of proceeds from cattle sales to dealers as well as distribute
imported cattle to government recognized butcher associations in the country
(Josserand and Sullivan, 1979). The bureaucracy that became the hallmark of the
Meat Marketing Board (MMB) contributed in no small way in cutting the flow of
cattle from the Sahel to Ghana in the 19708.

When Sahelian cattle imported to Ghana began to dwindle from the mid- 19708,
the Meat Marketing Board began to import cheaper frozen beef from South Ammca
and Europe, among others, which were distributed to Butcher Associations for sale

to consumers together with local cattle slaughtered. The only other agency that

118

imported beef during the period was the Ghana Industrial Holding Corporation
(GIHOC), whose beef imports went directly to feed its corned beef factory at
Bolgatanga in Northern Ghana.

The government control of the domestic cattle trade resulted in chronic
shortages of beef on the market throughout the mid-19708 to early 19808, until trade
liberalization under structural adjustment allowed the private sector to regain control
of the domestic meat market. There are three major markets for both domestic and
imported cattle in the 19908, which include the Kpong-Tamale cattle market in the
north, the Kumasi cattle market in the middle or forest belt, and the Ashaiman cattle

market in the south near Accra-Tema.

4.6. Cattle Production and Marketing in Cote d’Ivoire

With a total area slightly bigger than that of her coastal neighbor Ghana, Cote
d’Ivoire covers an area of 332,463 km2 and shares borders with all the other countries
in the Central Corridor — Ghana to the east, and Burkina Faso and Mali to the north;
as well as Guinea and Liberia to the west. Most of her land area falls within the forest
belt, stretching from the Atlantic coast in the south and tapering into the Guinea
savannah in the north. Trypanosomiasis and other cattle diseases, which are endemic
in the humid forest zones of sub-Saharan Africa, are a major constraint to cattle

production in Cote d’Ivoire as it is the case in Ghana.

119

Most of the cattle produced in Cote d’Ivoire come from the three regions of the
North (Korhogo, Ferkessedougou, and Boundiali), the North-Central. (Bouake and
Katiola), and the West-Central (Gagnoa, Divo, and Lakota). In addition, a
considerable number of Sahelian herders and their cattle frequently cross the border
to northern Cote d’Ivoire, either in search of grazing fields or as ‘illegal’ exports. The
Ministry of Agriculture’s Livestock Service and a parastatal, La Societe pour le
Developpement des Productions Animales (SODEPRA), are the two organizations
that have been responsible for the livestock sector (including cattle) in Cote d’Ivoire.
SODEPRA in particular has over the years run projects that have aimed at creating
a tsetse-flee environment in the cattle production zones to promote productivity, as
well as provide services for herders.

In the more typical traditional Ivorian herds which occur in the northern and
central regions, the smaller Baoule and/ or Taurin breeds together with Zebu-Taurin
and Zebu-Baoule crosses are extensively raised since they are more resistant to the
trypanosomiasis and other diseases. Near the northern border and around Korhorgo—
Ferke area, however, the larger Zebu cattle and Zebu-Taurin crosses are more
common. The sedentary system of cattle production is more typical in raising cattle
in Cote d’Ivoire, even though various forms of the transhumant systems exist
throughout the region.

For the purposes of this study, Cote d’lvoire has been divided into two zones

representing both production and consumption areas. These are:

120

Zone Savane (Nord) — which includes Nord (Ferke-Kohorgo), Nord-Ouest
(Odienne), Nord-East (Bondoukou), and Centre-Nord (Bouake) constitutes
the production zone; and together with

Zone Foret (Sud) — including, Centre-Ouest (Daloa), Centre (Yamoussoukro),
Ouest (Man), Est (Abengourou); Sud (Abidjan), and Sud-Ouest (San-Pedro)

constitute the demand or consuming zones in Cote d’Ivoire.

Cote d’Ivoire livestock data show that both cattle stock and slaughter numbers
grew in the 19808 as well as the 19908; but while the average annual growth rate was
higher for cattle stocks than slaughter in the 19808, the reverse was the case in the
19908. On the other hand, the average growth rate for cattle imports from the Sahel
were negative in the 19808 but positive in the 19908 by about the same margin
(14%).This is consistent with the experience of Cote d’Ivoire in the 19808 when most
of her cattle imports from the Sahel were substituted with cheap European beef
imports; and in the 19908, when the CFA franc devaluation made cattle from the
Sahel more competitive again.

The Savannah Zone of the north also produces most of Cote d’Ivoire’s
local cattle (94%), but consumes about 27%; compared to the south (Zone Foret),
which produces only about 6% of the total cattle stock but consumes about 73%. The

Abidjan metropolis, for instance, is a major beef consuming center in Cote d’Ivoire.

121

Table 4. 9. Officially Recorded Annual Average Stock, Slaughter, and Prices
of Cattle in Cote d’Ivoire (1985 - 1996)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Stock Slaughter“ Imports Cattle Price
(Numbers) (Numbers) (Numbers) (F CFA/head)
1985 954,000 210,000 182,996 134,778
1986 899,000 200,000 155,393 107,738
1987 935,000 205,000 129,291 106,191
1988 993,000 215,000 118,576 101,956
1989 1,049,000 225,000 123,382 1 16,597
1990 1,108,000 226,591 83,807 102,155
1991 1,145,000 238,674 129,112 109,533
1992 1,180,000 249,464 146,442 1 17,636
1993 1,205,000 249,823 137,754 1 10,585
1994 1,231,000 251,353 144,000 230,011
1995 1,258,000 270,000 148,000 181,509
1996 1,285,550 290,000 173,000 185,873
Average
Annual
Growth Rates
1935-1990 3.1% 1.6% - 13.6%
1991 - 1996 2.5 % 4.2 % 14.3 %
1985 - 1996 2.8 % 3.0 % 1.6 %

 

I'Slaughter figures include imported animals.

Sources: Stock and Import figures obtained from Berte and Zongo, 1996

 

Slaughter figures and prices estimated from FAO Production Yearbooks,
various issues.

122

Table 4.10 Human Population, and Officially Recorded Cattle Stock and
Slaughter by Zones in Cote d’Ivoire — 1993

 

Pop. Stock Stock Slaughter Slaughter Price
(Mil.) (N umber) (%) (Number) (%) FCFA/head

 

 

 

 

 

 

 

 

 

 

Zone
Savane 3.4 1,127,000 94 % 67,452 27 % 95,200
(North)
Zone Foret 9.3 78,000 6 % 182,371 73 % 110,000
(South)

 

Sources: Population estimated from Memento Chiflre De La Cote d 'Ivoire, 1986 -
I98 7. Ministere de l'Industrie et du Plan Cote d’Ivoire.
Stock and Slaughter figures estimated from Berte and Zongo, 1996
Prices obtained from Metzel et al, ibid..

123

Livestock marketing in general and cattle marketing in particular have been
quite open in Cote d’Ivoire, compared to other livestock markets in the sub-region.
Staatz (1979), for example, states that large numbers of cattle imported into Cote
d’Ivoire from Mali between 1970 and 1974 (most of which would have gone to Ghana
otherwise) resulted from economic instability and a reorganization of the cattle
market in Ghana during the period. Starting in the mid- 19608, Cote d’Ivoire gradually
increased her imports to become one of the most important markets for Sahelian cattle
in West Africa.

Cattle continue to flow in a north-south direction in Cote d’Ivoire. However,
unlike the 19608 and 19708 when there existed four major cattle trade routes (see
Staatz, ibid.), there now appears to be one major route by rail and truck from the north
through Bouake and then to Abidjan (cattle trekking south of Bouake has been banned
in Cote d’Ivoire). All cattle shipments through the eastern and western routes during
the 19608 and 19708 have been reduced to trickles due partly to dwindling numbers
of cattle that cross the borders, and partly due to reduced profitability. For example,
the eastern route through the border towns of Doropo and Bondoukou which used to
serve Ghanaian markets is almost now non-existent because Ghanaian markets have
become relatively unprofitable in recent years.

As common in most West African countries, cattle farmers and herders sell
their animals in singles or a few at a time to itinerant traders in nearby ‘collection

markets’; which these traders subsequently sell in larger markets to butchers for

124

slaughter, or to other traders for export to deficit regions. Tingrela is the most
important crossing point for cattle in Cote d’Ivoire, and also the largest cattle market
in the north of the country; so that most of the cattle from northern Cote d’Ivoire as
well as Mali and Burkina Faso are sold and shipped to Bouake and the south from
here. Cattle traders and butchers based in the south and central Cote d’Ivoire routinely
travel to Tingrela to buy cattle, particularly during periods of shortages of slaughter

animals in the south.

4.7. A Summary of Cattle Production and Marketing Costs in the Central
Corridor

Even though a complex array of cattle production systems exist in the West
African sub-region (e. g., transhumant, sedentary, semi-intensive and intensive
systems), the sedentary system of production seems to predominate now as
competition between access to land for grazing and crop production intensifies; and
soil degradation and environmental concerns, as well as population increases exert
pressure on land use in most parts of West Africa. For example, Herman (ibid, pp 8)
argues that there has been a great misconception about herders in the Sahel, that the
Sahel “continues to be populated by nomadic herders who live almost exclusively ofi’
their livestock through subsistence consumption of milk and exchange of animals for
money to purchase grain ..... ”. He states that the reality is that historic, climatic,
biologic, and economic factors have combined to motivate most herders who were
traditionally mobile to be increasingly stationary and more dependant on crop

125

production. In addition, the major droughts of the 19708 and 19808 redistributed cattle
ownership from more nomadic herders (who had to sell their animals to buy grain, at
very unfavorable terms of trade) to farmers (who had grain to sell).

Moreover, intensive systems of cattle production (e.g., peri-urban dairy
enterprises) have been shown to be less profitable as sources of slaughter cattle on a
large scale compared to the more labor intensive sedentary systems (Metzel et al.,
ibid.). Estimates of production and marketing costs in the Central Corridor were
therefore based on the sedentary system of cattle production, with the assumption that
future expansion in cattle production in the sub-region will derive more from the
sedentary rather than any other existing systems of cattle production.

Since the focus of this analysis is on the number of cattle that are produced and
shipped from one region or country to another, the unit applied in the cost estimates
is the ‘Animal Unit’ (AU), which means a head of cattle one year or older (World
Bank, 1975). This differs slightly from the ‘Reproductive Unit’ (RU), which refers
to one adult female and the fraction of adult males and non-reproductive offspring per
adult female in the herd (Metzel et al. ibid.); or the Unite Betail Tropicale (UBT)
referring to one lactating cow or 1.1 adult steer (Herman, ibid) used in other studies.

In Table 4.11, cattle production cost estimates based on 1993 prices are
presented for the four countries in the Central Corridor — Mali, Burkina Faso, Ghana,

and Cote d’Ivoire (See Appendix A41 for details of estimates).

126

Figure 4.11. Cattle Production Cost Estimates for the Central Corridor

 

 

 

 

 

 

 

 

(based on 1993 Prices)
Cattle Production Cost Estimates (assumes maturity in 5 years)
Mali Burkina Faso Cote d’Ivoire Ghana

(FCFA/head) (FCFA/head) (FCFA/head) C/head FCFA/head
Repd. Stock 16,019 15,584 12,330 19,729 8,887
Fixed Inputs 133 265 482 7,709 3,470
Labor 18,765 30,705 24,598 20, 146 9,075
Comm. 5,235 1,459 2,000 15,308 6,896
Feeds/Inputs
Misc. 6,280 1,248 3,364 9,273 4,177
Total Cost 46,432 49,261 42,774 72,154 32,505

 

 

 

 

 

 

 

Note: Cattle produced in Mali and Burkina Faso are Zebu types, with average live weight of 250 kg
per animal; Cattle produced in Ghana and Cote d’lvpire are mainly West African Short Horns
(WASH) and the Taurin, respectively, with average live weight of 165 kg per animal.

The 1993 Nominal Exchange Rate used is C2.22 per lFCFA.

Source: Computed from data provided in Metzel et al.(ibid.), Vol HI, 1994.

An important difference between cattle produced in the Sahelian zone (Mali
and Burkina Faso) and those produced in the coastal countries (Ghana and Cote
d’Ivoire) is that the Zebu cattle of the Saheian zone are larger animals (live weight

average 250 kg per animal) compared to those of the coastal countries (live weight

127

average 165 kg per animal). This has implications for the estimated cost of production
figures. For example, even though there are differences in feed costs, veterinary costs,
etc, depending on the type of animal, one could normalize these costs on per unit live-
weight basis. Then if we assume, based on the live weight differences, that the yield
from cattle from the coastal countries is 34% less than those from the Sahelian zone,
the production cost per unit of the smaller animals will be proportionately higher than
the estimated costs of Sahelian animals. Thus, for comparable animals, the cost of
cattle production in the Central Corridor is lowest in Mali (3 0,645 FCFA) and highest
in Cote d’Ivoire (42,774 FCFA).

The marketing cost of cattle, on the other hand, does not differentiate between
relative sizes (i.e., large and small cattle), and therefore the cost estimates per head
represent the actual averages across all countries. Except the transport per head,
which is highest (about one-and-a-half times higher) in Ghana (cattle shipment in
Ghana is done by truck only), among the four countries in the Central Corridor Ghana
has the lowest cost in most of the important cost items in cattle marketing (e.g., labor
since trucking requires less labor). Mali also has a relatively lower cost in cattle
marketing compared to the other francophone countries except in the cost of labor,
apparently because Malian cattle travel longer distances from farm-to-market, on the
average, relative to cattle in the other three countries. Again, in general, Cote d’Ivoire

has the highest cattle marketing cost in the sub region.

128

Table 4.12. Elements of Cattle Marketing Cost Estimates for the Central

Corridor (based on 1993 Prices).

 

 

 

 

 

 

 

 

 

 

Mali Burkina Faso Cote d’Ivoire Ghana
(F CFA/head) (F CFA/head) (F CFA/head) C/hd FCFA/hd

Transport

-trekkin8 18 FCFA/km 17 FCFA/km 21 FCFA/krn na

'thk 20 FCFA/km 19 FCFA/km 23 FCFA/km 67 C/km or

. 30 FCFA/km

4'81" na 20 FCFA/km 20 FCFA/km na
Capital Inputs 173 146 24 63 28
Labor 1000 625 790 700 3 15
Feed 20 25 53 100 45
Taxes 460 1,150 800 1,300 586
Broker’s fees 500 1,000 1,000 500 225
Tips 140 750 800 1,000 450
Misc. 750 670 850 800 360

 

 

 

 

 

 

Source: Computed from data provided in Metzel ct al.(ibid.), Vol 1H, 1994.

129

Transforming cattle into beef and beef marketing in all four countries typically

involve bouchers, wholesalers, and retailers, who form the final link between cattle

traders and consumers. Also in all four countries, cattle slaughter are required by law

to be done in abattoirs (or slaughter houses) and be subjected to veterinary inspection

before they are sold to the public (even though many slaughters occur outside the

abattoirs in each country). The expenses that are associated with these requirements,

together with other transformation and marketing costs are summarized in Table 4. 13.

Again, the beef marketing costs are higher in Burkina Faso and Cote d’Ivoire than in

Mali and Ghana The per kilogram average beef prices at the retail level are presented

in Table 4.14.

Table 4.13. Elements of Beef Marketing Cost Estimates for the Central Corridor

(based on 1993 Prices).

