The Commerce and Export of the Potato in Mali A Transport Optimization Study

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The Commerce and Export of the Potato in Mali

A Transport Optimization Study

Harmke J.M. Duijnisveld

Master Thesis, 23rd May 2007

Econometrics, Operations Research and Actuarial Studies Faculty of Economics

University of Groningen, the Netherlands

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La Commercialisation et l’Exportation

de la Pomme de Terre au Mali

Une ´

Etude d’Optimisation du Transport

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R´

esum´

e

La production de pommes de terre au Mali (Afrique de l’Ouest) prend une place importante dans l’agriculture. La production est grande, la pomme de terre est exportée aux autres pays qui ne la produisent pas. Cependant, plus que 80 % de la pomme de terre de consommation en Afrique de l’Ouest est importée de l’Europe. Pourtant il est important d’améliorer la commer-cialisation et l’export de pomme de terre au Mali. Plus les pommes de terre seraient vendues, distribuées et exportées, plus l’opportunité d’ élargir les marchés existants et d’explorer de nouveaux marchés serai grande.

Les plus grands problèmes de la commercialisation et l’export des pommes de terre au Mali sont relatés aux payements, aux coûts (irréguliers) sur la route et le système de transport qui est inefficace et insuffisant. Les problèmes des payements sont liés aux contrats (oraux) sur le prix et le moment du payement. Quelquefois les producteurs demandent un prix plus haut et les clients payent un prix plus bas qu’ils avaient accordé avec les commer¸cants. De temps en temps, les commer¸cants ne sont pas capables de payer les producteurs dans les délais, il est en partie causé par le payement des clients qui est parfois également en retard. De plus les coûts sur la route offrent des problèmes : bien que les coûts officiels douaniers sont suspendus, souvent les commerants doivent payer encore beaucoup. Quelquefois, les commer¸cants n’ont pas les documents officiels qui permettent de vendre, transporter et exporter les pommes de terre ; les coûts fonctionnent comme une pénalité supplémentaire. Parfois, les douanes ne sont pas bien instruites et informées sur les procédures et les législations officielles et pensent que les commerants doivent encore payer. Troisièmement les coûts informels peuvent être le résultat de la corruption aussi.

Le problème du transport est détaillé dans cette recherche. En ce moment, il y a beau-coup de commerants qui transportent individuellement les commandes des clients en louant un camion. Malheureusement, le nombre de camions de location ne suffit pas : souvent le commer¸cant n’est pas capable de trouver un camion et il ne peut donc pas transporter sa livraison au client. Cette étude analyse la question si les commer¸cants peuvent gagner plus en coopérant et transportant leurs pommes de terre collectivement. Pour y répondre, un modèle d’optimisation de transport est formulé et résolu pour le cas du transport individuel et celui du transport collectif. Les résultats montrent qu’il est plus rentable pour les commer¸cants de coopérer : en effet, ils louent moins de camions et même les petites quantités sont rentables `

a transporter, ce qui ne le serait pas avec le transport individuel.

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insécurité est modelée par l’introduction d’une variable aléatoire de Bernoulli qui mesure les cots quand un camion est loué et les cots quand les commer¸cants ne réussissent pas à trouver de camion (comme un pénalité présentant le manque de bénéfice). L’espérance mathématique de cette variable aléatoire est calculé et considéré pour une comparaison valide entre les cots de location et ceux de la possession d’un camion. Le modèle calcule la valeur minimum des coûts de transport pour quatre situations différentes : transport par camions de location, par camion de 10 tonnes, de 40 tonnes et par camion de 60 tonnes. Il est bien entendu que de posséder un camion de 40 ou 60 tonnes réduit les cots de transport de manière significa-tive. Même si les coûts de location normaux sont inclus (sans ajouter le pénalité), il est donc rentable d’acheter un camion de 40 ou 60 tonnes.

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Preface

During the first year of my studies Econometrics and Actuarial Sciences I attended a lec-ture of Dr. Ir. C. Schweigman explaining problems on Operation Research in development countries. From that moment I dreamt about doing an internship in Africa to experience the African live, learn about development issues and try to apply technical methods of Operation Research on development problems. Now, I am writing my preface after having performed an internship at a development project in Mali, West-Africa. My dream has become a part of my live, an unforgettable part.

First of all, I would like to thank my supervisor Prof. Dr. Ir. C. Schweigman, for making me familiar with OR in development countries, being enthusiastic about my desire to do an internship in Africa and making this possible in every way. During his visit to Sikasso we had interesting and important discussions on my analysis, my thesis and the problems. Sec-ondly, I would like to thank Dr. A. Maatman and his family. He is the head of the IFCD of West-Africa and my first contact. He searched a good place and project to perform my analysis with PRODEPAM, thanks to him I had the unique opportunity for this African internship. I owe many thanks to my supervisor of PRODEPAM, A. S. Traor´e. Every single minute that I needed support, he was there always enthusiastic and ready to encourage and help me. Without him, it was not possible to perform this analysis. Furthermore, he offered accommodation in his house which was extraordinary. At the same time, I would like to thank all my colleagues of PRODEPAM, TradeMali, Mali Finance in Sikasso and IFDC in Bamako who have helped me, introduced me in the Malian live and gave me a Malian name ’Djeneba Bleni’. Special thanks to Fatoumata Keita for arranging many practical matters, Suzan Can-tella for providing information and accommodation during my stay in Bamako and Tom Plat for encouraging me during my research, always giving me the first bite of his omelet, having lots of fun and being a good (but not winning) opponent in the Schotten-Totten competition. At last I would like to thank enormously my family and friends for their encouragement to finish my analysis and thesis when I returned to Groningen. Many thanks for the interest, phone-calls and understanding during the last month, I really appreciate this. Special thanks to Sandra who helped me structuring my thesis and encouraging in any way and at any mo-ment. Also special thanks to Laura for motivating me after my return to proceed with my thesis and being able to graduate in the end of June.

Merci beaucoup pour le s´ejour unique en Afrique, Aw ni ce.

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Summary

The production of potatoes in Mali (West-Africa) takes into account an important place in the agriculture. The potato production in Mali is large, it is exported to other countries which do not produce potatoes. Nevertheless, over 80 % of the consumed potatoes in West-Africa is imported from Europe. It is important to improve the commerce and export of the Malian potato such that more potatoes can be distributed and exported; the existing markets can be expanded and new markets can be explored.

The main problems of the commerce and export of the potato is Mali are dealing with the payments, the (unofficial) costs at the customs check point and an insufficient and inefficient system of transport. The payments show problems with respect to the (oral) agreements on the prices and the moment of payment. The producers sometimes ask higher prices and the clients pay the merchants lower prices than they agreed on. The merchant sometimes are not able to pay the producers in time, partly caused by the delayed payments of the clients. The costs at the customs check point also show problems: even though the official costs at the customs check point are suspended, the merchants do have to pay high prices. Sometimes these are penalty costs for the merchants who are not provided with the official documents for trading, transporting or exporting potatoes. It also happens that the customs are not well informed about the official procedure and legislation and think that the merchants still have to pay taxes. The unofficial costs might be a result of corruption as well.

