Cotton is the lifeblood of Gokwe and some areas along the Zambezi and Save valleys.
Remove the crop; you have extinguished life out of the area.
Since the cotton crisis started some three seasons ago, incomes for farmers in Gokwe and their quality of life have fallen sharply. With low seasonal incomes, the crisis has meant that businesses in the districts — Gokwe South and Gokwe North — have tended to record less business. The same applies for Sanyati in neighbouring Mashonaland West Province, Muzarabani and Rushinga in Mashonaland Central, Chiredzi and Mwenezi in Masvingo and Checheche in Chipinge in Manicaland.
Why the cotton industry has been downbeat is mainly to do with recurrent droughts and low prices merchants are paying — an average of $0,30 per kilogramme. In turn, the low producer prices have exposed productivity flaws. Another factor is the liberalisation of the cotton growing and marketing sector, after the government did away with then Cotton Marketing Board’s monopoly. New players, among them Cargill and Olam came in to contract growers. Unlike the CMB, some new entrants’ pursuit for profit and the inherently unequal power relations between them as financiers and farmers meant the latter frequently lost out. Cargill has ceased its cotton operations. Cottco, the successor company of the CMB that accounted for by far the largest market share, posted a $30 million loss last year, and racked up $56m of debt.
Amid the negative factors, production has fallen as farmers have shifted to better-paying crops like maize and tobacco. However, because cotton is produced in semi-arid regions, the options are not too viable.
The government had to take measures to restore the viability of the sector. It has done so by increasing its shareholding in Cottco from 16 to about 65 percent as well as taking over the $65 million debt in exchange for shareholdings.
Yesterday, we reported that the government will this season provide $26 million worth of inputs to at least 100,000 farmers who are expected to grow around 250,000 hectares of the white gold.
But the government recognises that providing inputs alone will not bring the required viability without corresponding attention to the marketing side of the crop. Thus, Cottco will from this season regain its dominance in the sector in terms of buying cotton. Agritex will identify farmers and distribute the inputs to them.
Provision of inputs will help a great deal because this has been an area where private contractors were manipulating prices to unjustly benefit themselves. They tended to price their inputs exorbitantly and later valued the farmers’ cotton very lowly. So after adding up the value of inputs they would have provided and deducting it from the farmer’s seasonal income, many producers actually ended up in arrears.
We estimate that $26 million will buy adequate inputs for cotton growers who will have no need to do business with private contractors. This intervention, we argue, is an important step towards restoring the viability that we want in cotton. Cottco should be more responsible than the discredited private contractors so that it will not cheat farmers.
However, we recognise that to a significant extent, local prices are affected by global trends. If prices abroad increase, they are likely to do the same locally and vice versa. Merchants have often blamed falling international prices for pegging abysmal producer prices. This is another area of serious concern — the extent to which Zimbabwe is involved in the cotton value chain. Our textiles sector is on its knees, so does not process much of locally grown cotton, necessitating exports, most unfortunately, to markets that offer low prices.
Overall, local industry processes about 20 percent of lint production. The government ensures that the local textile industry’s lint requirements are met by requiring that each ginner reserves 30 percent of lint production for local consumption.
Twenty percent domestic lint processing is too small for an economy that is geared towards greater value addition and beneficiation in terms of Zim-Asset. Therefore, we urge the government and the textiles sector to work out measures that will ensure that the economy builds capacity to value-add more cotton. This creates more jobs and helps the economy retain value in its cotton. Furthermore, increased local beneficiation of cotton into finished products limits the negative effects of price fluctuations on the global stage.
The market has apparently failed as far as the cotton sector is concerned; hence we support more state involvement through provision of inputs and marketing of the crop as Professor Ian Scoones, an authority on the local agriculture sector argues.
“That the state in Zimbabwe has returned to prop up the failing Cottco,” he said, “is perhaps a sign that the limits of liberalisation are finally being understood. Cotton is such a crucial crop for Zimbabwean smallholders that it is vital that, even as commodity prices dip, the capacity of the industry to produce top quality export cotton is maintained. Zimbabwe is still a major producer globally, and has a tradition of producing high quality lint. However, the dangers of assuming that a completely liberalised contracting approach will work in the longer term need to be heeded – for cotton, but also other crops such as tobacco, currently seeing a boom.”