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Faso Cote d’Ivoire Ghana
(F CFA/kg) (F CFA/kg) (F CFA/kg) C/kg FCFA/kg

Capital Inputs 173 21 52 45 28
Labor 1000 1,500 1,000 1,000 450
Feed 20 300 500 800 360
Taxes 460 7,500 l, 100 200 90
Abat.+ Mat. - 2,000 1,000 1,000 450
Tips 140 375 375 0 0
Misc. 750 200 1,200 1,500 680

 

 

 

Source: Computed from data provided in Metzel et al.(ibid.), Vol III, 1994.

130

Table 4.14 Prices of Local Beef in the Central Corridor: 1990 - 1996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali (F CFA/kg) Burkina Faso Cote d’Ivoire Ghana
W/bone Boneless FCFA/kg FCFA/kg C/kg FCFA/kg
1985 650 700 700 950 na
1986 690 700 700 942 na
1987 745 800 700 900 na
1988 700 950 700 928 na
1989 710 1,000 553 913 na
1990 670 980 527 885 985 835
1991 635 805 484 900 954 740
1992 640 790 469 545 977 618
1993 690 800 455 522 1,295 583
1994 900 1,000 738 968 1,618 910
1995 j 970 1,075 1,025 1,174 2,536 1,075
1996 1,070 1,255 801 1,225 3,544 1,110
Note: These prices are officially recorded national averages, and do not refer to prices in any
particular city or town.
Sources:
- Mali data is from 0MBE VI, Statistique du Betail et de la Viande, Rapports Annuels. '
Bamako, Mali.

- Burkina Faso data is from (a) Annuaire Statistique du Burkina Faso, 1994. INSD,
Ouagadougou, B. Faso; and (b) Les Statistiques de L 'Elevage au Burkina Faso.
1996, Ouagadougou.B.F.

- Ghana data is from Livestock Planning and Information Unit (LPIU), Ministry of Food and
Agriculture, Accra, Ghana.

- Cote d’Ivoire data is from (a) Holtzman, J. S. and N. P. Kulibaba.1992; and (b) Berte, K.
and D. Zongo. 1996.

131

CHAPTER V
Data, Model Analysis, and Discussion

5.0. Introduction

Modeling cattle trade in the four countries of the Central Corridor - Mali,
Burkina Faso, Ghana, and Cote d’Ivoire - necessitated assembling relevant data from
different sources, including recent studies, published reports, surveys and personal
interviews. A diverse set of coefficients were required to parameterize an initial
programming model, which was then calibrated to reflect the economic conditions
that prevailed in the base period (1993) as a point of reference for other scenarios.
Since the study combined individual as well as cross-country analysis, a fundamental
consideration was to determine techniques of production and marketing as well as
variable resources that caused cost structures to difi‘er across regions within a country
or across countries. This helped to identify relative cost differentials that formed the
basis of shipments of cattle and beef from one region to another, or from one country
to another.

This chapter discusses the underlying data for the different scenarios
considered, and the rationale for each scenario. Comparative analysis is then made

of the model outputs per country and across countries in the Central Corridor.

132

5.1. Data and Analytical Procedure

Data for this study have been gathered mainly fi'om secondary sources,
augmented by personal interviews of some practitioners, researchers, and other stake
holders in the beef cattle sub-sector of the West African Central Corridor. In October
1997, a short survey of cattle farmers in the Accra Plains and Northern Ghana was
conducted to investigate their cultural practices and production cost structures to
verify and/or support the existing data on cattle production in Ghana. With regard to
such published data as population, land use, etc, the National Statistical Services of
the countries involved, as well as the Food and Agricultural Organization (F A0) and

the World Bank were the primary sources.

Production and Consumption Regions

The modeling of beef and cattle trade in the Central Corridor is based on the
essential elements of traditional spatial equilibrium analysis. Concentration of cattle
production in the various regions in the countries of the Central Corridor form the
basis for identifying certain areas as production regions in each country. However,
since beef is consumed by all the population, all regions in each country form part of
the consuming regions based on whether such regions are net exporters or net
importers of cattle. Table 5.1 provides a summary of the various consuming and
producing regions specified in the Central Corridor (as discussed in the previous

chapters) and used for the trade model.

133

Eight cattle producing regions were identified (based on cattle stocks in the
l990s)for the central Corridor — two in Mali, three in Burkina Faso, two in Ghana,
and one in Cote d’Ivoire. Some of these regions were then combined in each country
because only minimal difi‘erences in cattle production existed across such regions
within the same country; and also to simplify the model and make it more tractable.
Four producing regions, one in each country, were finally specified for the model.
These included Mali (Zone Centre-Est and Zone Nord), Burkina Faso (Zone
Amenagee, Zone Cotoniere, and Zone Sahelienne), Ghana (Northern Zone), and Cote
d’Ivoire (Zone Nord).

On the other hand, there were six consuming or demand regions specified —
one in Mali (all Zones), one in Burkina Faso (all Zones), two in Ghana (all Zones),
and two in Cote d’Ivoire (all Zones). The two demand regions each specified for
Ghana and Cote d’Ivoire reflected the savannah north in each country where cattle
production is important, and the forest south where it is not.

A major determinant of whether shipments of cattle occur or not among
regions and across countries is the cost of transport in moving cattle from one point
to another within the Central Corridor. There are two cost elements which define the
total transportation cost based on the distances covered by marketing agents: (a) the
assembling cost, which consists of gathering the animals fi'om various collection
markets to a regrouping market; and (b) the shipment cost fiom regrouping markets

to terminal markets either within the same country or across borders from one country

134

Table 5.1.
Corridor

Cattle Producing Regions by Country

MALI

Zone Centre-E -- Sikasso, Koulikoro,
Segou, Mopti (Sikasso -Mopti)

Zone Nord — Tombouctou, Gao

(Tombouctou).
BURKINA FASO
ZoneArnenagee— Sissili, Sanguie,

Boulkiemde, Passore, Oubritenga,
Bazega, Ganzourgou, Kourittenga,
Boulgou, Zoundweogo, Nahouri
(Ouagadougou-Pouytenga)
Zone Cotonniere — Kossi, Sourou,
Mouhoun, Kenedougou, Houet,
Comoe, Poni, Bougouriba (Bobo

Dioulasso)

Zone Sahelienne — Seno, Ganga,
Namentenga, Sanmatenga, Bam,
Oudalan, Soum, Yatenga (Dori)

Zone Est — Gourma, Tapoa (Fada-
Ngourrna)

GHANA

Northern Zone -- Northern, Upper East,

Upper West (Kpong Tamale -Tamale)

South-East Zone -- Greater Accra,
Eastern, Volta (Accra Plains)

COTE D’IVOIRE
Zone Savane (Now — Nord (Ferke -
Korhogo), Nord-Ouest (Odienne),
Nord-East (Bondoukou), and
Centre-Nord (Bouake)

135

Cattle Producing and Beef Consuming Regions of the Central

Cattle Consuming Regions by Country
MALI
Zone Centre-Est -- Sikasso, Koulikoro,
Segou, Mopti (Bamako-Sikasso)
Zone Ouest -- Kayes (Kayes)
Zone Nord — Tombouctou, Gao
(Tombouctou).

BURKINA FASO
ZoneAmenagee— Sissili, Sanguie,
Boulkiemde, Passore, Oubritenga,
Bazega, Ganzourgou, Kourittenga,
Boulgou, Zoundweogo, Nahouri
(Ouagadougou-Pouytenga)
Zone Cotonniere — Kossi, Sourou,
Mouhoun, Kenedougou, Houet,
Comoe, Poni, Bougouriba (Bobo
Dioulasso)
Sahelienne — Seno, Ganga,
Namentenga, Sanmatenga, Bam,
Oudalan, Soum, Yatenga (Dori)
Zone Est — Gourma, Tapoa (Fada-
Ngourrna)

Zone

GHANA
South-East Z one -- Greater Accra,
Eastern, Volta (Accra - Tema)
Central- West Zone - Ashanti, Central,
Western, Brong Ahafo (Kumasi)
Northern Zone - Northern, Upper East,
Upper West (Tamale - Bolga)

COTE D’IVOIRE

Zone Foret (Sud) -- Sud (Abidjan), Sud-
Ouest (San-Pedro), Centre-Ouest
(Daloa), Centre (Y amoussoukro),
Ouest (Man), Est (Abengourou)

Zone Savane (Nord) — Nord (Ferke-
Kohorgo), Nord-Ouest (Odienne),
Nord-East (Bondoukou), and
Centre-Nord (Bouake).

to another. For each of the regions specified, a central reference point (usually a
major city) has been chosen.

The regrouping markets in each cattle producing center was assumed to be
within a 50-kilometer radius, and the cattle normally trekked to these markets. The
assembling cost per head of cattle is therefore computed based on a 50-kilometer
distance from the regrouping market.

In Table 5.2 the distances between regions in the Central Corridor and major
cities which are the reference points for the regions are shown. The per kilometer
transport cost per head of cattle used in the model have been estimated as 20
FCFA/km for truck shipments and 18 FCFA/km for trekking in Mali; 19 FCFA/km,
17 FCFA/km, and 20 F CFA/km for truck, trekking, and train shipments, respectively,
in Burkina Faso; 23 FCFA/km, 21 FCFA/km, and 20 FCFA/km for truck, trekking,
and train shipments, respectively, in Cote d’Ivoire; and 67 Cedis/km (or 30 FCFA/km)
for truck shipments in Ghana (see Table 4.12).

The transport cost per head of cattle in the sub-region therefore depends on
the distance the animal is shipped between markets and across countries. Moreover,
there exist numerous unquantifiable exigencies along the routes that cattle are shipped
within the Central Corridor, such that the cash cost of shipments may underestimate
the actual transaction cost incurred by marketing agents in the cattle trade. For
example, undue delays may be caused by over-zealous custom officers at the border

crossing points, and this may result in deaths of some animals, or weak animals

136

Table 5.2.. Estimated Distances (km) between Cattle Producing and Beef Consuming
Centers in the Central Corridor

Producing Centers

Consuming Nioro Mo- Sika- Timb- Bobo Dori Fada Yako Kpong] Accra Ferke

Centers Nara pti sso ouct- Diou- Ngo- Pouy- Tamale Plains Kor-

ou lasso unna tenga hogo
Bamako 432 767 374 912 611 1328 1197 1054 1330 2167 482
Sikasso 643 478 50 988 170 955 823 838 1064 1775 272

Nioro-Nara 180 920 743 720 813 1551 1629 1536 1762 2473 914
Mopti 920 50 478 409 446 561 733 583 709 1320 749
Timbouctou 720 409 887 150 952 970 121 l 992 l 1 18 1729 1158

Ouagadougo 1479 426 781 992 463 341 299 120 443 l 154 694

u-Pouytenga

Bobo 1043 486 168 895 180 617 655 483 719 1430 258
Dioulasso

Dori 1551 561 955 970 697 50 266 269 643 1354 875
Fada 1698 645 1057 1211 702 266 80 219 458 1169 913
Ngourma

Accra—Tema 2423 1270 1725 1679 1523 1304 1198 1040 711 100 1171
Kumasi 2150 1067 1422 1476 1220 1001 845 737 358 353 979
Tamale- 1762 709 1064 1118 590 643 487 379 100 811 977
Bolga

Abidjan 1468 1303 825 1712 1356 1429 1554 1335 780 656 614
Bouake 1115 950 472 1359 459 1076 1201 982 943 1009 261
Ferke- 914 749 272 1 158 258 875 970 751 977 1221 50
Kohorgo

Source: Estimated from Michelin Map No. 953 : Africa — North and West. 1989. PNEU MICHELIN,

Paris, France.

137

which then are sold at a discount; or even loss by traders because their animals

arrived too late at the market, etc.

Price Elasticities of Demand

Beef demand studies in the countries of the Central Corridor are limited. The
price elasticities of demand used in this study (except for Cote d’Ivoire) were
therefore derived price elasticities based on figures reported in individual studies in
the countries concerned between 1992 and 1997 (see sources from Table 5.3). The
studies cited (again, except that for Cote d’Ivoire) did not also differentiate between
local and imported beef at the retail level. Such a distinction would have been useful
particularly for Ghana, which together with Cote d’lvoire has imported substantial
amounts of beef annually in the 19805 and 19905, and where price differences exist
between imported and local beef that consumers buy on the market. Also, most of the
consumption studies usually report price elasticities for meat rather than specifically
for beef (e.g. Reardon et al., 1992; Metzel et al., 1997).

Since meat in all four countries includes goat meat, mutton, chicken, ete., one
would expect the price elasticity of demand for beef in each country to be greater than
the ‘aggregate’ elasticities for meat reported. Elasticities used for the analysis were
derived through sensitivity analysis, using the reported figures as the lower limit in
each case. In general, the price elasticity for beef in each country was assumed to be

about 10% higher than the price elasticity for meat reported.

138

In Table 5.3 meat demand elasticities as reported in the studies cited are given;
and then the derived elasticities used in the model for the base period analysis. All
four countries show price elasticities of demand for meat that are greater than one
(i.e., elastic), implying that there are important substitutes to meat in these countries,
especially Ghana and Cote d’Ivoire, where fish consumption plays an important role
in providing the protein needs of the populations. The derived elasticities for beef are
all greater than one and assumed more elastic than the elasticities for meat since on
its own beef will have more substitutes (such as mutton, goat meat, chicken, etc.). The
own-price elasticities for beef demand used for the analysis thus ranged between - 1.1
in Ghana and -1.5 in Burkina Faso.

Also presented in Table 5.3 are average prices per kilogram beef in the Central
Corridor in 1993. It is important to note that beef prices in the Central Corridor differ
by location within a country, and across countries due to differences in distances
between cattle producing centers and markets, and the different taxes imposed by
different provincial areas. The national average beef prices quoted therefore give an
indication of the average prices consumers pay across each country rather than a
location specific price (see Table 5.3 for data sources).

Quantities of local beef (local slaughter of cattle converted into beef, which is
the sum of national production plus imported live-cattle that are slaughtered) and
imported beef (beef imports coming from outside the sub-region) obtained form

published data are also presented to give an indication of the quantities and volume

139

Table 5.3. Beef Price Elasticities of Demand and Initial Model Values for the Central Corridor
(prices and quantities are 1993 figures)

Demand Elasticity Elasticity Price/kg(FCFA) Beef Quantities (rnt)
Centers (meat) (beet) Local Imports Local' Imports“ Total
MALI' - 1.17 -1.3 690 - 32,393 0 32,393
BURKINA FASO” -1.40 -1.5 455 - 28,258 0 28,258
GHANA"
-Southern Zone -l.04 -1.1 508 457 18,539 19,123 37,662
-Northern Zone -1.04 -1.1
C071? D ’IVOIRE"
-Zone Foret (Sud) - -1.3 522 470 42,975 16,768 59,743
-Zone Savane - -1.3

(Nord)

‘local refers to the smn of national production plus imported live-cattle that are slaughtered.
“imports refer to beef imports coming from outside the sub-region
Sources: Elasticity figures obtained from
'Metzel et al. 1997. Perspectives de Croissance des Exportations de Betail Malien. Equite et Croissance
par le Biais de la Recherche Econornique: Volet Regimes et Croissance du Commerce. Rapport Finale.
Associates for lntemational Resources and Development (AIRD). Massachusetts, USA.
hReardon, T., C. Delgado, and T. Tiombiano. 1992. Substitution by Urban Sahelian Consumers between
Coarse Grains and Imported Rice and Wheat: The Case of Ouagadougou. Mirneo. IFPRI. USA.
° Devcourt Ltd. 1997. Food Needs Assessment and Potential Disincentive Effects of PL 480 Title II
Program: 1997 - 2001. USAID, Accra, Ghana.
‘Kouamela K. 1996. Devaluation et Produits de L’elevage en Cote d’Ivoire: Une Etude Quantitave.
Consultant CAPEC, Abidjan, Cote d’lvoire.
Price and quantity figures for Mali were obtained from OMBEVI, Statistique du Betail et de la Viande,
Rapports Annuels.Price and quantity figures for Burkina Faso were obtained from Les Statistiques de
L 'Elevage au Burkina Faso. 1996, Ouagadougou.Burkina Faso; and the Annuaire Statistique du
Burkina Faso, 1994. INSD, Ouagadougou, Burkina Faso.
Price and quantity figures for Ghana were obtained from the Livestock Planning and Information Unit
(LPIU) of the Ministry of Food and Agriculture, Accra, Ghana.
Price and quantity figures for Cote d’Ivoire were obtained fiom Berte and Zongo, 1996.