The transport is studied in more detail in this analysis. Nowadays there are many mer-chants who transport their orders individually by renting a truck. Unfortunately, the number of trucks to rent is insufficient; often it is not possible to find a truck such that the merchant is not able to transport the order to the client. This study gives an answer to the question whether the merchants should cooperate and transport their potatoes simultaneously. To answer this question properly, a transport optimization model is formulated and solved for the situation of individual transport and cooperative transport. The results show that it is profitable for the merchants to cooperate: less trucks need to be rented and it is profitable to transport some orders of small quantities which are not delivered when transporting sepa-rately.

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owning a truck. The transport model calculates the minimal transportation costs for four different cases: transporting only with rented trucks, with a 10 tons, 40 tons or 60 tons truck. It follows that owning a 40 or 60 tons truck reduces the transport costs significantly. Even if the normal renting prices (without calculating the expectation) are considered, it is profitable to purchase a truck.

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List of Abbreviations

AV Association Villageoise

AMATEVI Association Malienne d’Assistance Technique Villageoise APROFA Agence pour la Promotion des Fili`eres Agricoles

APSS Association des Producteurs de Pomme de terre de Sikasso

BMS Banque Malienne de Solidarit´e

BNDA Banque Nationale de D´eveloppement Agricole

CAE Centre Agro-Entreprise

f CFA francs de la Communauté Financièle d’Africaine EMACI Entrepôt Malien en Côte D’Ivoire

EMAGH Entrepˆot Malien en Ghana

IER Institut d’ ´Economie Rurale

IFDC International Center for Soil Fertility & Agricultural Development ISCOS Institut Syndical pour la Coop´eration au D´eveloppement

IPR Institut Polytechnique Rural

NGO Non-Governmental Organization

OMA Observatoire du March´e Agricole

ONT Office National Transport

OP Organisation des Producteurs

PRODEPAM Programme de Développement de la Production Agricole au Mali SAEFEL Société Africaine d’Exportation des Fruits Et Légumes

SICA Société d’Intéret Collectif Agricole de Sikasso

TEC Tarif Ext´erieur Commun

UEMOA Union ´Economique et Monetaire Ouest Africaine

URCEP Union Regional des Commer¸cants et Exportateur de Pomme de Terre URDOC2 Projet de l’Unit´e de Recherche, Observatoire du Changement, second phase

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Introduction

In the West-African country Mali, agriculture takes into account a large part of the occupa-tion of the inhabitants. 80 % of the populaoccupa-tion is working in the field of the agriculture; 6 % of this cultivation is covered by potatoes. The potato has got the highest returns among all the cultivated goods in Mali. Therefore, the production and demand of the Malian potato is expected to grow. Therefore, it is important to develop and improve the potato value chain in Mali. The main difficulties of the chain are the high costs of the imported seed pota-toes, the insufficient storage facilities, the access to credits of the bank and the high costs of transporting the potatoes to clients. This last problem is analysed in more detail in this study. During the Journ´ees de Pomme de Terre 1 in September 2006 in Sikasso it is highlighted that the transport is the main problem of the commerce and export. The export costs are high due to the (unofficial) customs costs. Furthermore, it is difficult to rent a truck for transportation. There are not enough trucks available causing a risk that a merchant does not find a truck. In that case the merchant can not transport the potatoes what makes him unable to satisfy the demand of the clients; he will miss income. It is suggested this problem can be reduced by organizing a collective transport system. Nowadays, often the merchants work individually. They search the trucks by their own and transport their orders separately. When the merchants cooperate, they need less trucks and it might be easier to find a truck. As a result, the total transportation costs will decrease. By cooperation it might also be possible to obtain a credit of a bank to purchase a truck. This will reduce the problem of finding a truck to rent. Even though it is very expensive to purchase a truck, it might be profitable since the merchants do not need to rent a truck.

It is expected that by cooperation, the transport system will more efficient, the export costs will reduce and the net income of the merchants will increase. This will improve the commerce and export such that the internal and external markets can be expanded. It might even be possible to compete with European potatoes which cover a large part of the potato market in West-Africa.

This study focuses on the transport of the potatoes from Sikasso (the region of production) to the clients in Mali and other West-African countries. It analyses whether the transport

1_{During this two days conference, actors of each field of the potato value chain attend presentations,}

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costs can be reduced simply by transporting the potatoes simultaneously through cooperation of the merchants. It also examines the possibility for purchasing a truck. The question is whether it is profitable for the merchants to purchase a truck or should they continue renting the trucks.

The main subject of this analysis is the commerce and export of the potato in Mali. Therefore, the following paragraphs and chapters focus only on the commerce, export and its problem. The next two paragraphs summarize shortly the commerce, export and the cooperatives of merchants. Chapter 2 outlines the process of commerce, export, transport and payments in detail. Also the factors which influence these processes as the supply, demand, potato prices and transportation costs are described in this chapter. It is necessary to fully understand the processes and its components before being able to formulate the problem properly. Chapter

3describes the problem which is analysed in this study, it formulates the research questions, the problem settings and assumptions. The research questions are analysed by use of an optimization transportation model. The mathematical model is defined in terms of variables, parameters, objectives and constraints in chapter4. The model is applied to the commerce and export of the Malian potato. Its results can be read in chapter5together with the data specification and the sensitivity analysis. The last chapter (6) reports the conclusions of the analysis, it gives answers to the research questions and it recommends subjects for further research.

This study is performed in cooperation with the development projects Programme de D´ evelop-pement de la Production Agricole au Mali (PRODEPAM), TradeMali and Mali Finance. In appendix ?? detailed description of these projects is presented. Note furthermore that this study only focuses on the commerce and export. Nevertheless, it is very interesting to read other aspects of the Malian potato value chain as well. Therefore, in the appendix three other chapters for additional readings can be found. Appendix ?? gives an introduction on cultivat-ing potatoes in Mali; appendix ?? discusses the potato value chain, its actors and its problem. In appendix ?? a discussion on the markets for selling potatoes on national and international level can be found. This analysis only considers the clients in Mali and West-Africa who have ordered potatoes during campaign 2005/2006. Nonetheless, it is interesting to observe which other destinations are good opportunities for selling and distributing potatoes.

1.1 Commerce & Export

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lately started producing potatoes. This production is small and not sufficient. Therefore, Mali exports potatoes to Burkina Faso when its own production does not satisfy the demand. This is mainly in the second half of the potato season. Market research has been performed in Benin and Togo (Traor´e A.S., Dagnoko B., 2006, p. 10). These countries are a good opportunity for Mali to export potatoes as well. The markets in Mauritania and Senegal are being explored as they are the countries who import the largest amount of consumption potatoes from Europe. Unfortunately, the export to Senegal is limited by the bad condition of the roads.

