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Cotton production in Zambia and Zimbabwe plays a key role in the countries’ agricultural sector and in the lives of millions of farmers who depend on it as a cash crop. Yet, in both countries, cotton production is at one of its lowest levels in recent years. One dominant cause for declining production is informal trading, manifested in side-trading, that circumvents the dominant institutional model of contract farming.

Through a three-year research collaboration between IAPRI (Indaba Agricultural Policy and Research Institute), AEPRIC (Agricultural Economics, Policy Research and Information Centre) and IIED, we examined the informal cotton trade and its impacts on the economic, social and environmental performance of the cotton sectors in Zambia and Zimbabwe.

Our findings illustrate the drivers and consequences of side-trading, including the short term positive impacts on livelihoods and longer term negative impacts of declining crop quality, yields and soil fertility. We show that regulatory frameworks around contract farming have struggled to deal with growing market competition, over-capacity and side-trading. At the same time, farmers are becoming increasingly distrustful of sector institutions and ginning companies. We conclude by presenting two options for institutional reform which would reverse this trend, minimise informality and bring the cotton sector back from the verge of collapse.