140

of trade in cattle and beef within the Central Corridor. Both Mali and Burkina Faso
are each self-sufficient in beef, except that minimal quantities of high quality beef are
imported to serve some niche markets. Ghana and Cote d’Ivoire, on the other hand,
can satisfy only about one-third each in beef consumption from local production, and
the rest are met through live cattle imports from the Sahelian countries, or beef
imports from the European Union and elsewhere. In the 19805 both countries
imported large quantities of cheap low-quality beef from the European Union, but this

has declined substantially in the 19905.

5.2. Accounting for Risk in the Trade Model

As has already been discussed (Chapter II), this study applies a variant of the
more commonly used mean-variance (E, V) method to account for the risk-averse
behavior of cattle producers in the Central Corridor of West Afiica. The basic
assumption here is that the coefficient for aggregate risk aversion for a region or
country should be equal to the sum of the individual risk aversion coefficients (Hazell
and Scandizzo, 1974). This may be expressed as:

E.¢.y.’w. y. = 9 Y’ 0 Y
where Y is a vector of the aggregate of cattle numbers supplied (off-take) in each
region; Q is the aggregate n *n covariance matrix of “activity” revenues with diagonal

elements for all cattle producing regions; and (D is the aggregate risk aversion

parameter.

141

The revenue covariance matrix, 0, was estimated for each region/country using
the number of cattle off-take per year and the respective average prices per head for
the period 1985 to 1996. Ordinary least squares (OLS) regression analysis was done
on the price and off-take numbers separately to remove any trend or other systematic
movements inherent in the series to ensure that any variations observed reflected the
true stochastic variations. The aggregate risk aversion parameter, Q, was derived
through sensitivity analysis (see Hazell and Norton, ibid.) of different values of Q
between 0 (indicating risk neutrality of producers) and 2.5 (indicating producers are
risk averse). A value for Q found to be consistent for this analysis was 1.5. Table 5.4
shows the value of Q, detrended cattle off-take numbers, prices, and revenues (a
product of the detrended cattle numbers and prices for each country/region) used (in
the analysis (see Hazell and Norton, ibid.)

In relative tenns, lower mean, variance, and standard deviation figures indicate
less risky enterprises (Hazel and Norton, ibid.). Table 5.4 shows that for the cattle
exporting countries, cattle production is more risky in Burkina Faso than in Mali,
based on farmers’ expected revenue from cattle production. Similarly, for cattle
importing countries, production is riskier in Ghana than in Cote d’Ivoire. For the
Central Corridor, therefore, the data suggest that cattle farmers in Burkina Faso face
higher production risk than their counterparts in Mali or elsewhere; while cattle
farmers in Cote d’Ivoire face the least risk in terms of the variability of income from

cattle production.

142

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143

5.3. Accounting for the Effect of Exchange Rate Changes in the Trade Model

The theoretical underpinnings of how exchange rate changes in each country
in the Central Corridor will affect the flow of cattle and beef in the sub-region has
been discussed in Chapter II. Essentially, the adjusted effective exchange rate (EERJ
operative in each country is what will be relevant for trade transactions at any period.
The EER, in a country with a flexible exchange rate regime (such as in Ghana) may
be expressed as:

BER. = (1+C)E(1 Hus-ta);
or

EER, = E (1 + e)(1 + t... - t,.) (See equation 36)
where E is the nominal exchange rate, e is the rate of change of the nominal exchange
rate, t... and t“ are the prevailing import tariff rate and export tax rate on cattle or beef
in each country, respectively.

Under a fixed exchange rate regime, the nominal exchange rate, E, is
exogenously determined. The BER, applicable therefore is the effective exchange
rate (see equation (25)) adjusted for the rate of change, v, in the cross-border
exchange rate transaction cost:

EER, = E (1 + v)(1 + t.“ - t,,) (See equation 37)
where v is computed as the rate of change of the exchange rate premium (offrcial rate

minus the parallel rate).

144

This study applies the BER concept to determine the effects of exchange rate
changes on trade flows, production of cattle, and consumption levels of beef in the
Central Corridor through the use of simulation analysis within the framework of the
trade model. In Table 5.5 the rate of change of the Cedi relative to both the US Dollar
and the CFA Franc have been computed. The value of e was 0.16 and 0.08 for the
rate of change of the Cedi relative to the Dollar and the CF A Franc, respectively.

The difference in e for the two currencies is expected since, unlike the Cedi
which is ‘floating’, the CFA Franc is tied to the French Franc and therefore responds
to changes in the US Dollar-French Franc rate. Also, the January 1994 devaluation
of the CFA Franc relative to the French Franc by 50% resulted in a negative change
for the value of the cedi relative to the CFA Franc.

The value of e used for this analysis is that for the Cedi-FCFA since the two
are the relevant currencies for transactions in the sub-region. On the other hand, the
value for v in terms of the CF A Franc is assumed zero since its rate of change relative
to the US Dollar is zero and there is no significant parallel market for it. This implies
that when trade occurs across currency zones (i.e., trade that involves the CF A Franc
zone countries and Ghana), e captures the effect of transaction cost involved; but
trade among the CFA Franc zone countries assumes no other transaction costs in

currency exchange or transfer.

145

Table 5.5. Rates of Change in the Cedi and the CFA Franc - 1985 to 1997.

Year Goals/$1.00 FCFAI$1.00 CedlsIFCFA
1985 0.06 - 0.08 0.14
1986 1.20 - 0.05 0.35
1987 0.19 - 0.04 0.08
1988 0.07 - 0.04 0.06
1989 0.06 0.01 0.06
1990 0.04 - 0.05 0.10
1991 0.03 0.03 0.01
1992 0.03 - 0.01 0.09
1993 0.11 0.02 0.07
1994 0.08 0.23 - 0.05
1995 0.08 - 0.02 0.09
1996 0.06 0.01 0.05
1997 0.07 0.04 0.03

Ave. Rate of 0.16 0.00 0.08

Change

Source: Computed from Appendix A51

146

5.4. The Base Model and Scenarios Analyzed

The initial model was first calibrated to simulate 1993 beef and cattle trade in
the Central Corridor under the existing trading conditions (where Ghana’s currency
is the Cedi and the other three countries use the CFA Franc). The optimal solution
values of the base model were compared with published 1993 statistics on cattle
production and trade as well as beef imports and consumption in the sub-region. The
essence of this comparative analysis was to validate the model by demonstrating how
close the model values corresponded to reality. By replicating the 1993 statistics on
cattle production, trade, prices, and consumption for the countries of the Central
corridor, the model was deemed validated and therefore applied to simulate scenarios
that reflected more open trade and exchange rate effects in the sub-region. The results
of the validation are discussed in the next section.

The base model was run under three scenarios: (a) all four countries had more
open trade in cattle (i.e. all existing cattle trade barriers removed); (b) all four
countries adopted the same currency (CFA Franc in this case); and (c) all four
countries had more open trade and also adopted a single currency (a combination of
scenarios (a) and (b) above). This was accomplished by changing the initial
parameters and model constraints to reflect the intended scenario. The model solution
results were then compared with the base model and/or other scenario results. Welfare
analysis using producer and consumer surpluses computed from the model for the

various scenarios were then analyzed for countries of the Central Corridor.

147

5.4. 1. Results and Validation of the Base Model

The base model incorporated the existing conditions of beef and cattle trade
in the Central Corridor. This implies that trade transactions were conducted in CFA
Francs among the three countries that belong to the CFA Franc zone (Mali, Burkina
Faso, and Cote d’Ivoire); and in CFA Francs and Cedis (Ghana’s currency) when
such trade transactions involved Ghana. In the case of imported beef into the region,
trade transactions typically involved the US Dollar, the CFA Franc, and/or the Cedi.
The base model analysis therefore incorporated exchange rate differentials and the
transaction cost associated with currency transfers or exchanges from one currency
to another, particularly from the Cedi to the CFA Franc and vice versa.

Also incorporated into the base model were administrative and technical
barriers including business taxes, market presentation taxes (or sales taxes), health
certification taxes, unofficial tips and bribes along the trade routes, etc; which
together constituted about 10% of the market price of an animal in 1993. As has
already been discussed (see Chapter 111), countries in the Central Corridor have used
both tarifl‘s and non-tariff instruments to affect cattle trade in the sub-region until
recently. Under the current global and regional trade environment, border tax
adjustments (i.e., indirect taxes shifted to consumers in the final price of goods and
services), together with administrative and technical regulations, are the most

important barriers to intra-regional trade in cattle in the subregion. Moreover, each

148

country in the Central Corridor maintained an average of about 15% tariff on
imported beef during 1993, and this was also accounted for in the base model.

The validation of the base model was done by comparing and determining how
accurately the model generated cattle off-take levels, cattle prices, and cattle slaughter
relative to the base year (1993) figures; whether the published cattle exports and
imports, as well as beef imports and consumption figures were replicated by the
model; and how sensitive the optimal solution values were to changes in the price
elasticities of demand for the various countries (see McCarl and Spreen, ibid.). The
base model results compared with published statistics on the relevant variables are
presented in Table 5.6.

In general, the price and quantity values endogenously determined by the
model compared well with the reported 1993 data for each country in the Central
Corridor. It is noteworthy from the onset that country statistics for the Central
Corridor and for Africa in general are either unavailable or incomplete in most cases,
so that some data are estimated from what is available. Reported statistics from
difl‘erent sources therefore vary significantly (e.g. country data versus FAO data),
such that the reliability of published data is constantly in doubt. Nevertheless,
published data can serve as very useful bench mark for analysis, and variations of
10% to 20% depending on the direction of variation, could be considered acceptable
based on experts’ knowledge when comparing model results and published data. For

example, most people in the region believe that official statistics underestimate trade

149

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151

trade flows, which is consistent with the results of the trade model. The base model
estimates higher trade figures for each country/region except Mali, in which case the
oficial estimates also include exports of cattle to other countries outside the Central
Corridor (such as Senegal, Liberia, and others). Worley et al., (ibid) validating trade
model figures with data for the USA and Canadian red meat and grains, considered
5% and 10% variation from actual data acceptable, even for the USA and Canadian
data that are much more reliable than those of the Central Corridor.

The price per head of cattle as endogenously determined by the base model
and the reported average cattle prices vary between 1% of Burkina Faso prices and
12% of prices in Ghana. This is reasonable because cattle prices differ across
difl'erent regions in the same country in the Central Corridor, and an estimated
aggregate price representing an entire region or country may differ from the actual
price prevailing on the market. Similarly, the price per kilogram of beef differs by
about 10% between the model values and published data for Ghana and Cote d’Ivoire;
and about 20% for Mali and Burkina Faso. This is comparable to a price difi‘erence
of about 11% between the 1993 published national average price3 per kilogram of
becf(with bones) in Mali (690 FCFA/kg) and the price of the same product in Mali’s

Gao Province (620 F CFA/kg).

 

3The national average prices are unweighted simple averages of all regions/provinces.

152

The published slaughter figures for all four countries were lower than those
endogenously determined by the model, the variation ranging from 3% in Burkina
Faso, 4% in Cote d’Ivoire, 17% in Mali, to as much as over 50% for Ghana Even
though there is a continual flow of Sahelian cattle unto the Ghanaian market, there are
no omcial statistics to indicate this, which explains why there is a wide divergence
between the statistical and model slaughter figures for Ghana.

The higher slaughter figures predicted by the model were expected because
published slaughter figures represent only animals slaughtered at the abattoirs, and
do not account for the many home slaughters in all parts of each country in the
Central Corridor. There is also possible under recording of slaughter figures at the
abattoirs since per head slaughter taxes are levied at these abattoirs, and it is not
uncommon for tax agents and butchers to collude to evade taxes.

Beef demand figures from published data and predictions from the model
varied by between 7% and 15% across all the countries, except Southern Cote
d’Ivoire, indicating that the endogenously generated values from the model were
within a reasonable range. The high beef demand estimate for Southern Cote d’Ivoire
seem to come from an over-estimate of the local source cattle slaughtered (about
177,281 cattle) compared to actual statistics indicating total slaughter of 249,823
cattle with a live cattle import component of 137,754 animals.

In terms of off-take figures, most people familiar with livestock in West Afiica

agree that either the cattle stock levels are overestimated so that the off-take figures

153

derived from them also get overestimated; or that the actual off-take ratios should be
about 5% or 6% rather than the 10% off-take ratio usually assumed by researchers
and policy makers. This conclusion is supported by the divergence between off-take
figures and slaughter plus exports and/or import figures usually observed in the data.

Except for Burkina Faso which the trade model had a higher estimate (12%)
than published data for off-take figures, the model figures were lower than published
data by 7% and 15% for Mali and Ghana, respectively; and by 29% for Cote d’Ivoire.
Since Mali and Burkina Faso export cattle to other countries in the region (Senegal,
Togo, Benin, Nigeria, etc.) but which were not accounted for directly in the model,
such exports may account for some of the higher off-take figures. This may also
explain the published cattle export figure of about 30% more than predicted by the
model for Mali, while more exports than published were predicted by the model for
Burkina Faso. In the case of Burkina Faso, it is more reasonable to assume that a
significant portion of exported cattle were not recorded, such as between Burkina
Faso and Ghana or Cote d’Ivoire.

The issue of Ghana’s imports of cattle is another interesting consideration.
Whereas official records showed no or very few imports of cattle to Ghana in 1993
(Burkina Faso’s official statistics show 7,192 cattle exports to Ghana), the model
predicted Ghana’s total imports of about 85,000 cattle. This figure, which represents
some twelve thousand metric tons of beef, was more close to reality than the zero

imports recorded in official documents since it is common knowledge in the sub-

154

region that thousands of cattle move southwards from Mali and Burkina Faso to
Ghana annually. Also, official records indicate that local cattle account for only one-
third of the total amount of beef consumed in Ghana annually, and the balance of
two-thirds come from imports of live cattle and fiozen beef (Metzel, et al. ibid., Vol.
II). This two-thirds of beef that is imported is equivalent to about 179,343 Sahelian
cattle. What actually pertains in Ghana as far as beef consumption is concerned thus
supports the reasonableness of the model-generated figures.

In order to ascertain how stable the model results were, sensitivity analysis was
done by changing the price elasticity of demand for each consuming country/region
by 10% up and down (i.e. 10% increase in one case, and 10% decrease in another).
The sensitivity results indicate that cattle production and shipments in both cases
remained the same or changed only slightly; even though beef prices and pay-off
values (i.e. consumer and producer surpluses) were modified slightly within 5% of
the initial base model values (see Appendix A5.6 and Appendix A5.7).