Figure 1.1: Import of European consumptions potatoes by West-Africa from 1993 - 2002 (in tons)

Figure 1.2: Export of Mali to West-Africa from 2001 - 2003 (in tons)

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are many individual merchants it is difficult to obtain precise information concerning the exporting quantities. Nevertheless, the sales of the cooperatives of URCEP and Mali Yiriden are summarized in table 1.1. During campaign 2005/2006 URCEP and Mali Yiriden have distributed a total of 2388 tons potatoes within Mali and 3470 tons to other West-African countries (see appendix ?? for a map of West-Africa and Mali). An amount of 3470 tons of potatoes is distributed from Sikasso within Mali or West-Africa by these cooperatives. This amount is expected to increase during the next campaign.

Note that the time period to export potatoes is from the beginning of the harvest in January until June.

Cooperative Destination Sales (tons)

National level

Yiriwas´e Bamako 1979

Sinign´esigi Bamako 70

Sinign´esigi Bamako, S´egou 32

Sinign´esigi S´egou, Mopti 233

URCEP Mali, other destinations 74

Subtotal 2388

International level

Benkadi Bambougou Ouagadougou 197

Benkadi N’Gorodiassa Ouagadougou 386

Nounpansigi Ouagadougou 352

Faso Kanu Abidjan 424

URCEP Accra 32 Maliyiriden Accra 65 Maliyiriden Ouagadougou 13 Subtotal 1469 Total 3857 Source: TradeMali

Table 1.1: Merchants cooperatives with their sales (in tons) per destination during campaign 2005/2006

1.2 URCEP & Mali Yiriden

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on national and international level. Mostly, they are collaborating with other cooperatives. Within URCEP the main problem are the following (source: presentation of URCEP during the Journ´ees de Pomme de Terre):

• The members have difficulties understanding the principles of the cooperatives. The cooperatives have just been founded. The members are used to export the potato individually. They do not always recognize the advantages of collaboration. It is very important for the merchants to cooperate. Especially concerning the transport, the transportation costs might reduce what is in favor of all cooperatives. It is important for the cooperatives to acknowledge the advantages of cooperation;

• The costs on the roads (as customs and transit costs) are very high. Often the taxes are unofficial, change from day to day and depend on the negotiation skills of the merchants. The problem is that the merchants do not know their rights and some customs do not know the official procedure;

• The payment of the clients often have a delay. This causes problems for the cooperatives to pay the producers, since the merchants pay the producers after the payment of the clients. Mainly, it is a result of a lack of contract and respecting the agreements. Mali Yiriden is a cooperative for the commerce and export of vegetable and fruits in Mali. Mali Yiriden is founded in 1991. It is selling and exporting several products, where the potato takes into account 40 %, the mango is good for 30 %, and 20 % concerns mainly fruits as oranges. Generally speaking, Mali Yiriden exports potatoes to Ouagadougou, Accra, Lom´e, Abidjan and transports them to Bamako as well. During the previous campaign, the export of Mali Yiriden has only taken place to Ouagadougou and Accra, see table1.1. The commerce of the potato of Mali Yiriden has not been significantly important.

Mali Yiriden faces the following difficulties (Traor´e A.S., Dagnoko B., 2006, p. 11):

• An insufficient transport system to deliver the potatoes in time. Especially, there is a lack of adapted transport to deliver to Lom´e. The route the Lom´e is in a really bad condition, therefore it is difficult to find a good truck for the transport.

• The clients do not respect the contracts of payment.

• It is difficult to stabilize the producer prices. This problem can be reduced by storing the potatoes in warehouses. In the previous campaign, Mali Yiriden was not able to store the potatoes. Nowadays, a warehouse is constructed by ISCOS of 300 tons for the producers and the merchants as well (see paragraph ??).

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Chapter 2

The Process of Commerce & Export

In the previous chapter an introduction on the commerce, export and the cooperatives of merchants is given. The focus of this study is on the commerce and export in general and more specifically, the transport of the potatoes. Therefore, it is important understand thor-oughly the process of commerce (see paragraph2.1), the components influencing the commerce (paragraph2.2) and the costs of transporting the potatoes (see paragraph 2.3).

2.1 Commercial Process

This section describes the process of commerce at first. The transport process, the formal process of export and the process of payments are described in mored detail in separate para-graphs.

Within the process of commerce there are several actors. The main actors are the pro-ducers, the merchants and the clients. There is a group of transporters as well. Sikasso is the main region of producing the potatoes (see appendix ??). Therefore, the producers, merchants and transporters are located in Sikasso, the clients are located at other destination in Mali and West-Africa. In figure2.1 a scheme is given of the process and the actors. This scheme is describing the existing commercial process where the merchants do not own trucks, but it is only possible to rent trucks. The focus of this study is on the cooperatives of mer-chants. Therefore, the merchants are the most important actors. The merchants are buying the potatoes from the producers, distribute and sell them to the clients. The merchants do not store the potatoes; they are only an intermediate between the producer and the client. In this study, only the cooperatives of merchants are taken into account. Remind that there are many individual merchants as well. They are difficult to approach and left out of the study. Some clients have formed cooperatives, but many of them are working individually. The producers are not concentrated, they are in the villages and provide the potatoes when they are demanded. The transporters are not concentrated as well, they are individuals who possess trucks. Normally, the trucks have a volume of 40 tons, but there are trucks of 10 and 60 tons as well.

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Figure 2.1: Scheme of the commercial process and their actors

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has to pay. The payment is either cash or credit in one or two weeks. There are cases in which the payment is delayed, which is a big problem. It is also possible that the client wants to pay a lower price. This happens when at the moment of deliverance the amount of potatoes at the market has increased and, as a result the price has decreased. This is problem for the mer-chant, he has to sell the potatoes, since when he returns with the potatoes he will have losses. Depending on his negotiation skills, he will receive a (slightly) lower price. This problem is caused by lack of written contract. It can be reduced when the merchants introduce writ-ten contracts which will be respected from both sides. When the merchant has received the money of the client, he returns to the producer for the payment. The merchant pays the pro-ducer after the deliverance at the client. At that moment, the propro-ducers might have changed the price. Also this is a problem for the merchants; often they have to pay the new price. The oral agreement is not respected what is caused by lack of written and respected contracts. Note that even though the clients call for ordering the potatoes, there does exist some ex-pectation concerning the orders. For example, Yiriwas´e sends normally every Thursday and every Saturday a quantity of 30-40 tons to Bamako during the months February, March and April. The clients in Bamako call for confirming the precise quantity and negotiating the price. Hence, the merchants are not totally dependent on the phone call of the clients. A large part of the potatoes are sold at the market of Sikasso. There are over one hundred women selling the potatoes. Some women sell 50 kg per day, but women who are known can even sell more than 100 kg per day. Thus, besides the clients who call for an order, there are Malian clients who come to Sikasso to purchase the potatoes. These clients transport the potatoes themselves. Mostly, these quantities are small and easily transported. In this case, the merchant does not have to pay the transportation costs but only the collecting and packing costs. The payment of the clients is cash. This trade does not cause any problems.

