The Development Of Lesotho's Wool And Mohair Marketing System: Options For Continued Institutional Change And Policy Reform

This paper traces the development of Lesotho's wool and mohair marketing system from one dominated by the private sector in the pre-Independence period to one dominated by government marketing in the postIndependence era. It seeks to assess what practices or market structures generated the longstanding Basotho antipathy towards private sector marketing and concludes that the pre-Independence structure could be characterized as one of "duo-trading", a situation which exists when a trader has a relative monopsony in the purchase of agricultural produce from farmers and a relative monopoly in the sale of consumer goods to farmers. Evidence suggests that traders did not normally exploit their monopsony position in the purchase of wool and mohair. Prices paid were approximately those paid on a competitive market. Instead, with the aid of high sales receipts, they took advantage of their monopoly position to extract higher profits in the sale of consumer goods. Unfortunately, government attempts to reform the marketing structure have failed to take account of the duo-trading structure and have assumed that only a monopsony position prevailed. As a result, they have had little impact on the returns to traders, except perhaps to raise them. As far as farmers are concerned, government intervention has resulted in a dualistic shearing and sales pattern. Farmers with disproportionately large flocks tend to shear at government woolsheds where a variety of implicit government subsidies augment their wool and mohair incomes. Smaller farmers, preferring the immediate cash payments made by traders, pay full, unsubsidized costs and receive relatively lower incomes as a result. Although the present government-private marketing structure operates reasonably well, there are a number of inefficiencies (in addition to inequities) which ought to be addressed by government policy makers. This paper makes some suggestions for overcoming some of these problems. This is followed by the outline of a proposal for a more wide ranging restructuring of the wool and mohair marketing system.