Based on the stability of the figures endogenously determined by the base
model, and the foregoing discussion of these figures relative to published data for the
countries in the Central Corridor, the base model results were accepted as valid
benchmarks for comparing the outcomes of the open trade scenarios subsequently
generated. The welfare implications of what each scenario represented were also
analyzed. The caveat here, though, is that due to the inherent weakness of data in the

Central Corridor, the strength of the model predictions is more in the direction of

155

changes in cattle production and flows in cattle trade, rather than the specific

magnitudes of these changes.

5.4.2. Results of the More Open Trade Model

The more open trade scenario represented the case where all four countries
(Mali, Burkina Faso, Ghana, and Cote d’Ivoire) had all existing cattle trade barriers
(representing about 10% of the average price of cattle in the region) removed so that
trade among them proceeded as if the whole sub-region was a “single” country;
except that Ghana retained her own currency. Under this scenario (Table 5.7), off-
take numbers increased relative to the base model figures for Mali (2%), Burkina Faso
(11%), and Ghana (11%); but declined for Cote d’Ivoire (28%). However, slaughter
figures decreased for Mali (2%), and Burkina Faso (1%); while it increased for
Ghana (16%), and for Cote d’Ivoire (2%). On the other hand, the price per head of
cattle‘ in the production regions increased for all four countries between 15% and
19% relative to the base model values.

These increases in off-take figures suggest that more open trade could generate
increases in cattle production in the sub-region, even though cattle production in Cote

d’Ivoire would decline as cheaper imports of cattle are substituted for local

 

‘Cattle produced in Mali and Burkina Faso were assumed to be of the larger Zebu breed (about
250 kg live-weight), while those produced in Ghana and Cote d’Ivoire were the smaller WAflI
and Baoule breeds (about 165 kg live-weight).

156

production. Cattle farmers in particular stand to gain in all the four countries, with
demand-driven increases in cattle prices at the production centers, even though the
case of Cote d’Ivoire is not clear because fewer local cattle would be produced. It
implies also that only more efficient cattle producers in Cote d’Ivoire would survive
if the sub-region adopted a more open trade in cattle; in which case, higher prices for
local cattle could bring higher average returns to farmers.

Also, the decline in slaughter figures in the cattle exporting countries (Mali and
Burkina Faso) while those in cattle importing countries (Ghana and Cote d’Ivoire)
increased was expected. Consistent with theoretical expectations, the more open trade
increased competition from coastal markets in the importing countries, and allowed
cattle traders to ship more cattle there which reduced local slaughter.

In terms of exports (Mali and Burkina Faso) and imports (Ghana and Cote
d’Ivoire), more open trade increased the volume of trade in cattle as well as beef
consumption in all four countries. Total exports from Mali to both Ghana and Cote
d’Ivoire increased by 9% relative to the base model; and those from Burkina Faso
increased by 28%. This increase in exports from Burkina Faso could include some re-
shipments from Mali and/or Niger which the model did not specifically separate out.

At the same time, beef consumption decreased in Mali and Burkina Faso by
3% in each case (beef demand quantities adjust with beef price changes), as higher
export demand and higher cattle prices at the production centers encouraged farmers

to send more cattle to the market (note that the model assumes a downward sloping

157

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159

demand function and an upward sloping stepped supply function), and traders to
export more cattle. Consumers in the exporting countries were therefore hurt as beef
prices slightly increased (0.2% in both Mali and Bm'kina Faso) and thereby decreased
beef consumption in the two countries (by 2% in Mali and 1% in Burkina Faso).

The results of the more open trade model thus suggest that as trade barriers are
removed, substantial portions of savings accruing to traders and marketing agents are
passed on to cattle producers, who gain at the expense of beef consumers in the
exporting countries. On the other hand, beef prices remained stable in importing
countries while cattle prices increased at the cattle production centers in those
countries, because demand increased for all animals, both the larger animals from the
Sahel region and the smaller local cattle, which then benefitted local producers.

As already noted, increases in the volume of cattle trading resulted in
increased imports of cattle to both Ghana and Cote d’Ivoire. While imports to
Southern Ghana increased by some 32% compared to the base model, those to
Northern Ghana increased by only 7%; apparently because more open trade allowed
more access to markets in Southern Ghana, where beef demand has been traditionally
higher. Both Southern and Northern Cote d’Ivoire also received increases in cattle
traded from the Sahelian countries (30% and 54% for the south and north,
respectively), which suggests that a substantial percentage of local cattle in Cote

d’Ivoire were replaced by cheaper imports of Sahelian cattle.

160

Beef consumption as well as beef prices in both Southern Ghana and Southern
Cote d’Ivoire remained the same, as the increase in cattle imports into both zones
substituted for decreased beef imports. Beef imports from the rest of the world to
Ghana declined by 12% from 19,123 mt to 16,820 mt; and those to Cote d’Ivoire
declined by 5% from 16, 768 mt to 15,850 mt (see Appendix A5.3). This suggests that
more open trade in cattle in the sub-region will improve the competitiveness of
Sahelian cattle in the coastal markets.

The decline in imports of beef from the rest of the world resulted from their
being substituted by Sahelian cattle (and therefore beet) which had become more
competitive. This is also a fimction of the structure of the model, which incorporates
a step-wise supply function rather than a monotonically increasing supply function.
In this model, Sahelian cattle are imported up to the point where they are no longer
competitive with European imports, at which point the supply curve shifts up a step,
and European imports come in at the world price. Thus, with the reduction of
transport cost in the Sahel in the more open trade scenario, the model allocated a
larger portion of coastal consumption to the now cheaper Sahelian production, with
the residual made up by Eur0pean beef imports. This explains why the model shows
imports of European beef falling even though the price in the coastal areas did not
change.

On the whole, a more open trade in the Central Corridor will result in

increased cattle trade and beef consumption in the sub-region; while beef imports

161

from outside the region would decline, provided the present tariffs and other
restrictions on beef imports into the region remain. Cattle farmers gain through higher
prices of local cattle, but beef consumers, particularly in the exporting countries, lose
as a result of lower local slaughter and higher beef prices. The effect of more open
trade on Cote d’Ivoire producers is indeterminate since more cattle imports from the
Sahelian countries would substitute for local slaughter, driving out less efficient cattle

producers.

5.4.3. Results of the Base Trade Model Assuming All Countries in the Central
Corridor Use a Single Currency (i.e., CFA Franc).

The scenario where all countries were assumed to use a single currency (i.e.,
the CFA Franc) but with the existing trade barriers in place was designed to mimic
the case of a single currency zone for the Central Corridor. Mali, Burkina Faso, and
Cote d’Ivoire already belong to the CFA Franc zone, so that under this scenario
Ghana is assumed to have adopted the CFA Franc as its national currency. The results
of the model analysis based on the “single currency zone” scenario are shown in
Table 5.8.

Off-take figures increased relative to the base model (under this scenario) for
Burkina Faso (12%) and Ghana (8%), but declined for Mali (2%) and Cote d’Ivoire
(10%). Slaughter figures, however, decreased in Mali (3%) and Burkina Faso (3%);

but increased in Ghana (5%) and in Cote d’Ivoire (9%).

162

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163

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164

Source: Model values were computed from Appendix A5.4.
Cattle prices at the producing centers also increased by about 15% in all four

countries; and beef prices increased slightly in three countries as well by about 0.2%
in both Mali and Burkina Faso, and 3% in Ghana; while in Cote d’Ivoire beef price
remained unchanged.

The total volume of trade in the Central Corridor would increase under the
single currency scenario, even though both exporting and importing countries might
have different experiences. Exports fro Mali, for example, would decline by about
2%, even though Burkina Faso will export more cattle (32%). The strategic
geographical position of Burkina Faso as an interlinking-trade node for all the
countries, and particularly to Ghana, seems to give it an advantage in cattle trade.
Cattle imports to Southern Ghana and Southern Cote d’Ivoire would increase by 9%
and 36%, respectively. The Northern Zones of Ghana and Cote d’lvoire would both
decrease their imports of cattle by 7% and 3%, respectively. Also, beef demand would
increase in the northern zones of both countries while demand would remain
unchanged in the southern zones.

These figures suggest that the adoption of a single currency by all countries
in the Central Corridor will benefit them all in terms of the beef trade, particularly
because total trade will expand. Burkina Faso, for example, will unambiguously
benefit as a result of increased cattle exports, while the case of Mali is inconclusive

because exports will decline slightly. In the presence of substantial trade barriers,

165

adopting a single currency for the sub-region will not automatically lead to expansion
in cattle production in the sub-region (e.g., Mali’s off-take declined). Even though the
disincentives created by trade barriers could make the domestic markets in cattle
exporting countries more competitive, their effect seems to be outweighed by the
lower transaction cost due to a single currency so that local slaughter would decrease;
while at the same time both cattle and beef prices would increase in the sub-region
as a result of competition from importing coastal markets for available supplies of

cattle.

5.4.4. Results of the More Open Trade Model Assuming All Countries in the
Central Corridor Use a Single Currency (i.e., CFA Franc)

The open trade-single currency scenario represents the case where besides
using a single currency, all barriers to cattle trade are removed by all four countries
of the Central Corridor. The results of this scenario are presented in Table 5.9.

Under this scenario, the off-take values relative to the base model increased
for all countries except Cote d’Ivoire. The increases were Burkina Faso (12%), Ghana
(9%), and Mali (7%); and the decline for Cote d’Ivoire was 4%.

Similarly, cattle prices at production centers increased for all countries as in
the case of other scenarios. However, slaughter in the cattle exporting countries, Mali

and Burkina Faso, decreased by 3% and 2%, respectively; while those in the

166

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167

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168

Source: Model values were computed from Appendix A55.
importing countries, Ghana and Cote d’lvoire, increased by 16% for each country.

In terms of the volume of cattle trade, the figures seem to suggest that there
would be an increase under the single currency with open trade scenario. For
example, Mali and Burkina Faso will increase their cattle exports by about 19% and
31%, respectively. Sahelian cattle imports would increase in Southern Ghana by as
much as 45%, and in Southern Cote d’Ivoire by about the same margin (43%).
Imports to the Northern zones of both countries, however, would decline by 8% and
1% for Ghana and Cote d’Ivoire, respectively.

While beef consumption would decline in the exporting countries as beef
prices increased, it would increase in the importing countries, particularly in the
northern zones of these countries. Beef demand in Mali was down 3%, and that in
Burkina Faso also down by 2%; but the increases in Northern Ghana and Northern
Cote d’Ivoire were minimal, 1% and 2%, respectively. The implication here is that
more open trade using a single currency would reduce transaction cost and cause
trade in cattle in the Central Corridor to expand, which will create incentives for more
cattle slaughter in the importing countries.

These figures suggest that the adoption of a single currency coupled with a
more open trade in cattle will expand the cattle sector (total off-take increases), as
well as increase the overall flow of cattle, and the consumption of beef in the Central

Corridor. This result is consistent with theoretical expectations that more open trade

169

(i.e., little or no barriers to trade) increases the volume of goods and services traded;
while lower transaction cost due to the use of a single currency facilitates trade by

speeding up the flow of goods and services across nations.

5.5. Welfare Analysis

The welfare of economic agents involved in cattle production and trade in the
Central Corridor was measured by computing the consumer surpluses for each
region/country based on prices, quantities, and demand parameters generated by the
trade models; as well as estimating producer profits using the prices, ofl‘-take
numbers, and production cost of cattle at each production center. Government revenue
gains or losses under each scenario were also computed to show the effect of each
scenario on government budgets in the respective countries. Similarly, estimates of

other transfers, such as tips and bribes cattle traders pay along the trade routes were

made.

Consumer Surplus Measures

Since the quadratic programming trade models generated aggregate consumer
and producer surpluses representing the entire Central Corridor, it was necessary to
compute individual country/region consumer surpluses using the formula below (as

discussed earlier in Chapter II):

170

ACSJ = 2. ( a. - 1/2b.Q.' ) Q.‘ - P.'Q,' (see Equation 43)
where a. and bI are intercept and slope, respectively, generated by the trade models
for each demand or consuming region; and P.’ and Q.‘ are prices and quantities,
respectively, also generated by the trade models. Figures for changes in consumer
surplus relative to the base model are presented in Table 5.10.

The values of consmner surplus measures indicate that while there is decline
in consumer welfare in Mali, Burkina Faso, and Southern Ghana, and Southern Cote
d’Ivoire showed marginal increases in consumer welfare under all trade scenarios
relative to the base model, the results are mixed for Northern Ghana and Northern
Cote d’Ivoire. Consumer welfare declined for both Mali and Burkina Faso under the
more open trade scenario by about 2% each, while it was only a marginal decrease
for Southern Ghana. Consumer welfare declined also for Northern Cote d’Ivoire by
4% relative to the base model. On the other hand, Northern Ghana showed that
consumers gained under the more open trade scenario by about 16% in consumer
surplus, while Southern Cote d’Ivoire experienced only a marginal increase relative
to the base model.

Under both the single currency and single currency with more open trade
scenarios, there would again be consumer welfare decrease for Mali, Burkina Faso,

and Southern Ghana by about 3% in each case. Northern Ghana would also

171

Table 5.10. Consumer Surplus Changes Under Different Trade Scenarios in the
Central Corridor - Estimates Based on 1993 Figures

 

 

Mali Burkina Ghana Cote d’Ivoire
Base Model South 6!! North 0!! South C! North CI
Q - Qty DD 30269 23393 36136 6853 36647 14012
P - price 545 550 455 455 576 576

CSFCFA 3.9099E+10 2.531E+10 3.693E+10 8.381E+09 5.095E+10 2.442E+10

CS US 5 138 mil. 89 mil. 131 mil. 30 miL 180 mi]. 86 mil.
CS as % of 7% 5% 2% 0.5% 2% 1%
GDP
Open Trade Model
Q - Qty DD 29722 23058 36136 7695 36647 13564
P - price 546 551 455 455 576 576
A CS FCFA - 8.53E+08 - 4.232E+08 0 +1.349E+0 +1,442,421 -1.01E+09
9
A CS US 8 - 3 mil. - 2 mil. 0 + 5 mil. +5 mil. - 4 mil.

Base Model assuming a Single Currency (FCFA)
Q — Qty DD 29493 22749 36136 6876 36647 14202
P - price 546 551 468 468 576 576
A CS FCFA -1.209E+09 - 813050738 -102E+09 -2.05E+08 +1435092 +431989550
A CS US S - 4 mil. - 3 mil. - 4 mil. - 0.7 mil. + 5 miL + 2 mil.
Open Trade Model assuming a Single Currency (FCFA)
Q - Qty DD 29291 22863 36136 6949 36647 14239
P - price 546 551 468 468 567 567
A CS FCFA -l.521E+09 668600614 -l.02E+09 ~93689938 +1435092 +518l40857
A CS US 8 -5 mil. - 2 mil. - 4 mil. - 0.3 mil. + 0.005 + 2 mil.

mil.

Source: Computed from Appendix Table A58.

172

experience decline in consumer welfare under these two scenarios by about 1% to
2%. Southern and Northern Cote d’Ivoire, on the other hand, would gain in consumer
welfare under these scenarios. Even though the consumer welfare gains in the south
will only be marginal, gains in the north will be relatively higher, about 2% increase
each under the single currency and the single currency with open trade scenarios.

These figures suggest that while the welfare of consumers in cattle exporting
countries would generally decline under all trade scenarios, the results will be mixed
for the cattle importing countries in the Central Corridor. Also, even though a more
open trade in cattle in the Central Corridor will improve the welfare of beef
consumers in Ghana, the adoption of a single currency for the sub-region would
impinge on consumer welfare in Ghana mainly because a single currency is likely to
lead to higher beef prices.