2.1.1 Transport Process

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A second option for improving the transport system, is to purchase a truck. When the merchants own a truck, they do not face the difficulties of finding a truck to rent. They are not dependent anymore on the availability of the rented trucks. They will be able to organize the transport themselves. When they plan their transport well, they can satisfy the demand of the clients in all cases. Nevertheless, purchasing a truck is very expensive. It will hardly be possible for the merchants to buy a truck without financial support. Nowadays, it is not possible for the individual merchant to obtain credits (see appendix ??). When the merchants cooperate, it might be possible to obtain a credit of a bank for buying one truck. They might be able to convince the bank to give a credit. In case that the merchants succeed in convincing the bank, it will give a credit for purchasing just one truck. Since it is difficult to obtain credits, it is not likely that the bank will give a credit for buying more than one truck.

Also for convincing the bank and be able to obtain credits, it is necessary for the merchants to cooperate. Therefore, also for this reason, it is good to highlight the importance of coop-erating.

2.1.2 Formal Export Process

For exporting the potato a formal process needs to followed. Merchants need official docu-ments when exporting and / or distributing potatoes on national level. An official cooperative is provided with three documents. The first document is the certificate of recognition, the second is the commercial registration and the third is the Identification Fiscale Unique (IFU), an official unique identification number of the enterprise. To export an amount of products, the cooperative needs a Declaration Pr´ealable d’Exportation. This fourth document contains the quantity which is exported, the producer price and the consumer price. Even more, it is preferable but not obliged to have, when the client sends a confirmation of the order contain-ing the quantity, the consumer price and possibly the date of deliverance. The last document is the certificate of phytosanitaire. This certificate shows the origin of the potatoes and makes sure that the potatoes are of good quality without diseases. These documents are obliged to have when transporting potatoes both on international and national level.

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to pay this amount instead of loading and unloading where after he is allowed to pass. This is a good example of unofficial costs: even though the merchant is registered and provided with the official documents, he pays the customs an amount of money. For this reason there are many non-registered exporting cooperatives and merchants, maybe over 90 %. Mali Yiriden is a cooperative which is officially registered, the cooperatives of URCEP are not officially registered.

2.1.3 Process of Payment

In paragraph 1.2 it is acknowledged that the payment of the clients shows problems. It is important to describe in detail the present process of payment. First the payments by the clients will be described and secondly, the payments by the merchants.

Payment by the Clients

A general problem of the clients payment is that the clients might have changed the price at the moment of payment (see paragraph 2.1). The consumer price is negotiated with the clients before the merchant purchases the potatoes from the producers. Unfortunately, when the merchant delivers the potatoes, the client might have lowered the price when the supply of the potato has increased. Since the merchant needs to sell the potatoes, often he agrees on the lower price. Therefore, the prices are not fixed by the merchants, they depend on the clients. Concerning the method of payment, the clients might pay cash or credit. The clients in Mali pay cash, the clients in Ouagadougou pay 70 % of the amount cash and 30 % after one week. The clients in Bobo-Dioulasso pay cash. These clients do not cause any problems. There is a problem with the payments of the clients in Ivory Coast who pay per bankaccount. There rests an amount of 500000 f CFA1 which has a delay of six months (in November 2006). Also the clients in Ghana cause problems with the payments. They should pay cash, but often the payments is delayed with three months. A second problem with the Ghanian clients is the currency. The currency in Ghana is the Cedis which is very unstable (see appendix ??). The price agreement is made in the Malian currency f CFA. But when the Ghanian clients pay, the Cedis might have devaluated and therefore the merchants of URCEP receive less money.

The cooperatives of URCEP do not have contracts with the clients. If they use contracts, it is necessary to respect to contract from both sides. Often, it is difficult for the cooperatives to deliver the potatoes in time, since they do not always find a truck to rent. Since URCEP does not own a truck, they can not respect the contract at all times and it is not possible to use contracts (interview URCEP, 2006).

The clients of Mali Yiriden in Ouagadougou pay within fifteen days, this does not cause any problems. Mali Yiriden has got problems with the payment of the clients in Accra, the capital of Ghana. Three months after the deliverance, there still rests an amount of 735000 f CFA (in November 2006). Mali Yiriden did have a written contract with the clients in Accra, but unfortunately, they have not respected the contract (interview Mali Yiriden, 2006).

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Payment by the Merchants

The payment of the merchants at the producers shows some problems as well. A problem is that the producers do not always keep their promises concerning the producer price agree-ments. At the moment that the merchants visit the villages to order the potatoes a price decision is made. When the merchants return to pay, the producers might have changed their prices. The producer asks a higher price when the price has increased in the period between the agreements and payment. The merchant needs to purchase the potatoes and depending on his negotiating skills he often agrees on a (slightly) higher price.

In general, the cooperatives of URCEP pay the producers when they have received the money from the clients. Usually, the producers are paid within one or two weeks. When the clients do not pay in time, URCEP is able to pay the producers with their own benefits. Never-theless, the producers would like to obtain the money earlier, since they have to pay back the credits of the bank (see paragraph 2.3). Unfortunately, this is not possible. URCEP does not have contracts with the producers. When they use contracts, they have to respect these contracts what is not always possible for URCEP. This has got to do with the fact that URCEP provides the producers seed potatoes and fertilizers; in return the producers provide URCEP the first part of the harvest. It is difficult for URCEP to obtain credits at banks for purchasing the seeds and fertilizers. Therefore, when they do not obtain credit, they can not purchase seeds and fertilizer for the producers and they can not respect the contract.

Mali Yiriden also does not have contracts with the producers. They pay the producers when they have received the money of the client. When they do not receive the money from the clients, the producers are not paid. There is still a village waiting for their money since the clients of Accra has not paid yet (November 2006). This is a big problem.

In general, it can be stated that the problem of the payment is not only a problem of a lack of contracts but as well a problem of not respecting the contracts. It is caused by the fact that the commerce of the potato has just developed; it is not enough organized yet (see appendix ??).

2.2 Commercial Components

The commerce and export of the Malian potato is influenced by many factors. The main components of commerce are the supply, the demand and their corresponding producer and consumer prices. In this study, the consumer price is a component of the commerce since it is considered to be the price paid by the clients (see paragraph 2.2.4). The components are described in the following four sections. The first section starts with the supply, the following paragraphs describe the demand, producer and consumer prices respectively.

2.2.1 Supply

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variety has got a different yield, production cycle and preservability. The producers choose a mixture of varieties to balance the yield and preservability, see paragraph ??. By taking into account the amount of imported seed potatoes, the production cycle and the yield per variety, the production can be determined per variety for different time periods. The production is being stored in warehouses. Storing potatoes causes losses; the percentage of losses depends on the quality of the warehouses (see paragraph ??). The demand of the clients is not specified per variety (see paragraph2.1). Therefore the supply is partly determined by the total production of the different varieties. Since the production is being stored in warehouses, the supply depends on the storage losses as well. Of course, supply also depends on the quantity sold up to that period. Thus supply is time-dependent, it is determined by the production, the losses and the sales of the previous time-periods.

2.2.2 Demand

The second component of the commerce is the demand of potatoes. Demand is a wide concept which is difficult to determine. Theoretically, the demand is the quantity which consumers would like to buy. Often, it is not possible to measure precisely the preferences of the con-sumers. As a result, often the demand is determined by the sales where there might be a big difference between the sales and the demand. In this study, demand is defined as the quantity of potatoes that the clients order at the merchants. This is not the same as quantity sold by the merchants since sometimes the merchants are not able to rent a truck resulting in no trade (see paragraph 2.1). The merchants are interviewed and asked to indicate the frequency and quantity of potatoes demanded by the clients.

Nevertheless, the sales do give an indication of the demand. The sales of URCEP and Mali Yiriden during campaign 2005/2006 are given in table1.1. It is very important to note that these sales are only a small part of the total quantity which is sold, since there are many individual merchants who are not included in the study. The sales and the demand depend on the production in own and foreign countries. In Mali, Sikasso is said to be the only region of potato production (see paragraph2.2.1). For the foreign countries, little potato production can be found in Burkina Faso and in Ghana. The production in Burkina Faso influences de-mand of the Burkinian clients: they dede-mand very little potatoes in the months January until March, but from April the demand is much higher (interview merchants, 2006). Ghana is importing not many Malian potatoes, thus it is difficult determine the influence of its potato production. The export of Mali to West-Africa from September 2004 until June 2006 is given in figure 2.2 (source: TradeMali). It is interesting to observe that the period of export is from January to May, where March is the most important month of export. Note that these quantities only show the registered export which is lower than the total export since many individual merchants are exporting what often is not registered.

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Figure 2.2: Export of the Malian potato to West-Africa (Sept 2004 - June 2006, in tons)

2.2.3 Producer Price

The producer prices are the prices which are given to the producers. In figure2.3the producers prices per week for the region Sikasso are given for campaign 2005/2006 (source Observatoire du March´e Agricole, OMA). The prices depend on the time. At the beginning of the harvest time in January the prices are higher than in February when there are many potatoes har-vested. In June the potatoes will be most expensive since by then, almost all potatoes are already sold. The downfall of the price at the end of January can be explained by the fact that the producers need to pay back their credits of the bank which they have obtained for purchasing the seed potatoes. All the producers need to pay back their credit at the same moment. They sell many potatoes during a short period to have enough money for paying back their credit. This reduces the price significantly. Note that the peak at the 13th of February is not logically explained, it is likely that the price increases and decreases suddenly at this period. Therefore it is considered to be a measurement error (see paragraph5.1). Generally speaking, the price depends mainly on the supply and demand of the potatoes. The price will be lower when there are less potatoes available. When the demand is high compared with the supply, the price will increase. The producer price is not influenced by the storage costs. One could expect that when the potatoes are stored for a longer period, storage costs are higher and the producer prices increases as well. The prices are high enough to cover the additional storage costs, otherwise it would not be profitable for the producers to store.

2.2.4 Consumer Price

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Figure 2.3: Producter price for region Sikasso (in f CFA / kg) during campaign 2005/2006

his lowest level in March. The consumer prices show the same trend as the producer prices. The consumer price also depends on the destination of the client. The clients in Ouagadougou pay a different price than the clients is Accra. One could expect that the consumer prices will depend on the transportation costs. The distance to Accra is longer than to Ouagadougou resulting in higher transportation cost. Therefore, it could be expected that the consumer prices are higher in Accra than in Ouagadougou. But the consumer prices are such that it is profitable for the merchant to trade. Therefore the market-principle of supply and demand explains the consumer price. As a result, there might be a difference in the margin of the profit per client; it might be more profitable to export to Ouagadougou than to Accra. Note that in this study, the clients at the same destination are said to pay the same price. There-fore, the prices are specified per destination instead of per client.

In figure 2.4 the consumer prices at the different regions of Mali are given from January 2005 until November 2006 (source OMA). These are prices of the second choice of potatoes. The organization OMA makes a distinction between the first, the second and the third choice potatoes. The first choice are the big tubers, the second choice are the tubers of average seize and the third choice are the small tubers. Since all the merchants and producers say that the clients do not demand for different varieties or sizes of potatoes, in this research the consumer prices of the second choice potatoes are considered. Observing the prices in figure

2.4, they indeed show the same trend as formerly discussed. The potatoes in Sikasso have the lowest prices. This is appropriate, since the supply is large in Sikasso and there are no cost for transportation. The prices in Kayes are the highest, this is plausible as well, since Kayes is very far and difficult to reach. Therefore, the supply in Kayes is small. Note furthermore that there are two observations for Bamako, Bamako M´edine and Bamako Dibida. These are the two main markets of Bamako. The prices at both markets is approximately the same. Unfortunately, OMA does not register the prices in Gao. It is stated that the prices in Gao are between the prices in Mopti and Kayes. Concerning the location, this seems appropriate since Gao is farther then Mopti but easier to reach than Kayes.

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Bobo-Dioulasso, Accra and Abidjan. The prices do not show large difference, but it is obvious that the price in March is at his minimum and increases with the time. From this graph, it is appropriate that the prices are mainly determined by the behavior of the demand and supply. Note that the consumer prices are the prices which are paid by the end-consumers. In this study, it is said that the consumer prices are paid by the clients, even though the clients might not be the end-consumers. Normally, many merchants are involved when trading potatoes. Each merchants takes its own margin. Therefore, the end-consumer prices might be higher than the prices paid by the clients since they might be merchants as well. It is interesting to compare the consumer prices on national level (which are given by OMA) with the prices on international level (which are indicated by merchants). They are shown in figure2.4 and

2.5respectively, appendix ?? reports their values. Comparing the prices, it can be seen that the prices on national level are within the same range as the prices on international level. Therefore, saying that the clients pay the consumer prices is correct and it is not necessary to verify the prices given by OMA with the merchants.

Figure 2.4: Consumer price of second choice potatoes in Mali (Jan 2005 - Nov 2006, in f CFA / kg)

2.3 Transport

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Figure 2.5: Consumer price in West-Africa (Jan 2006 - June 2006, in f CFA / kg)

2.3.1 Handling Costs

The handling costs are the costs which are made before the potatoes are transported and during the transport. Before being able to transport the potatoes, they need to be collected, packed and loaded. The potatoes are packed in sacs of 25 kg. There are other methods of packing, but the sac of 25 kg is mostly used. The costs for collecting and loading include as well the salary costs and the rent of a small truck to pick up the potatoes from the villages to Sikasso. Note that the potatoes need to be unloaded at the client. These costs are paid by the client.

Transporting the potatoes with a truck from Sikasso to another destination causes losses. The percentage of losses depends on the climate and thus on the time of the year. The hu-midity in West-Africa and the composition of the potatoes influence the percentage of losses. In January and February the potatoes contain more fluids whereas the potatoes are more sensible for weight. In these months, the losses are caused by the total weight of the trans-ported quantity. In March, April and May, the losses are somewhat smaller. In June the potatoes contain less fluids, but the losses are caused by the humiditiy. Of course, the travel time influences the percentage of losses. The longer the travel time, the larger the percentage of losses is.