For example, the consruner surplus would decline for Mali by USS 3 million
under the more open trade scenario, and would decline fru'ther by USS 4 million for
the single currency scenario, and by USS 5million under the single currency with
open trade scenario. Similarly, Burkina Faso consumers would see a welfare decline
of USS 1 million under the more open trade scenario, and higher declines of USS 2.9
million and USS 2.4 million under the single currency, and single currency with more
open trade scenarios, respectively. In contrast, the magnitude of consumer surplus
increase accruing to Cote d’Ivoire relative to the base model would be in the range of

USS 0.05 million to USS 1.8 million under all trade scenarios. The implication is that

173

more cattle trade in the Central Corridor and the adoption of a single currency would
have mixed effects on the welfare of consumers in the sub-region, particularly

consumers in cattle importing countries.

Measura of Producer Profits

The usual approach in determining the producer gains using the quadratic
programming method is to compute the shadow price for the fixed factor (land in this
case). Such a measure represents the quasi-rent or producer surplus from each
economic activity that factor owners or producers enjoy. In this analysis, however,
the fixed factor, land, is mostly a communal pr0perty with no or only a rudimentary
market, making it difficult to irnpute cash values to the land at the production centers.
An alternative way to show producer gains is to estimate cattle producer profits using
values generated from the trade model for each scenario.

Profits accruing to cattle producers at the production centers were estimated
to give an indication of producer gains under the various trade scenarios. The
producer profits for each re gion/country was computed as the difference between total
revenue (i.e., cattle off-take numbers x price per head of cattle) and total cost (i.e.,
cost of production + cost of marketing at the producer level). Off-take nmnbers and
cattle prices per head were generated by the trade models, while cost figures were the
initial parameters of the trade models. Table 5. 1 1 shows the producer profits for cattle

producers in the Central Corridor (Mali, Burkina Faso, Ghana, and Cote d’Ivoire).

174

Table 5.1 1. Changes in Producer Profits Under Different Trade Scenarios in the
Central Corridor - Estimates Based on 1993 Figures

 

Mali Burkina Faso Ghana Cote d'Ivoire
Base Model
Total Cost 2.0854E+10 1.8934E+10 4396162500 4793853360
Total Revenue 2.711E+10 2.4614E+10 5555322240 6231940560
Profits FCFA 6256039230 5680080000 1159159740 1438087200
Profit USS 22 mi]. 20 mil. 4 mil. 5 mil.
Profit as % of GDP 1% 1% 0.07% 0.07%
Open Trade Model
Total Cost 2.1322E+10 2.106E+10 4865362500 3451284592
Total Revenue 3.1982E+10 3.159E+10 7297987340 5176926888
Profits FCFA 1.0661E+10 1.053E+10 2432624840 1725642296
Profits USS 38 mil. 37 mil. 9 mil. 6 mil.
Profit as % of GDP 2% 2% 0.2% 0.08%
A in PfFCFA 4404670570 4849969010 1273465100 287555096
A in PfUSS 16 mil. 17 mil. 5 mil. 1 mil.
% A in Profit 73% 85% 125% 20%
Base Model assuming a Single Currency
Total Cost 2.0347E+10 2.1253E+10 4731243750 4295573520
Total Revenue 3.0521E+10 3.1879E+10 7096810770 6443360280
Profits FCFA 1.0173E+10 1.0626E+10 2365567020 2147786760
Profits USS 36 mil. 38 mil. 8 mil. 8 mil.
Profit as % of GDP 2% 2% 0.2% 0.1%
A in PfFCFA 3917426450 4946250000 1206407280 709699560
A in PfUSS 14 mil. 18 mil. 4 mil. 3 mil.
% A in Profit 64% 90% 0 60%
More Open Trade Model assuming a Single Currency
Total Cost 2.197E+10 2.1253E+10 4795931250 4605855832
Total Revenue 3.2955E+10 3.1879E+10 7193841270 6908783748
Profit FCFA 1.0985E+10 1.0626E+10 2397910020 2302927916
Profit USS 39 mi]. 38 mil. 9 mil. 8 mil.
Profit as % of GDP 2% 2% 0.2% 0.1%
A in PF FCFA 4728801640 4946250000 1238750280 864840716
A in PfUSS 17 mil. 18 mil. 4 mil. 3 mil.
% A in Profit 77% 90% 0 60%

Source: Computed from Appendix Table A59.

175

Estimates of profits that would accrue to cattle producers in the Central
Corridor indicate that farmers in all four countries would gain under all trade
scenarios, though the levels of profitability would be different in each country.
Farmer profits would be higher relative to the base model in the cattle exporting
countries (between 63% and 87% increases) as well as in the cattle importing
countries (profit increases range between 104% and 110% in Ghana and between
20% and 60% in Cote d’Ivoire). Cattle farmers in Burkina Faso would realize the
highest increases in profits under the single currency and the single currency with a
more open trade system in the Central Corridor (USS 17.5 million) than the adoption
of a more open trade system in the sub-region (USS 17.1 million). Malian cattle
farmers, on the other hand, will have more profit under the single currency with a
more open trade scenario (USS 16.7 million), and least profit under the single currency
scenario (USS 13.8 million).

The experience of cattle farmers in importing countries would be somewhat
difi'erent from those of exporting countries. For example, profits for cattle farmers in
Ghana would increase by 104% to l 10%, highest under the more open trade scenario
(USS 4.5 million) and least under a single currency system (USS 4.3 million). Farmers
in Cote d’Ivoire would, on the other hand, realize their highest profit increase under
a single currency with a more open trade scenario (USS 3.1 million), and their
smallest profit increase under a more open trade scenario (USS 1 million). These

profit increases may be attributed to the expansion of cattle trade in the Central

176

Corridor, which raises producer prices of cattle and thereby provides incentives for
farmers in importing countries to increase cattle ofi-take. In the case of Cote d’Ivoire,
the pattern of farmer profitability is expected since a single currency with a more
open trade scenario substitutes more local slaughter with imports from the Sahelian
countries than an open trade scenario. Also, higher demand for all cattle types
translate somewhat into increased prices for the smaller local cattle and thereby

increase producer gains.

Changa in Government Revenue and 0th er Transfers

Estimates of changes in government revenue in the different countries due to
more open cattle trade in the Central Corridor are presented in Table 5.12. Also
presented in Table 5.12 are estimates of tips/bribes that cattle traders would paid
under the different trade scenarios.

Government revenues were higher in both Burkina Faso and Cote d’Ivoire
(about USS 0.5 million); than in Mali and Ghana (about USS 0.2 million) under the
base model analysis. Similarly, government potential revenue losses under the more
open trade scenarios were higher in Burkina Faso and Cote d’Ivoire than in Mali and
Ghana by about the same margins as the gains under the base model. Government
revenues from cattle trade in these countries were driven by the level of taxes/tariffs

and numbers of animals officially traded. Taxes, for example, have been higher in

177

Table 5.12. Estimated Changes in Government Revenue and Other Transfers
Under Different Cattle Trade Scenarios in the Central Corridor .

 

Mali Burkina Ghana Cote
Faso d’Ivoire

Base Model
Total GRev FCFA 645,611,078 682,152,000 398,249,012 669,878,814
Total GRev USS 2 mil. 2 mil. 1 mil. 2 mil.
GRev as % of GDP 0.1% 0.1% 0.02% 0.03%
Bribes/Tips US S 1.6 mil. 1.6 mil. 0.5 mil. 2.2 mil.
More Open Trade Model
Total GRev FCFA 702,807,600 872,416,250 436,084,011 931,984,296
Total GRev USS 3 mil. 3 mil. 2 mil. 3 mil.
GRev as % of GDP 0.2% 0.2% 0.04% 0.04%
Bribes/Tips US S 1.8 mil. 2 mi]. 0.5 mil. 3 mil.
Single Currency Model
Total GRev FCFA 631,296,072 900,360,875 365,453,389 806,201,515
Total GRev USS 2 mil. 3 mil. 1 mil. 3 mil.
GRev as % of GDP 0.1% 0.2% 0.02% 0.04%
Bribes/Tips US S 1.6 mil. 2.1 mil. 0.4 mil. 2.6 mil.
Single Currency & Open Trade Model
Total GRev FCFA 770,714,736 895,953,375 444,087,039 840,005,492
Total GRev USS 3 mil. 3 mil. 2 mil. 3 mil.
GRev as % of GDP 0.2% 0.2% 0.04% 0.04%
Bribes/1‘ ips US S 2 mil. 2.1 mil. 0.5 mil. 2.7 mil.

GRev means Government Revenue.

Source: Computed from Appendix Table A5. 10.

178

both Burkina Faso and Cote d’Ivoire than in Mali and Ghana. Except for Burkina
Faso where government revenue was higher relative to the base model, the single
currency model generated lower government revenue for Cote d’Ivoire, and
government revenue losses for both Mali and Ghana, howbeit, negligible. However,
compared to the base model, government potential revenue losses would be higher for
all four countries under the single currency and more open trade scenario since more
animals would be traded.

Other transfers, mainly bribes and tips, that traders pay to officials in
government offices and custom ofi'rcers along the trade routes were estimated to be
about two-thirds of the revenue that went to government coffers in each case. Such
gains that went into private pockets would be higher under the single currency
scenario than all other scenarios; while the losses to these officials would be highest
in the case of a single currency with open trade. This suggests that while some of
these government officials are more likely to support a single currency regime in the
Central Corridor, they might oppose it if combined with a more open trade.

Considering both the consumer surplus and producer profits, as well as
changes in government revenue and other transfers together, one could conclude that
there would be an overall gain with trade and currency reform for all four countries
in the Central Corridor, even though cattle exporting countries would enjoy higher
gains that cattle importing countries. These net gains for all four countries might be

the result of trade diversion of extra-Afiica beef imports as the Central Corridor

179

adopts a more open trade regime for cattle. Moreover, even in the case of Ghana and
Cote d’Ivoire, where there would be loses in consumer surpluses under some of the
trade scenarios, producer profits are likely to outweigh consumer loses.

The gains in welfare under a single currency scenario in the sub-region is not
completely certain. Whereas Mali and Burkina Faso, and to a large extent Cote
d’Ivoire, have definite gains in welfare if a single currency is adopted, the gains that
would accrue to Ghana are not substantial enough (producer profits exceed losses in
consumer surpluses by only a small margin); so that firrther analysis as well as more
political persuasion would be needed to get Ghana on board a single currency system

in the sub-region.

5.6. Effects of the CFA Franc Devaluation on Cattle Trade and Welfare in the
Central Corridor
The trade model was applied to simulate what effects the CFA fianc
devaluation of January 1994 would have on the cattle sub-sector in the sub-region
(the CFA franc was devalued by 50% relative to the French franc). We should note
that a long-run perspective is the underlying assumption of the trade model, and
therefore the simulation results reflect the long-run period when economic agents

have had time to adjust to the devaluation. The results of the trade model with a CFA

fianc devaluation (assuming trade conditions in 1993) are presented in Table 5.13.

180

Efl'ects of the CFA Franc Devaluation on Trade

As expected, the model indicated that there was de-stocking in both Mali and
Burkina Faso by cattle producers to take advantage of the improved competitiveness
of cattle in the coastal markets as a result of the CFA franc devaluation. Similarly,
cattle farmers in Ghana and Cote d’Ivoire made substantial de-stocking as well. As
a result, cattle off-take numbers increased in all four countries. Off-take increased by
4% in Mali, 7% in Ghana, 12% in Burkina Faso, and 13% in Cote d’Ivoire; but
slaughter numbers declined in Mali (5%) and Burkina Faso (3%), while they
increased in Ghana (11%) and in Cote d’Ivoire (2%).

These changes that resulted fiom the devaluation are consistent with the actual
observed changes in these countries afier the CFA franc devaluation, even though the
magnitude of change differ in some respects. For example, Yade et al. (ibid.) report
that the post-devaluation off-take increases stabilized, on the average, at about 17%
in Burkina Faso, but only modestly in Mali (after initial large increases of 58% in
Mali and 30% in Burkina Faso); and there was noticeable reduction in cattle slaughter
in the two cattle exporting countries (i.e., Mali and Burkina Faso).

The model indicated that cattle prices at the production centers, as well as beef
prices also increased in all four countries. The increase in cattle prices were in the
range of 15% to 18%; but beef price increases were higher in all four countries.

The beef price increase was highest in Ghana (77%), while in the other three

countries the increase was about 48% in Mali and Burkina Faso, and 49% in

181

 

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183

Cote d’Ivoire. Subsequently, except Southern Ghana and Southern Cote d’Ivoire,
which maintained their pre-devaluation beef consumption levels, beef demand
decreased in both Mali and Burkina Faso (about 3% to 5%), as well as in Northern
Ghana and Northern Cote d’Ivoire (about 5% to 10%).

Again, these figures are consistent with actual observations in all four
countries in the post-devaluation period (Yade et al.). Reardon et al. report that as
beef prices increased after the C FA devaluation, low-income households reduced beef
consumption in favor of processed fish (smoked and dried), while high income
households tried to maintain their pre-devaluation beef consumption levels.

Following the CF A franc devaluation, the model shows that cattle exports
increased in Mali by 20% and in Burkina Faso by 33%.. In response, even though
cattle imports to Northern Ghana and Northern Cote d’Ivoire declined by 20% and
10%, respectively, imports to Southern Ghana and Southern Cote d’Ivoire increased
by 78% and 38%, respectively. As a result, beef imports from the European Union5
to Ghana and Cote d’Ivoire declined by 30% and 40%, respectively. It is evident
therefore that Sahelian cattle effectively replaced beef imports in the coastal countries

as their competitiveness improved following the devaluation. Hence, an objective of

 

’in 1994 the EU cut its export subsidies on beef, which also affected its beefexports to the West
African coast.

184

the CF A fianc devaluation of restoring the competitiveness of Sahelian cattle exports

in the coastal markets seemed to have been achieved.

Effects of the CFA Franc Devaluation on Welfare

Welfare, as measured by changes in consumer surplus, producer profits, and
changes in government revenue and other transfers relative to the base model,
declined on the average in the Central Corridor as a result of the CFA franc
devaluation. Estimates of consumer surplus and producer profits based on the
simulation results, as well as changes in government revenue and othertransfers, are
presented in Table 5.14.

There was a general decline in consumer surplus in all four countries as a
result of the CFA franc devaluation. In absolute terms, the decline in consumer
surplus was higher in the cattle importing countries relative to cattle exporting
countries, mainly because the sharp decline in cheap European beef imports (also due
to the reduction of EU subsidies on beef exports) was not fully compensated for by
imports of cattle from the Sahelian countries. Ghana had the highest decline, in excess
of 40%, followed by Cote d’Ivoire (33% to 38%); while Burkina Faso and Mali
experienced decline in consumer surplus of 36% and 3 8%, respectively. In percentage
terms, prices rose more in importing countries than in exporting countries following

the devaluation. Total higher decline in consumer surplus in coastal countries than in

18S

Table 5.14. Consumer Surplus (CS), Producer Profit (PP), and Government
Revenue/Other Transfers Changes Resulting from the January 1994 CFA
Franc Devaluation.