2.3.2 Rented Truck Costs

In paragraph2.1.1 the process of renting a truck is explained and the difficulty of renting a truck is discussed. When the merchant does not find a truck for a reasonable price, the trade does not take place and the merchant misses net revenue. It is important to note that the difficulty of renting a truck is a big problem for the merchants. It restricts the commerce and export in a significant way.

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transporter, the gasoline and the other fixed costs of the truck. It does not include the costs on the road like the customs costs. The daily expenses consist of the costs for food, they are paid by the merchant per day.

The renting costs are the costs for a truck which returns directly; it is a non-Malian truck. To rent a Malian truck is too expensive what results in trade which is not profitable for the merchants. When there is no cheap truck available, the merchants will not be able to satisfy the demand and therefore there is not trade, see also paragraph2.1.

The renting costs depend on the destination and the type of the truck. The rented trucks have mainly a volume of 40 tons, but there do exists trucks of 10 and 60 tons as well. The renting costs are less for a 40 tons truck than a 60 tons truck, since it is cheaper to transport with the 40 tons truck.

The renting costs might depend on the time as well. It could be possible that in one month there are more trucks driving from Sikasso to Ouagadougou than in the other month. The merchants have indicated that the renting costs do not differ much over time.

2.3.3 Owned Truck Costs

The costs for possessing a truck are outlined in this paragraph. It is possible to purchase a trucks of 10, 40 or 60 tons. The trucks have fixed costs and variable costs which both depend on the capacity of the truck. The fixed costs are depreciation costs and insurances. The truck is purchased by a credit of the bank, therefore in this case the depreciation costs are actually the costs for paying off the credit. It depends on the purchase price, the interest rate and the number of years of depreciation. The interest rate of the bank differs between 10 and 15 % but often it is 15 %. Normally, the depreciation period is between 5 and 10 years, where 5 years is used mostly. The depreciation in Africa often is paid by means of a linear system of repayment. The yearly payment is the purchase price divided by the number of years of depreciation plus the interest over the resting value of the truck. Hence, the repayment is different over the years.

The variable costs are the gasoline, the salary and daily expenses of the driver, the costs for maintenance, oil and tires. The variable costs are given per kilometer and are independent of the tonnage transported. In many studies, the costs are given per kilometer - tonnage. The variable costs in this study are obtained by interviewing merchants and truck-owners. Their responses depend on the motor in the truck and do not depend on the weight of the merchandise. The variable costs depend on the type of the truck since different trucks use a different amount gasoline per kilometer. The salary and daily expenses of the driver are equal for all trucks. The variable costs might depend on the time since the gasoline usage largely depends on the type of roads. When the truck is driving on sand roads during the rain season, it uses more gasoline than during the dry season. The roads which are included in this study are for 95 % asphalted. Therefore, the variable costs depend hardly on the time period.

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Mali are allowed to unload a part of the cargo at Ouagadougou and continue to Abidjan or Accra.

It is important to keep in mind that the period of commerce is from January until June. The question rises what the merchants will do with the truck off-season. It might be possible to distribute other products and to hire out the truck in the second half year. In that case, the fixed costs can be shared and it is more profitable possessing a truck. Also concerning the return of the truck from a final destination, the same question can be asked. After having delivered the potatoes at the desired destinations the truck needs to return. When the truck returns empty, extra the transportation costs are made which can be reduced by returning with merchandise of other goods. One has to note that finding merchandise to return with can take a lot of time.

2.3.4 Administrative Costs

For exporting goods from Mali to other West-African countries but also for transporting goods within Mali, one has to follow an official procedure which is accompanied with administrative costs. These costs are for example the costs at the customs-check points. In this section, the administrative costs are described. The costs can be divided in several groups. There are costs for Value Added Tax (VAT), phytosanitaire, transit, customs, Entrepˆot Malien en Cˆote D’Ivoire (EMACI), Official National Transport (ONT) and possibly costs for convoy, police and gendarmes.

• VAT: To purchase an amount of products, normally one has to pay a certain percentage of VAT. In Mali this percentage in zeor for potatoes and other agricultural products. • Phytosanitaire: To distribute potatoes within and to the exterior of Mali, one needs

a certificate for phytosanitaire (see paragraph 2.1.2). The certificate of phytosanitaire is bought in Mali and it allows to distribute to the final destination / country with possibly passing an other country. Unfortunately, often the merchants have to pay the costs for phytosanitaire once again when they pass a country. These extra costs are unofficial.

• Transit: The merchant has to pay transit costs as well. The merchant visits a transit office which arranges the official document to export the potato to the final destination taking into account the passing countries as well. Normally, the merchant only pays the transit costs at the transit office. Unfortunately, often the documents are not accepted at the border and the merchant has to pay transit costs again.

• Custom-check point: At the customs-check point the merchant used to pay the fixed taxes Tarif Ext´erieur Commun (TEC). These costs are determined by the Union ´Economique et Monetaire Ouest Afrique (UEMOF), this union is comparable with the European Union in Europe. Nowadays, UEMOF has suspended the TEC for the export of agri-cultural products. Officially, the merchant does not have to pay costs at the customs for exporting potatoes.

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with or without official document pays a certain amount at the customs. Remind that for distributing the potato within Mali the merchant pays customs costs as well, since there is a customs-check point at the entrance of each large city.

• EMACI & ONT: A fourth type of costs which is paid, is EMACI and Entrepˆot Malien en Ghana (EMAGH) for exporting potatoes to Ivory Coast and Ghana respectively. These are costs paid per ton only at the Malian border for being allowed to use the ports of the West-African countries. One also has to pay an amount per truck to the ONT. The ONT is only paid at the Malian border.

• Convoy, police and gendarmes: The political situation in the West-African countries is important for the export. When a country is not stable, it might be unsafe to export products. Often, to support the economical situation, there is a convoy, police and gendarmes to provide security on the roads. At this moment (2007), Ivory Coast is unstable due to rebellions. To export a quantity of potatoes to this country, the merchant needs to pay a convoy and costs for the police and gendarmes. The convoy, police and gendarmes assure the safety of the transporter and the merchandise.

As noted before, a major problem of exporting the potato is that many costs are unofficial. These unofficial costs make it difficult to export: the merchants do not know what costs on the road to expect and therefore they can not estimate the costs of exporting. One day it might be relatively cheap to export, the other day the merchant might pay twice as much. A reason for the existence of unofficial costs is that both the merchants and the customs are not well informed on the official costs. The customs are sometimes not well informed on the new legislation. The merchants do not have any knowledge on the formal administrative costs and their rights in general. They are therefore totally dependent on the decision of the customs. Even if the merchants were well informed, it is difficult for them to defend their right since it is the customs who has to allow them pass the border.

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Elements Costs Costs on Malian level

Renting truck 300000

Load and offload 11200

Costs for phytosanitaire 3000

Transit costs 45000

Costs customs Bougoula Hameau 7500

Costs customs H`er`emakono 30000

EMACI H`er`emakono 5000

ONT 2500

Subtotal 404200

Costs on the level of Burkina Faso

Costs customs Kologo 43000

Costs for phytosanitaire 13500

Conseil Burkinab´e des Chargeurs (like EMACI) 10000

Costs customs Bobo Dioulasso 5000

Costs entrance Ouagadougou 5000

Subtotal 76500

Total 480700

Source: TradeMali, 2005

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Chapter 3

Transport of Potatoes: Problem

Specification

In the previous chapter the processes of commerce and export, their components and the transport costs are outlined in detail. This chapter specifies the problem which is analyzed in this study, the settings, its objectives and assumptions.

3.1 Problem Description

The main problem of the commerce and export is the lack of cooperation between the mer-chants causing an inefficient transport system and increased transportation costs. Two other major problems are the method of payment by the clients and the merchants and the high (unofficial) administrative costs. By cooperation the transportation costs are expected to decrease. Also the usage and respect of contracts might improve and there might be some influence on the unofficial administrate costs. Therefore, it is very important that the mer-chants acknowledge the advantages of cooperation (see paragraph2.1 and 2.1.1).

In this study, the cooperation of the merchants is analysed with a focus on the transport. The first research question is

• Is it profitable for the merchants to cooperate The second research question is

• Is it profitable for the cooperating merchants to purchase a truck and which type of truck should be bought

The first research question is intuitively clear: it is expected that it is profitable for the merchants to cooperate since the transportation cost will decrease. Nevertheless, it is good to verify this by means of an analysis. One can acknowledge more and understand better the advantages of cooperation.

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3.2 Problem Settings

This section reports the problem settings. The problem settings are the following: 1. The commerce and export of the potato during campaign 2005/2006 is analyzed, 2. The focus is on the merchants of URCEP and Mali Yiriden, the cooperatives are:

Yiriwasé, Sinignésique, Numpansiké, Benkani N’Gorodiassa, Benkadi N’Bambougou, Faso Kanou and Mali Yiriden.

3. The national destinations are: Kayes, Bamako, S´egou, Mopti and Gao,

4. The international destinations are: Ouagadougou, Bobo-Dioulasso, Accra and Abidjan, 5. The time axis is from January until June in weekly time periods.

6. Sikasso is the only region of production, commerce and export,

7. The clients do not demand different varieties of potatoes but ask for ’potatoes’, 8. The potatoes are packed in sacs of 25 kg,

9. There are different types of truck to rent and to purchase, the trucks only differ on capacity which can be either 10, 40 or 60 tons,

10. The renting trucks can only serve one destination; the owned truck can serve more destinations in once,

11. The owned trucks need to return to Sikasso within time period,

12. The depreciation costs of the owned truck are the depreciation costs of the first year, 13. The variable costs of the owned truck do not depend on the tonnage of the merchandise, 14. All the roads are asphalted,

The first four problem settings define the focus of the study. The commerce and export of campaign 2005/2006 is analysed by only taking into account the merchants of URCEP and Mali Yiriden and their clients. Their clients are located at the destinations indicated in settings3 and 4. One is talking about destinations instead of clients because the clients are not well structured. Therefore, it is more appropriate to consider a destination than a specific client. Note that besides the merchants of URCEP and Mali Yiriden, there are many individual merchants. They are left out the study since they are too difficult to approach. The total quantity which is sold by the cooperatives of merchants is approximately 3850 tons (see table1.1). The total production during campaign 2005/2006 is 55000 tons (see paragraph

2.2.1). It is important to keep in mind that this study only analyses a small part of the total commerce.

The fifth problem setting defines the time axis. The problem in this study is dynamic. The commerce and export takes place on several time periods during the potato season from January until June. The specification of the time period is one week. This is plausible, normally the orders of the clients are delivered within one week (see paragraph2.1).

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previous paragraphs. Setting 12 notes that the initial setting of the depreciation costs are the costs of the first year. Through sensitivity analysis, the influence of these costs can be studied. This setting and settings11 and 14 are discussed in more detail in paragraph3.3.2.

3.3 Objectives

The objective of this study is to maximize the net revenue of the merchants for different sce-narios. The scenarios describe whether or not the merchants cooperate, if and which truck is owned (see paragraph5.3). The net revenue of these scenarios will be compared to answer the research questions. Even though the focus is on the transport costs, it is questioned whether it is profitable to cooperate or purchase a truck. The net revenue is taken into account in-stead of only the transportation costs since there are situations in which it is not profitable to transport the demanded potatoes to the clients. In these situations the transportation costs are higher than the revenue.

The net revenue is determined by the revenue and the transportation costs. The transporta-tion costs are divided in four groups: the handling costs, the rented truck costs, the costs for owning and driving with the owned truck and the (in)formal administrative costs. The handling and administrative costs are taken into account to obtain a total overview of the transportation costs even though they might be the same for each scenario.

The sections3.3.1and 3.3.2define the revenue and transportation costs respectively.

3.3.1 Revenue

This section defines the revenue, it is determined by the supply, demand, producer and the consumer prices. These components are already explained in general terms in paragraph2.2. Table3.1present an overview of the factors.

Supply

In paragraph 2.2.1 the supply of the potato in Mali is described. It is discussed that the supply depends on the production, the storage losses and the sales. In this study, only the clients of the cooperatives of URCEP and Mali Yiriden are taken into account. Their orders cover only a small part of the total demand. Therefore, supply always exceeds demand and as a result, supply is sufficient to satisfy demand at all time periods.

Demand

In section 2.2.2 the demand for potatoes is discussed. In this study, the demand per time period is defined as the quantity demanded by the clients at the cooperatives of URCEP and Mali Yiriden during campaign 2005/2006. URCEP and Mali Yiriden have been interviewed and have indicated the frequency and quantity of potatoes that the clients order. Therefore, it is assumed that the demand is known, it depends on the destination and the time.

Producer Price

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the producer and merchants are respected. The price does not change unofficially. Consumer Price

The consumer prices are the prices paid by the end-consumers. In this study, it is assumed that the clients on national level pay the consumers prices which are given by OMA in monthly periods. The prices on international level are indicated by merchants per week. The national and international prices range between the same values. Therefore, it is plausible to assume that the clients pay the consumer prices; it is not necessary to verify the prices given by OMA with the merchants (see also paragraph2.2.4).

The consumer prices are assumed to be known and unchangeable after agreement between the client and merchant. Note that the monthly prices will be extrapolated to weekly prices, since a time period covers one week.

Component Unity Depend on

Supply potatoes Ton

-Demand potatoes Ton Time, Destination Producer prices f CFA / kg Time

Consumer prices f CFA / kg Time, Destination Table 3.1: Components of the revenue and purchase costs

3.3.2 Transportation Costs

The transportation costs can be divided in several groups. In paragraph2.3a detailed expla-nation of the handling costs, rented and owned truck costs and administrative costs is given. In this section, the costs are defined and important assumptions are outlined. Table5.7shows an overview of all the transportation costs.

Handling Costs

The potatoes are packed in sacs of 25 kg (see paragraph 3.2). The costs for packaging are per 25 kg, the costs for collecting and loading per kg potato. These costs are independent of the time, destination and type of truck. The transport of the potatoes causes a percentage of losses which depends on the time and on the destination (see paragraph2.3.1).