Consumer Mali Burkina Ghana Cote d’Ivoire
Surplus Faso

South GH North GH South CI North CI

 

Base Model

CS 3.9099E+10 2.531E+10 3.693E+10 8.38lE+09 5.095E+10 2.442E+10
CS FCFA 138 mil. 89 mil. 131 mil. 30 mil. 180 mil. 86 mil.
CS USS

Devaluation 86 mil. 57 mil 75 mil. 15 mil. 121 mil. 54 mil.
CS USS

A CS USS -52 mil. -32 mi]. -56 mil. -15 mil. -59 mi]. -33 mil.

Producer Profits (PP)*

Base Model

PP 6256039230 568008000 1 159159740 1438087200
PP FCFA 22 mil. 0 4 mil. 5 mil.
PP USS 20 mil.

Devaluation 39 mil. 40 mil. 5 mil. 13 mil.

PP

USS

A PP USS 17 mil. 20 mil. 0.8 mil. 8 mil.

Changes in Government Revenue and Other Transfers

Base Model

GRev. FCFA 645611076 682152000 398249012 669878814
GRev. USS 2 mil. 2 mil. 1 mil. 2 mil.
Devaluation

GRev. USS 3 mil. 3 mil. 2 mil. 3 mil.
GRev as % of 0.2% 0.2% 0.04% 0.04%
GDP
Bribes/Tips 2 mil. 2.1 mil. 0.6 mil. 2.6 mil.

*PP assumes a 100% increase in the prices of tradeable inputs, and a 20% increase in labor
cost after devaluation. GRev. refers to Government Revenue. Both pre and post
devaluation figures were converted to USS using the same exchange rate.

Source: Estimates based on Table 5.13 and Appendix Table A5. 10.

186

the Sahelian countries was due also, in part, to higher incomes in coastal countries.
This is consistent with what was expected since there were increases in the
general price levels in all four countries, while quantities of beef consumed either
declined or were maintained at previous levels. The case of Ghana is not really
different from the experience of the other three countries because, even though it is
not part of the CFA franc zone, Ghana has experienced a continual depreciation of
the Cedi since structural adjustment started in the country in the early 19805.
Producer profits increased in all four countries following the CFA fianc
devaluation. This was based on the assumption that the prices of tradeable inputs used
in cattle production and marketing increased by 100% while labor cost increased by
20% following the devaluation. Yade et al. (ibid) report that in Mali, the price of
cotton seed based livestock feed increased by 43% between 1993 and 1996; and the
prices of agro-industrial by products used in cattle production in Burkina Faso also
increased by about 40% to 50% in the 1994/95 marketing year (which followed
directly afier the devaluation). Producer profits in Mali increased by 75%, while those
in Burkina Faso doubled (101%). Similarly, in Ghana and Cote d’Ivoire, producer
profits increased by 19% and 153%, respectively, indicating that as expected, cattle
farmers in Ghana did not benefit from the CFA franc devaluation as much as their

counterparts in the CFA franc zone countries.

187

Considering both the consumer surplus and producer profit changes together,
and also looking at government revenue changes and changes in other transfers (i.e.,
bribes/tips), we conclude that even though the CFA franc devaluation resulted in
losses in consumer welfare for beef consumers in all four countries of the Central
Corridor (which may be attributed to the decline in beef consumption, coupled with
the general increase in beef prices across all four countries), cattle producers in
general enjoyed higher profits, and therefore experienced welfare increases following
the CFA franc devaluation, even though their experiences differed from one country
to another. The overall effect therefore was mixed for the Central Corridor. Both
cattle exporting and importing countries experienced decrease in welfare following
the CFA Franc devaluation as consumer losses outweighed producer gains, but the
welfare loss was higher for cattle importing countries than for exporting countries.

By comparing the model results for the more open trade (pre-devaluation
period) with that of the CFA franc devaluation, it is seen that both off-take and
slaughter figures were higher for all countries (except off-take in Ghana) with the
devaluation than under the more open trade scenario. Cattle trade in the sub-region
also expanded more following the devaluation (7% more animals traded) than would
occur under a single currency scenario prior to devaluation. Also, changes in

consumer surplus and producer profits, as well as government revenue relative to the

base model, were higher in the case of the CFA franc devaluation than under the more

188

open trade scenario. These differences in the effect of the two scenarios suggest that
devaluation would have a greater efi‘ect on the cattle sector compared to a more open
trade policy for the sub-region, emphasizing the importance of macro adjustments
compared to sectoral adjustments in the formulation and implementation of economic

policies.

189

CHAPTER VI

Summary and Policy Implications

6.1. Summary

The focus of this study was to estimate the magnitude and direction of trade
flows in cattle and their associated welfare implications in the event that more Open
trade is instituted in the Central Corridor of the West Afiican sub-region. This will
inform the ongoing debate on economic integration in West Afiica (a goal that has
eluded the ECOWAS countries since the mid 19705).

The choice of cattle for this analysis is home out of two related issues. First,
animal production is a major economic activity in the two Sahelian countries,
representing about 16% and 10% of Gross Domestic Product (GDP) in Mali and
Burkina Faso, respectively. The World Bank, for example, estimates that about 30%
of exports from Mali and 26% from Burkina Faso are trade in animals. At the same
time, coastal countries in the region, such as Ghana and Cote d’Ivoire, are net
importers of beef and cattle; and this has traditionally created a potentially viable
trade in animals between the sahelian and coastal countries.

Second, the European Union (EU) in the 1980s and early 19905 followed a
policy of dumping beef in West Afiica (at prices about 30% to 50% lower than beef

from the West African sub-region) as a way of containing problems with European

190

surpluses (Madden, ibid.). The exports of beef from the EU to West Afiica increased
about 700% in the 1980s, which greatly afi‘ected the traditional cattle trade in the
region. GATT (1993), for example, reports that in 1992/93 about 99% of all non-
Afiican beef imports to West Afiica came from the EU countries. There is need for
assessing how cattle trade in the sub-region has been affected as a result of the EU
beef dumping, as well as the overvaluation of West Afiican currencies, which also
contributed to making imports of beef from Europe artificially cheap.

It is evident from the existing literature on regional economic integration (and
therefore more open trade in Sub—Saharan Afiica) that there exists a wide gap between
recognizing what the potential benefits of integration are, and actually quantifying
such benefits. In part, the reluctance of government to commit to firll implementation
of the numerous protocols on integration and liberalization of trade in the West
Afiican suboregion could be attributed to the uncertainties that surround these
expected benefits. This study is therefore an attempt to quantify the magnitudes of
such gains (or losses as the case may be) to specific countries and economic agents.

The study is limited to the four countries (Ghana, Cote d’Ivoire, Mali and
Burkina Faso) due to time and financial constraints. Also, Ghana and Cote d’Ivoire
provide a comparison between coastal countries in the region, while inclusion of Mali
and Burkina Faso allows comparison between both coastal and interior countries, and

between two interior countries.

191

This study applies a competitive market fiamework to detemrine the
magnitudes of gains from trade and how such gains are distributed among economic
agents. The approach was to consider the central corridor of West Africa as a trading
area which satisfies the competitive market assumption (homogenous product, large
number of sellers and buyers, etc.) in respect to cattle trade. In order to simulate the
efi‘ects of a competitive market, the net social welfare that was generated from
demand for beef at the country or regional level was maximized for the case where
no trade barriers exist, the common regional currency scenario, etc. The analysis of
this situation was accomplished using a quadratic programming model and comparing
a base year analysis with results obtained from other different scenarios.

For the maximization of the net social surplus for beef consumption in the
West African Central Corridor, we apply the principles of welfare economics based
on the argument that the competitive equilibrirun that results will yield Pareto
efl'rcient allocation in the beef sub-sector. When the objective frmction is maximized,
the model generates optimal values for all prices and factors of production and
outputs of commodities included in the model at the point where the market is in
equilibrium. These values represent the production and consumption levels of the
economy modeled, and allow us to compute the consumer and producer surpluses as
welfare indicators. Hence, the model provides a convenient way for conducting

simulation analysis for a sector of an economy at the country or regional level when

192

a competitive market framework is an appropriate representation as in the case of beef
and cattle trade in the central corridor of West Africa.

Since agricultural production, particularly in developing countries, has been
recognized as risky due to the mostly uncontrollable nature of the environment in
which production and distribution take place, cattle farmers’ risk- averse behavior was
accounted for in the model. Farmers generally confront numerous natural hazards
such as drought, fire, or floods, which may destroy both crops and livestock; as well
as variability in outputs, inputs, and prices that affect their incomes, and they
therefore show risk-averse behavior in most farm decision making processes.

This study applies the more commonly used mean-variance (E, V) method to
account for the risk-averse behavior of economic agents in the cattle sub-sector of the
Central Corridor of West Africa. The basic assumption here is that the coefficient for
aggregate risk aversion for a region or country should be equal to the sum of the
individual risk aversion coefficients (Hazell and Scandizzo, ibid.) For this analysis
the risk-aversion coefficient, (I), was 1.5 (derived through sensitivity analysis). Also
accounted for in the trade model is the effect of exchange rate changes on the flow
of cattle in the Central Corridor.

The quadratic programming applied in this analysis maximizes a non-linear
objective function (a polynomial of the second degree) subject to a set of linear

constraints, with all the variables defined for non-negative values. The optimal

193

solution of the model gives estimates of beef quantities and cattle numbers per
country/region; and also provides information on the transportation network among
supply and demand centers. The analysis is based on a long rim-scenario, allowing
time for changes in government policies to take effect.

After providing an overview of trade in general, and production and marketing
of cattle and beef in the Central Corridor in particular, an initial base model was
calibrated to simulate 1993 (base year for the analysis) beef and cattle trade in the
Central Corridor under the existing trading conditions (where Ghana’s currency is the
Cedi and the other three countries use the CFA Franc). The base model was then rrm
under three scenarios: (a) all four countries had more open trade in cattle (i.e., all
existing cattle trade barriers removed); (b) all four countries adopted the same
currency (CFA Franc in this case); and (c) all four countries had more open trade and
also adopted a single currency (a combination of scenarios (a) and (b) above). This
was accomplished by changing the initial parameters and model constraints to reflect
the intended scenario.

In order to ascertain how stable the model results were, sensitivity analysis was
done by changing the price elasticity of demand for each consuming country/region
by 10% up and down (i.e. 10% increase in one case, and 10% decrease in another).

In general, the price and quantity values endogenously determined by the model

194

compared well with the reported 1993 data for each country in the Central Corridor,
thereby validating the model.

Analysis of a more open trade in the Central Corridor indicates that there will
be increased cattle trade and beef consumption in the sub-region; while beef imports
from outside the region would decline, provided the present tariffs and other
restrictions on beef imports into the region remain. Cattle farmers gain through higher
prices of local cattle, but beef consumers, particularly in the exporting countries, lose
as a result of lower local slaughter and higher beef prices.

Under the single currency scenario, the total volume of trade in live cattle
within the Central Corridor would increase even though both exporting and importing
countries might have different experiences. The figures generated by the model
suggest that the adoption of a single currency by all countries in the Central Corridor
will benefit them all, particularly because total trade will expand. Burkina Faso, for
example, will unambiguously benefit as a result of increased cattle exports, while the
case of Mali is inconclusive because exports will decline slightly. In the presence of
substantial trade barriers, adopting a single currency for the sub-region will not
automatically lead to expansion in cattle production in the sub-region (e.g., Mali’s
ofl-take declined).

In the case of the single currency and a more open trade scenario, the oflltake

values relative to the base model increased for all countries except Cote d’Ivoire. This

195

suggests that under this scenario, there would be expansion in the cattle sector (total
ofl-take increases), as well as increase in the overall trade flow in cattle, and the
consumption of beef in the Central Conidor.

Welfare analysis using consumer surplus and producer profits, and also net
transfers, indicates that there would be an overall gain for all four countries in the
Central Corridor, even though cattle exporting countries would enjoy higher gains
than cattle importing countries. Moreover, even in the case of Ghana and Cote
d’Ivoire, where there would be loses in consumer surpluses under some of the trade
scenarios, gains in producer profits are likely to outweigh consumer loses. Also,
changes in net transfers (including government revenue and bribes/tips) under
different trade scenarios range from USS 1 million to USS 3 million for all four
countries; and do not significantly alter the effects of consumer surplus and producer
profit changes.

The January 1994 devaluation of the CFA franc by 50% relative to the French
franc also affected cattle trade flows and beef consumption in the Central corridor.
Following the devaluation, there was de-stocking in both Mali and Burkina Faso by
cattle producers to take advantage of the improved competitiveness of cattle in the
coastal markets, thereby expanding cattle trade in the sub-region. Also, the CFA fi‘anc
devaluation resulted in losses in consumer welfare for beef consumers in all four

countries of the Central Conidor. On the other hand, cattle producers in general

196

enjoyed higher profits, and therefore experienced welfare increases following the
CFA franc devaluation.

Comparing the CFA franc devaluation and the more open trade models, it is
evident that the effect of the devaluation was greater on the cattle sector than the more
open trade scenario. This comparison highlights the importance of macro adjustments
relative to sectoral adjustments in the context of formulating and implementing
economic policies.

Even though many studies have been conducted on the livestock sector and on
cattle and small ruminants in particular in West Afiica, few have attempted to
quantify the gains and losses to the various actors or economic agents involved in the
sub-sector. The major contribution of this study, therefore, is the simulation analysis
that has shown the trends and directions of cattle trade flows as well as beef imports
and consumption in the Central Corridor under various policy options. The
magnitudes of these variables are also provided, but due to the general weakness of

the data in the region, considerable caution is needed when interpreting these figures.

6.2 Policy Implications
This study that has analyzed cattle trade flows in the Central Corridor, as well
as beef imports and consumption, has shed considerable light on the existing potential

in cattle trade and some of their implications to the sub-region. As a result of

197

structural adjustment and economic reforms, the governments of all four countries in
the Central Corridor have sought to liberalize both the input and product markets of
their respective livestock sectors, encouraging the private sector to play a more pivotal
role in these markets. Government policy options in the livestock sector, particularly
for cattle and beef, thus relate more to incentive creation and the provision of
enabling environment that promote private sector initiative, and ensure gains for
economic agents involved in the sector.

The results of the study have implications for government policies in all four
countries. First, the study shows that under the more open trade scenario there will
be increased cattle trade and beef consumption in the sub-region, while beef imports
fi'om outside the region would decline. Encouraging more open trade will therefore
be a way the governments of all four countries in the Central Corridor can promote
the welfare of their people, as well as move towards closer cooperation and
integration. The caveat, though, is that promoting more open trade in cattle will be at
the expense of consumers in the exporting countries. However, a dwindling cattle
trade in the sub-region, on the other hand, could lead to a decline in welfare for
producers, and an increase in beef import bills for coastal countries.

One issue of interest besides how to compensate for losses in government
revenue, under a more open trade system, particularly for cattle exporting countries,

will be how to address the decline in beef consumption in the Sahelian countries

198

(exporters), which could threaten the quality of life in those countries. Considering
that there is no easy answer to these problems, one way to address them will be for
more vigorous government action to boost productivity in the cattle sector, such as
more extension to cattle producers and making relevant inputs available on a timely
basis. A more productive cattle sector will be capable of satisfying both domestic
demands and exports, as well as spread gains that could compensate for any losses in
government revenue.

Second, even though under a single currency scenario there is increase in cattle
trade in the sub-region, there are also losses to some countries, particularly Ghana and
Mali. On the other hand, the single currency with more open trade scenario leads to
a relatively greater expansion of the cattle sector, and could increase the overall net
gains to individual countries. A regional approach to promoting the cattle sector in the
sub-region could therefore bring greater benefits to all economic agents and countries
involved. We should note that all the countries in the Central Corridor except Ghana
already belong to a single currency zone (CFA Franc Zone), and that the single
currency with more open trade seem to generate more benefits for these countries.
Another important consideration is that the model estimates the minimum level of
benefits for the single currency or single currency with open trade scenarios as it
doesn’t take into account costs associated with currency transfer across countries by

individuals (e. g. traders that carry CFA francs or Cedis across the borders).