Rented Truck Costs

In section2.3.2the renting costs are described. The renting costs are the the rent per trip and the daily expenses, but does not include the administrative costs. The renting costs depend on the destination and the type of truck rented.

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indicated whether it is difficult to find a truck. The answers range between very difficult and very easy. The difficulty of renting a truck is translated in a probability of finding a truck to rent. When the merchants do not find a truck, they miss net revenue what is said be their losses. Taking into account the probability and corresponding losses, additional costs are calculated (see paragraph4.2.5for a formal derivation). The renting costs which are used in this study are the net renting costs plus additional costs. The method of including additional costs does imply an important assumption. A merchant only seeks for one type of truck to a destination. In case that he does not find this truck, he will not trade, even though it might be possible to transport with another type of truck. For example, when a merchant is not able to find a 40 tons truck to Bamako, he will not seek for a 10 tons or 60 tons truck to Bamako but he will conclude that he is not able to transport the potatoes. One could question this assumption since it would always be better to sell 10 tons than nothing. In this study, the extra costs are included in this way. Due to lack of time, it is not possible to examine the case where the merchants is also able to transport with other trucks.

The additional included costs do not depend on the time. It represent the missed net revenue, which is calculated by the consumer, producer prices and demand. These factors depend on time and therefore the net revenue is time-dependent as well. Since the extra costs are in-cluded for modelling reasons, it is plausible to assume that these costs are not time-dependent. Therefore, the average of the producer and consumer prices over time are taken into account when calculating the extra costs. Instead of the demand, the capacity of the truck is consid-ered (see paragraph4.2.5). As a result, the additional costs and the total renting costs in this study are time-independent.

Owned Truck Costs

The owned trucks have fixed costs and variable costs. The fixed costs are the depreciation and the insurances. The initial costs for depreciation is the repayment of the first year. In the sensitivity analysis also the repayments of the others years can be studied. Both the depreciation and insurance costs depend on the type of the truck. Normally, the fixed costs are paid per year. The potato season for commerce and export is only from January until June. For making a valid comparison, this yearly amount of fixed costs are totally paid during the months January until June; they are paid per week. The fixed costs are divided by the number of weeks in this period. Thus, in this study, during the months July until December the merchants do not pay fixed costs; they have already paid the yearly amount during the months January until June.

The variable costs are the gasoline, oil, maintenance, the tires, salary and the daily expenses of the driver. The variable costs depend on the distance but are constant with respect to the tonnage of the merchandise. All the costs except the daily expenses depend on the types of the trucks. The variable costs do not depend on the time, since in this study it is assumed that all the road are asphalted.

The owned trucks are able to serve more destinations in once. In this study it is assumed that they have to return to Sikasso within one week for usage in the next time period. The owned truck returns empty from the final destination. Since they are able to serve more destinations in once and have to return within one week, it is not likely that the merchant has got time to find cargo for the return trip.

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and earn additional net revenue. The additional net revenue is the profit of hiring out the truck per week. The potato season is half a year from January until June; the period off sea-son covers also 26 years. Since both periods span the same time, one can study one separate week and take into account the additional revenue of hiring out the truck during one week and the transportation costs of distributing the potatoes during one week simultaneously. Administrative Costs

The administrative costs are described in detail in paragraph 2.3.4. There are costs for phytosanitaire, transit costs and costs for convoy, police and gendarmes. In this study, the (total) transit costs is defined to be the costs paid at the transit office, the costs at the customs-check point (also on the interior of Mali), the EMACI and the ONT. The costs for convoy, police and gendarmes are paid in the countries which are unstable. Both the transit costs and cost for convoy, police and gendarmes are paid per route; the costs for phytosanitaire is paid only once. All the administrate costs are paid per truck and time-independent. Officially, the ONT is paid per ton, but this amount is small such that it is plausible to assume that the transit costs do not depend on the tonnage of the potatoes. One very important remark: in this study the administrative costs are assumed to be fixed even though they might change daily (see paragraph 2.3.4). For analysing the transport of the potatoes, it is necessary to specify the administrative costs. They are specified as a starting point. The purpose of this study is to compare the transportation costs of different trucks. Each scenario is analysed with the same administrative costs, therefore the comparison of the scenarios is not influenced by the assumption of fixed administrative costs.

Type of Costs Unity Depending on

Handling Costs

Collecting, packing, loading per kg

Losses by transport percentage destination, time

Rented Trucks Costs

Rent, salary, gasoline, maintenance per trip type truck, destination

Daily expenses driver per trip destination

Additional costs per trip destination

Owned Truck Costs

Depreciation and insurance per week type truck

Gasoline, oil, tires, maintenance per destination type truck

Salary driver, daily expenses per destination type truck

Additional net revenue off-season per week type truck

Administrative Costs

Costs for phytosanitaire per truck

-Transit costs (transit, customs, EMACI and ONT) per truck destination Costs for convoy, police and gendarmes per truck destination

Table 3.2: Overview of the transport costs

3.4 Assumptions

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1. The demand and supply are known for all time periods; supply is sufficient to satisfy demand at all time periods,

2. The producer and consumer prices are known and fixed. They are paid by the producers and clients respectively,

3. The time periods are mutually independent,

4. When the merchants do not find the rented truck, there is no trade. The merchants do not search for another type of rented truck,

5. The banks are willing to give the merchants access to credit for purchasing one truck, 6. The merchants might hire out the owned trucks off-season; the owned trucks return

from their final destination empty,

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Chapter 4

Mathematical Model

The problem to be analyzed is described in the previous chapter. This chapter contains the specification of the mathematical model. The first paragraph explains the design of the model and the reasoning behind it. The second paragraph defines the variables and parameters; the last part defines the objective and constraints.

4.1 Model Design: Transport Model

The problem described in the previous chapter is analysed by a mathematical model. This model is used to obtain insight in the factors influencing the commerce and export and more specifically, the transport of the potatoes. Furthermore, it is a tool to get answers to the research questions (should the merchants cooperate and purchase a truck). The first research question is intuitively clear: the transport is expected to be more efficient by cooperation since the rented trucks are transporting more potatoes in once and thus the merchants need less rented trucks. The second question is more difficult to answer at forehand; this model may be a tool to give an answer to it.

The transport of the potatoes is the main issue in this study. There are two possibilities: transporting by rented trucks or by an owned truck. The merchants are able to own only one truck since it is difficult to obtain a credit of a bank (see paragraph 2.1.1). Thus the objective of this study is not to determine the number of trucks to be bought but whether and which size of truck should be bought. For this reason, purchasing a truck is not modelled as a decision variable but as a policy parameter. This parameter is used for indicating whether and which size of truck the merchants own. For each scenario, the net revenue and transport costs are compared. The net revenue and transport costs are determined by transporting the potatoes with minimal costs. The decision variables show how to transport the potatoes with lowest costs; the model is a transport model. It has the possibility of transporting with an owned and rented trucks with different capacities, compares the costs and decides which truck is cheapest to use.

The Commerce and Export of the Potato in Mali A Transport Optimization Study