199

 

Third, the welfare analysis indicates that there will be net welfare gains for
both consumers and producers in the Central Corridor under a trade regime that has
a single currency with more open trade, in spite of the consumer welfare losses in
Ghana and Mali. Governments of the countries in the Central Corridor could therefore
take advantage of such welfare gains by more cooperation in their policy formulations
regarding both cattle and other goods and services that will also seek to compensate
the losers (such as Ghana). For example, the Sahelian countries which are landlocked
could channel some of their exports and imports through Ghana to help generate
“compensatory” revenue for that country. This is particularly important as these
governments face prospects of increasing populations and therefore new challenges

as to how to adequately cater for these populations.

6.3 Limitations of the Study

This study has been done with mainly secondary data, with only limited
primary data content. The quality of the available data therefore has a bearing on the
analysis and conclusions of the study. Even though there existed good sources for
production cost and marketing and transformation cost data, some of the aggregate
data such as trade figures and prices collected at the official level could have

shortcomings inherent in such official data in most of West Afiica. One should

200

therefore exercise some caution in the interpretation and use of the results of this
study.

Also, an important consideration is that the implementation of these trade and
currency reforms, especially the more open trade, and single currency with more open
trade scenarios. These could meet with considerable political opposition from
politically powerful groups who might lose their rents in the form of transfers under
existing conditions. For example, losses in tips and bribes range between US$05
million in Ghana to US$2.7 million in Cote d’lvoire under the single currency with
more open trade scenario (see Table 5.12). Implementing these reforms should

therefore take into account how these groups might be affected.

6.4 Future Research

The challenge of useful quantitative analysis becomes a more daunting task in
the absence of very reliable data base. In pursuing the objectives of this study, the
availability of good data became a major determining factor in deciding on what could
and could not be done. For example, a more dis-aggregated analysis for each country
in the Central Corridor that would look at the provincial level would have been
pursued if the relevant data were available. Considering that good data is
indispensable for policy formulation, planning, and implementation, as well as for

research, governments in the Central Corridor should invest more resources to

201

generate reliable data for the beef and cattle sector, as well as all other sectors of the
economy.

Also, due to time and financial constraints, this study was limited to beef and
cattle, which is a subset of the livestock sector. Future research should pursue a more
extensive analysis that will incorporate other livestock and livestock products, such
as small ruminants. An area of considerable interest is to what extent trans-shipment
of livestock is made through Burkina Faso due to its strategic geographic position in
the Central Corridor, particularly from Mali and Niger; and whether the seasonality
of livestock sales and shipments has any significant effect on beef consumption in the
sub-region. Moreover, considering the expected population increases in the sub-
region in the near future, it will be useful to do projections on cattle production and
beef consumption in the sub region based on the simulation analysis used for this
study.

This analysis was conducted with a pre-devaluation (1993) data base. It will
be interesting to do a similar analysis with a post-devaluation data base, say for 1998
data, to see whether there have been any significant structural changes in cattle trade

in the sub-region.

202

 

APPENDICES

 

 

Appendix A4.1

Cattle Production Cost Estimates for the Central Corridor (1993 Prices)

Production Cost - Mali Cattle (F CF A/head)

Sikasso - sed Yr 1 Yr 2 Yr 3
Rep Stock 16019 0
Fixed Inputs 71 26
Labor 5516 5516
Comm. Feeds/Inputs 1539 1539
Misc. (99. vert.) 1846 1846
TOTAL 24991 8927

N PV COST 46,432.15 F

Production Cost - Burkina Faso Cattle (F CFA/head)

Yako - sed. Yr 1 Yr 2 Yr 3
Rep Stock 15584 0
Fixed Inputs 121 60
Labor 9026 9026
Comm. Feeds/Inputs 429 429
Misc.(eg. vert.) 367 367
TOTAL 25527 9882
NPV COST 49,261.90 F
Production Cost - Ghana Cattle (Cedis/head)
K. Tamale - sed. Yr 1 Yr 2 Yr 3
Rep Stock 19724 0
Fixed Inputs 3500 1750
Labor 5922 5922
Comm. Feeds/Inputs 4500 4500
Misc.(eg. vert.) 2726 2726
TOTAL 36372 14898
NPV COST C72,! 54. 48

(or F CFA 35,502)

Production Cost - Cote d'Ivoire Cattle (FCFA/head)

Korho - sed. Yr 1 Yr 2 Yr 3
Rep Stock 12330 0
Fixed Inputs 218 110
Labor 7231 7231
Comm. Feeds/Inputs 588 588
Misc.(eg. vert.) 989 989
TOTAL 21356 8918
NPV COST 42,775.53 F

Yr 4 Total NPV“
0 0
26 26 133.45 F
5516 5516 18,764.50 F
1539 1 539 5,235. 42 F
1 846 1 846 6,279. 78 F
8927 8927
Yr 4 Total NPV‘
0 0
60 60 265.11 F
9026 9026 30,704.93 F
429 429 1,459.39 F
367 367 1,248.47 F
9882 9882
Yr 4 Total NPV“
0 0
1750 1750 C7, 703.20
5922 5922 C20, 145.04
4500 4500 C15,308.24
2726 2726 C9,2 73.39
14898 14898
Yr 4 Total NPV"
0 0
1 10 110 482.20 F
7231 7231 24,598.64 F
588 588 2,000.28 F
989 989 3,364.41 F
8918 8918

SOURCE: Production cost figures were computed based on Metzel et al., 1993.

203

“ Discount Rate used was 12%

Note: This appendix table presents the discounted values of inputs used in the model.
The column at the extreme right (bold) presents the discounted value of individual
inputs used to construct the ans of the model; while the NPV Cost gives the

discounted total cost.

 

204

Appendix A5.].

Nominal Exchange Rates of the Ghana Cedi and CFA Franc Relative to the US Dollar,
and of the Cedi relative to the CFA Franc — 1985 to 1997.

Year Cedis/USS] FCFA/USS] Cedis/1000 FCFA
1985 54.37 449.26 121.13
Qt. I 50.00 498.01 100.60

11 52.36 470.36 110.60

111 55.25 434.34 126.13

IV 59.88 394.34 147.93

1986 89.20 346.30 302.39
Qt. I 89.96 360.38 234.90
II 90.09 357.34 252.78

III 90.09 338.89 272.33

IV 90.09 328.61 449.54

1987 153.73 300.54 536.53
Qt. I 130.00 306.39 490.11
11 150.00 301.27 524.53

III 160.51 306.76 533.43

IV 174.43 287.72 598.05

1988 202.35 297.85 673.74
Qt. I 180.02 283.44 635.92
11 185.77 288.93 644.98

III 213.73 315.95 656.94

IV 229.86 303.07 757.11

1989 270.00 319.01 817.16
Qt. I 245.35 314.71 778.67

 

205

II
III

IV
1990
Qt. I
11
111
IV
1991
Qt. 1
11
III
IV
1992
Qt. 1
11
111
IV
1993
Qt. I
II
III
IV
1994
Qt. I

11

266.35
275.59
292.72
326.33
307.42
321.38
334.04
342.49
367.83
351.42
365.09
371.82
383.00
437.09
393.22
409.70
445.16
500.26
649.06
571.62
601.00
672.82
750.81
956.71
906.18
933.33

327.71
325.31
308.31
272.26
286.79
282.21
267.19
252.87
282.11
260.50
293.95
296.37
277.60
264.69
275.52
272.03
248.00
263.22
283.16
277.33
272.91
290.61
291.79
555.20
586.20
568.75

822.85
833.09
934.04
1180.44
1045.31
1118.49
1225.81
1332.16
1293.97
1357.45
1253.00
1215.43
1350.00
1576.09
1428.44
1340.31
1677.48
1858.13
2224.03
200.37
2237.50
2216.69
2441.56
1779.35
1789.29
1631.07

 

206

111 965.81 535.36 1761.10

IV 1021.53 530.51 1935.95

1995 1200.43 499.15 2364.09
Qt. I 1069.03 516.88 2019.36
II 1141.20 491.77 2244.21

III 1210.68 494.90 2434.31

IV 1380.80 493.04 2758.46

1996 1637.23 511.15 3188.89
Qt. I 1516.42 503.51 2990.56
11 1618.70 515.81 3131.87

III 1686.62 509.39 3285.67

IV 1727.18 517.50 3347.47

1997 2037.16 582.85 3508.77
Qt. I 1793.79 559.71 3269.47
11 1976.00 577.82 3449.33

111 2161.67 604.02 3560.00

1V 2217.17 589.85 3756.27

 

Source: Cedis/USS and FCFA/USS were obtained from the lntemational Financial Statictics,
IMF. Washington DC. Various Issues. Cedis/FCFA were obtained from Fosu, 1997.

207

Appendix A5.2.

Optimal Solution Values for the Base Model (initial existing conditions as in

 

 

 

 

 

 

 

1993).
Mali Burkina Ghana Cote d’Ivoire

South North Zone Zone
Zone Zone Foret Savane

Off-take (num) 348,390 294,000 101,940 86,010

Price(FCFA/hd) 77,816 83,722 54,495 72,456

Demand (Mt) 30,268 23,392 36,136 6,853 36,646 14,012

Price(FCFA/Mt) 545,620 550,430 455,045 - 575,800 -

WD Imports(Mt) - - 19,850 - 16,850

 

 

 

 

 

 

 

 

208

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train

MZ.MZ 108,102 108,102

MZ.GN 8,500 3,798

MZ.CN 20,000 20,000

MZ.GE 14,891

MZ.CC 65,000

BFBF 83,545 83,545

BF .GN 10,000 10,000

BF.CN 9,500 9,500 9,500
BF.GE 38,000

BF.CC 20,206 20,206
GN.GN 21,200

GN.GE 80,740

CN.CN 20,100 20,100

CN.CC 45,810

 

 

 

 

Note:
WD Imports implies World
Imports

MZ.MZ is shipments within

Mali

MZ.GN is Mali to North Ghana

MZ.CN is Mali to North Cote

d’Ivoire

MZ.GE is Mali to South Ghana

MZ.CC is Mali to South Cote

d’Ivoire

BF .BF is shipments within

Burkina

BF.GN is Burkina to North

Ghana

BF.CN is Burkina to N. Cote

d’Ivoire BF.GE is Burkina to

South Ghana

BF.CC is Burkina to S. Cote

d’Ivoire

GN.GN is shipments within

N.Ghana

GN.GF. is N. Giana to S. Ghana

CN.CN is shipments within

North Cote d’Ivoire

CN.CC is North Cote d’Ivoire to
South Cote d’Ivoire

 

209

 

conditions as in 1993).

Appendix A5.3.
Optimal Solution Values for the Open Trade Model (based on existing

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Ghana Cote d’Ivoire
South North Zone Zone
Zone Zone Foret Savane
Oflltake (num) 356,200 327,010 112,820 61,922
Price(FCFA/hd) 89,788 96,603 64,687 83,604
Demand (Mt) 39,722 23,058 36,136 7,695 36,646 13,564
Price(FCFA/Mt) 545,920 550,640 455,04 - 575,800 -
5
WDImports(Mt) - - - 15,132 -
16,820

 

 

210

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train
MZ.MZ 106,150 106,150
MZ.GN 12,500
MZ.CN 15,400 15,400
MZ.GE 28,400
MZ.CC 72,200
BF .BF 82,350 82,350
BF .GN 10,950 10,950
BF .CN 11,500 11,500
11,500
BF .GE 41,500
BF .CC 32,205
32,205
GN.GN 26,180
GN.GE 86,638
CN.CN 20,100 20,100
CN.CC 21,722

 

 

 

 

Note:

WD Imports implies World
Imports

MZ.MZ is shipments within

Mali

MZ.GN is Mali to North Ghana

MZ.CN is Mali to North Cote

d’Ivoire .

MZ.GE is Mali to South Ghana

MZ.CC is Mali to South Cote

d’Ivoire

BF .BF is shipments within

Burkina

BF .GN is Burkina to North

Ghana

BF.CN is Burkina to N. Cote

d’Ivoire BF.GE is Burkina to

South Ghana

BF .CC is Burkina to S. Cote

d’Ivoire

GN.GN is shipments within

N.Ghana

GN.GE is N. Ghana to S.

Ghana

CN.CN is shipments within

North Cote d’Ivoire

CN.CC is North Cote d’Ivoire to
South Cote d’Ivoire

 

211

 

 

Appendix A5.4.
Optimal Solution Values for the Base Model (based on existing conditions as in
1993) assuming all Countries used the Same Currency (i.e. FCFA).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Ghana Cote d’Ivoire

Southern Northern Zone Zone

Zone Zone Foret Savane
Off-take (num) 339,920 330,000 109,710 77,070
Price(FCFA/hd) 89,788 96,603 64,687 83,604
Demand (Mt) 29,493 22,749 36,136 6,876 36,646 14,202
Price(FCFA/Mt) 546,050 550,830 467,980 - 575,800 -
WD - - 18,718 - 13,050 -
Imports(Mt)

 

212

 

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train
MZ.MZ 105,332 105,332
MZ.GN 9,500
MZ.CN 15,000 15,000
MZ.GE 11,758
MZ.CC 78,000
BF.BF 81,245 81,245
BF.GN 11,500 8,923
BF.CN 12,500 12,500 11085
BF .GE 45,650
BF .00 35,520 29,830
GN.GN 24,425
GN.GE 85,282
CN.CN 22,500 22,500
CN.CC 32,070

 

 

 

 

Note:

WD Imports implies World
Imports

MZ.MZ is shipments within Mali
MZ.GN is Mali to North Ghana
MZ.CN is Mali to North Cote
d'Ivoire

MZ.GE is Mall to South
Ghana

MZ.CC is Mali to South Cote
d’Ivoire

BF .BF is shipments within
Burkina

BF.GN is Burkina to North
Ghana

BF .CN is Burkina to N. Cote
d’Ivoire BF .GE is Burkina to
South Ghana

BF.CC is Burkina to S. Cote
d’Ivoire

GN.GN is shipments within
N.Ghana

GN.GE is N. Ghana to S.
Ghana

CN.CN is shipments within
North Cote d’Ivoire

CN.CC is North Cote d’Ivoire
to South Cote d’Ivoire

 

213

 

 

Appendix A5.5.

Optimal Solution Values for Open Trade Model (based on existing conditions
as in 1993) assuming all Countries used the Same Currency (i.e. FCFA).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Ghana Cote d’Ivoire
South North Zone Zone
Zone Zone Foret Savane
Off-take (num) 367,030 330,000 1 11,210 82,637
Price(FCFA/hd) 89,788 96,603 64,687 83,604
Demand (Mt) 29,291 22,863 36,136 6,949 36,646 14,239
Price(FCFA/Mt) 546,160 550,760 467,980 - 575,800 -
WD - - 15,980 - 1 1,240 -
Imports(Mt)

 

214

 

 

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train
MZ.MZ 104,612 104,612
MZ.GN 13,000
MZ.CN 15,250 15,250
MZ.GE 33,662
MZ.CC 80,642
BF .BF 81,655 81,655
BF .GN 11,000 5,661
BF.CN 15,050 15,050 7,248
BF.GE 42,910
BF .CC 40,270 29,500
GN.GN 25,425
GN.GE 85,782
CN.CN 21,550 21,550
CN.CC 39,537

 

 

 

 

Note:

WD Imports implies World

Imports

MZ.MZ is shipments within Mali

MZ.GN is Mali to North Ghana

MZ.CN is Mali to North Cote

d'Ivoire

MZ.GE is Mali to South Ghana

MZ.CC is Mali to South Cote

d’Ivoire

BF .BF is shipments within

Burkina

BF .GN is Burkina to North

Ghana

BF.CN is Burkina to N. Cote

d’Ivoire BF.GE is Burkina to

South Ghana

BF .CC is Burkina to S. Cote

d’Ivoire

GN.GN is shipments within

N.Ghana

GN.GE is N. Ghana to S.

Ghana

CN.CN is shipments within

North Cote d’Ivoire

CN.CC is North Cote d’Ivoire to
South Cote d’Ivoire

 

215

 

 

Appendix A5.6.

Sensitivity Analysis: Optimal Solution Values for the Base Model assuming a
10% increase in the Price Elasticities of Demand for each Consuming

 

 

 

 

 

 

 

Region/Country
Mali Burkina Ghana Cote d’Ivoire
South North Zone Zone
Zone Zone Foret Savane
Ofl-take(num) 351,290 294,000 101,940 86,010
Price(FCFA/ 77,816 83,722 54,495 72,456
hd)
Demand (Mt) 30,268 23,392 36,136 7,259 36,646 14,012
Price(FCFA/ 575,010 582,860 493,198 - 622,850 -
Mt)
WD - - 19,850 - 16,850 -
Imports(Mt)

 

 

 

 

 

 

 

 

216

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train

MZ.MZ 108,102 108,102

MZ.GN 8,500 6,693

MZ.CN 20,000 20,000

MZ.GE 14,891

MZ.CC 65,000

BF .BF 83,545 83,545

BF .GN 10,000 10,000

BF .CN 9,500 9,500 9,500
BF .GE 38,000

BF .CC 20,206 20,206
GN.GN 21,200

GN.GE 80,740

CN.CN 20,100 20,100

CN.CC 45,810

 

 

 

 

Note:

WD Imports implies World
Imports

MZ.MZ is shipments within Mali

MZ.GN is Mali to North Ghana

MZ.CN is Mali to North Cote

d’Ivoire

MZ.GE is Mali to South Ghana

MZ.CC is Mali to South Cote

d’Ivoire

BF .BF is shipments within

Burkina

BF .GN is Burkina to North

Ghana

BF.CN is Burkina to N. Cote

d’Ivoire BF.GE is Burkina to

South Ghana

BF .CC is Burkina to S. Cote

d’Ivoire

GN.GN is shipments within

N.Ghana

GN.GE is N. Ghana to S.

Ghana

CN.CN is shipments within

North Cote d’Ivoire

CN.CC is North Cote d’Ivoire to
South Cote d’Ivoire

 

217

 

Appendix A5.7.
Sensitivity Analysis: Optimal Solution Values for the Base Model assuming a
10% decrease in the Price Elasticities of Demand for each Consuming
Region/Country

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Ghana Cote d’Ivoire
South North Zone Zone
Zone Zone Foret Savane
Off-take (num) 340,340 294,000 101,9450 86,010
Pn'ce(FCFA/hd) 77,816 83,722 54,495 72,456
Demand (Mt) 30,268 23,392 36,136 6,448 36,646 13,289
Price(FCFA/Mt) 516,240 517,990 416,896 - 528,750 -
WD Imports(Mt) - - 19,850 - 16,850 -

 

218

 

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train
MZ.MZ 108,102 108,102
MZ.GN 8,500 902
MZ.CN 20,000 14,841
MZ.GE 14,891
MZ.CC 65,000
BF .BF 83,545 83,545
BF.GN 10,000 10,000
BF .CN 9,500 9,500 9,500
BF .65 38,000
BF .CC 20,206 20,206
GN.GN 21,200
GN.GE 80,740
CN.CN 20,100 20,100
CN.CC 45,810

 

 

 

 

Note:

WD Imports implies World
Imports

MZ.MZ is shipments within Mali
MZ.GN is Mali to North Ghana
MZ.CN is Mali to North Cote
d’Ivoire

MZ.GE is Mali to South
Ghana

MZ.CC is Mali to South Cote
d’Ivoire

BF .BF is shipments within
Burkina

BF.GN is Burkina to North
Ghana

BF.CN is Burkina to N. Cote
d’lvoire BF.GE is Burkina to
South Ghana

BF.CC is Burkina to S. Cote
d'Ivoire

GN.GN is shipments within
N.Ghana

GN.GE is N. Ghana to S.
Ghana

CN.CN is shipments within

North Cote d’Ivoire
CN.CC is North Cote d’Ivoire
to South Cote
d'Ivoire

 

219

 

 

Appendix A5.8.
Consumer Surplus changes under different Trade Scenarios in the Central
Corridor - Estimates based on 1993 figures

Mali Burkina Ghana

 

Cote d’Ivoire
Faso
Base Model South G11 North 611 South CI North CI
a - intercept 1018194 896900 747764 884153 1063972 1220004
b - slope -18.11 -15.87 -15.2 -98.98 -17.84 -74.73
Q - Qty DD 30269 23393 36136 6853 36647 14012
P - price 546 550 455 455 576 576

CS - FCFA 3.9099E+10 2.531E+10 3.693E+10 8.381E+09 5.095E-l-10 2.442E+10

 

CS- US 5 138,158,317 89,434,942 130,491,699 29,616,244 180,028,738 86,299,385
Open Trade Model

a - intercept 1018194 896900 747764 _ 884153 1063972

1220004
b - slope -18.11 -15.87 -15.2 -98.98 ~17.84 ~74.73
Q - Qty DD 29722 23058 36136 7651 36647 13564
P - price 546 551 455 455 576 567
A CS - -8.531E+08 - 4.232E+08 - 3,614 +1.349E+09 1.44E+06 -1.008E+09
FCFA
A CS - -3,014,537 4,495,590 - 13 +4,767,170 5,097 -3,561,529
US 3
Base Model assuming a Single Currency (FCFA)
a - intercept 1018194 973333 727218 858972 1063972 1220004
b - slope -18.11 -15.87 -14.77 -96.15 -17.84 -74.73
Q - Qty DD 29493 22749 36136 6876 36647 14202
P - price 546 551 468 468 576 576
A CS - -l.209E+09 -813E+08 -1.024E+09 -2.053E+08 +1.435E+06 +4.319E+08
FCFA
A CS - 4,272,124 -2,872,971 -3,6l7,292 425,466 +5,071 +1,526,465
US 8

220

Open Trade Model assuming a Single Currency (FCFA)

a-intercept
b-slope
Q-QtyDD
P-price

A CS -
FCFA

ACS-
USS

1018194
-18.11
29291

546
452113-109

6,376,261

896900
-15.87
22863

551
-6.686E+08

-2,362,545

727218
-l4.77
36136

468
- 1.024E-l-O9

-3,617,292

221

858972
-96. 15
6949
468
-9.368E+07

-331,060

1063972
-l7.84
36647

576
+1 .435E+06

+5,071

1220004
-74.73
14239

576
+5.181E-108

+1330,886

 

Appendix A5.9.

Changes in Producer Profits under different Trade Scenarios in the Central

Corridor - Estimates based on 1993 figures

Mali B Faso
Base Model
Prd Cost 46432 49261
Loc Mkt Cost 13427 15141
Unit Cost 59859 64402
Total Cost 2.0854E+10 1 .8934E+10
Off-take 348390 294000
Price/head 77816 83722
Total Revenue 2.711E+10 2.4614E+10
Profit FC FA 6256039230 5680080000
Profit USS 221061457 200709541
Open Trade Model
Prd Cost 46432 49261
Loc Mkt Cost 13427 15141
Unit Cost 59859 64402
Total Cost 2.1322E+10 2.106E+10
Off-take 356200 327010
Price/head 89788 96603
Total Revenue 3.198215+10 3.159E+10
Profit FCFA 1.0661 E+10 1.053E+10
Profit USS 376703527 372086537
Ch in PfFCFA 4404670570 4849969010
Ch in PfUSS 15564207 171376997
Base Model assuming a Single Currency
Prd Cost 46432 49261
Loc Mkt Cost 13427 15141
Unit Cost 59859 64402
Total Cost 2.0347E+10 2.1253E+10
Off-take 339920 330000
Price/head 89788 96603
Total Revenue 3.0521 E+10 3.1879E+1O
Profit FCFA 1 .0173E+10 1 .0626E+10
Profit USS 35948642 375488693
Ch in PfFCFA 3917426450 4946250000
Ch in Pf USS 138424963 174779152

222

Ghana

32505

1 0620

431 25
43961 62500

1 01 940

54496
5555322240
1 1 591 59740
4095970. 81

32505
1 0620
43125
4865362500
1 12820
64687
7297987340
2432624840
859584749
1 2734651 00
449987668

32505
1 0620
431 25
4731 243750
1 0971 0
64687
709681 0770
2365567020
835889406
1 206407280
426292325

Cd'Ivoire

42774

1 2962

55736
4793853360

8601 0

72456
6231 940560
1 438087200
5081 580.21

42774
1 2962
55736
3451 284592
61 922
83604
51 76926888
1 725642296
609767596
287555096
1 016095.75

42774
1 2962
55736
4295573520
77070
83604
6443360280
21 47786760
758935251
709699560
25077723

 

More Open Trade Model assuming a Single Currency

Prd Cost

Loc Mkt Cost

Unit Cost
Total Cost
Off-take
Price/head

Total Revenue

Profit FCFA
Profit USS

Ch in PfFCFA

Ch in PfUSS

46432
1 3427
59859
2. 1 97E+10
367030
89788
3.2955E+10
1 .0985E+10
3881 5692.1
4728801640
167095464

49261
15141
64402
2.1253E+10
330000
96603
3.18795+10
1 .0626E-l-10
375488693
4946250000
174779152

32505
1 0620
43125
4795931 250
1 1 121 0
64687
71 93841 270
2397910020
84731 80.28
1238750280
437720947

42774

1 2962

55736
4605855832

82637

83604
6908783748
2302927916
81 37554.47
864840716
305597426

CFA Franc Devaluation effect (assumes 100% increase in tradeable input prices, and

20% increase in labor cost)

Prd Cost

Loc Mkt Cost

Unit Cost
Total Cost
Off-take
Price/head

Total Revenue

Profit FCFA
Profit USS

Ch in Pf FCFA

Ch in Pf US$

55420
4220
59640
2. 1674E+10
363410
89788
3.263E+10
1 .0956E+10
387140801
4700045450

166079345

56861
5142
62003
2.0461 E+10
330000
96603
3.1879E+10
1 .1418E+10
403462898
5737920000

202753357

223

49694
2361
52055
5671 91 2800
1 08960
64687
7048295520
1 376382720
48635431 8
21 7222980

767572.367

41216
5142
46358
451 9905000
97500
83604
81 51 390000
3631485000
128321 02.5
21 93397800

775052226

 

Appendix A5.10
Changes in Government Revenues under different Cattle Trade Scenarios in the

Central Corridor
Mali Burkina Faso
Base Model
No. of Cattle 132,189 126,912
Tax/animal 4,884 5,375
Imp Beef (Mt) 0 0
Tariff FCFA 0 0
Total FCFA 645,611,076 682,152,000
Total USS 2,281,311 2,410,431
More Open Trade Model
No. of Cattle 143,900 162,310
Tax/animal 4,884 5,375
Imp Beef (Mt) 0 0
Tariff FCF A 0 0
Total FCFA 702,807,600 872,416,250
Total USS 2,483,419 3,082,743
Single Currency Model
No. of Cattle 129,258 167,509
Tax/animal 4,884 5,375
Imp Beef (Mt) 0 0
Tariff FCFA 0 0
Total FCFA 631,296,072 900,360,875
Total USS 2,230,728 3,181,487
Rev Chg FCFA -l4,315,004 218,208,875
Rev Chg USS -50,583 771,056
Single Currency plus More Open Trade Model
No. of Cattle 157,804 166,689
Tax/animal 4,884 5,375
Imp Beef (Mt) 0 0
Tariff FCFA 0 0
Total FCFA 770,714,736 895,953,375
Total USS 2,723,374 3,165,913
Devaluation Model
No. of Cattle 158,609 168,522
Tax/animal 4,884 5,375
Imp Beef (Mt) 0 0
Tarifl‘ FCFA 0 0
Total FCFA 774,646,356 905,805,750
Total USS 2,737,266 3,200,727
Rev Chg FCFA 129,035,280 223,653,750
Rev Chg USS 455,955 790,296

224

Ghana

95,189
4,170
19,123
1,3 10,882
398,249,012
1,407,240

104,300
4,170
16,820

1,153,011
436,084,011
1,540,933

87,331
4,170
18,718

1,283,1 19
365,453,389
1,291,355
-32,795,623
-115,886

106,233
4,170
15,980

1,095,429
444,087,039
1,569,212

1 1 1,941
4,170
13,520

926,796

467,720,766
1,652,724
69,471,754
245,483

Cote d'Ivoire

173,912
3,845
16,768

1,187,174

669,878,814

2,367,063

242,1 10
3,845
15,132

1,071,346
931,984,296
3,293,231

209,435
3,845
13,050

923,940

806,201,515
2,848,769
136,322,701
481,706

218,260
3,845
1 1,240
795,792
840,005,492
2,968,217

207,191
3,845
10,200

722,160

797,371,555
2,817,567
127,492,741
450,504

 

Appendix A5.11.

Optimal Solution Values for the Effect of the CFA Franc Devaluation (based
on existing conditions as in 1993).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mali Burkina Ghana Cote d’Ivoire

South North Zone Zone

Zone Zone Foret Savane
OtT-take (num) 363,410 330,000 108,960 97,500
Price(FCFA/hd) 89,788 96,603 64,687 83,604
Demand (Mt) 28,672 22,607 36,136 6,161 36,646 13,285
Price(FCFA/Mt) 807,880 815,700 804,180 - 859,880 -
WD - - 13,520 - 10,200 -
Imports(Mt)

 

225

 

 

 

Cattle Shipments by Mode of Transport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trekking Truck Train
MZ.MZ 102,400 102,400
MZ.GN 13,500
MZ.CN 13,861
MZ.GE 35,748
MZ.CC 95,500
BF .BF 79,868 79,868 1740
BF .GN 12,343
BF .CN 28,500 19,138
BF .GE 58,350
BF .00 35,520 14,671
GN.GN 23,121
GN.GE 85,840
CN.CN 21,250 21,250
CN.CC 55,000

 

 

 

 

Note:

WD Imports implies World
Imports

MZ.MZ is shipments within Mali

MZ.GN is Mali to North Ghana

MZ.CN is Mali to North Cote

d’Ivoire

MZ.GE is Mali to South Ghana

MZ.CC is Mali to South Cote

d'Ivoire

BF .BF is shipments within

Burkina

BF.GN is Burkina to North

Ghana

BF.CN is Burkina to N. Cote

d’Ivoire BF.GE is Burkina to

South Ghana

BF .CC is Burkina to S. Cote

d’Ivoire

GN.GN is shipments within

N.Ghana

GN.GE is N. Ghana to S.

Ghana

CN.CN is shipments within

North Cote d’Ivoire

CN.CC is North Cote d’Ivoire to
South Cote d’Ivoire

 

226

 

 

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