Zimbabwe heading for worst cotton season in history
ZIMBABWE is bracing for its worst cotton season ever, with deliveries so far falling far short of projections. As buying nears completion in key cotton-growing regions such as Gokwe, Muzarabani and Sanyati, in just a month after the season opened, a meagre 11 000 tonnes have been delivered by farmers.
This is a significant shortfall compared to Government’s projection of 41 000 tonnes and the industry’s 30 000 tonnes.
Last year, Zimbabwe produced about 90 000 tonnes.
Industry insiders predict that even with ongoing mop-up purchases in the Lowveld region, the total output might not even reach 20 000 tonnes.
Data from this publication reveals a stark disparity.
Cottco, the largest financier of cotton has collected roughly 9 000 tonnes, while just four private companies have managed to purchase around 2 000 tonnes.
The imbalance is further highlighted in Gokwe, the nation’s cotton heartland, where buying has concluded with only 5 000 tonnes delivered —traditionally, Gokwe contributes roughly 60 percent of the country’s cotton output.
The drastic decline is primarily attributed to the El Nino-induced drought that also severely impacted other crops like maize and tobacco.
However, it is worth noting that tobacco, which are generally less drought-tolerant than cotton, fared better.
While a 20 percent decline is expected for tobacco, the impact seems less severe compared to cotton’s potential collapse.
“The drought this season has been brutal, but it is not the whole story,” a senior manager with Cottco told this publication.
“Even with some late purchases coming in, we are looking at a total output well below expectations.”
Inputs distribution shortcomings
Analysts are raising concerns about potential shortcomings in the distribution of inputs, a responsibility recently transferred from Cottco to the Grain Marketing Board (GMB).
Cottco, which manages the Presidential Inputs Scheme responsible for 85 percent of cotton production, previously handled input distribution.
Some farmers allege they could not capitalise on the early rains because they lacked the necessary inputs.
The Presidential Inputs Scheme provides farmers with free seeds, fertilisers and chemicals.
“The challenges with input distribution, especially early on, really hampered our ability to capitalise on the planting window,” Nixon Tafirei, an agricultural commodity analyst with a local research firm said.
The rationale behind shifting input distribution responsibility from Cottco to the GMB was threefold; leveraging GMB’s extensive national reach, curbing alleged input theft, and alleviating Cottco’s financial burden of distribution costs.
Essentially, the aim was to transfer the financial responsibility of input distribution to the Government, allowing Cottco to focus resources on paying farmers.
Previously, this distribution cost was borne by Cottco, which partly hampered their ability to pay farmers promptly.
However, it appears the GMB also faced funding constraints, leading to delayed input distribution.
In some areas, it has been alleged that the GMB, with the help of Agritex officers was distributing the inputs without making the farmers sign the contracts, which could have paved way for diversion of inputs use.
Policy reforms
While the drought undoubtedly played a major role in the production decline, analysts have emphasised the need for policy reforms to ensure the cotton industry’s future viability.
Analyst argue that the reforms should focus on creating a level playing field for private sector participation.
Currently, private players face an uneven competition with Cottco.
Cottco farmers benefit from Government-free inputs, while private companies must purchase inputs for their contracted farmers.
In addition, both sectors are forced to buy cotton at the same price set by the Government.
“Cotton production needs a fundamental shift,” Carlos Tadya, an economist said.
“A private sector-led industry, with a supportive role from the Government, is the most sustainable path forward. This would not only improve efficiency but also alleviate the strain on the national budget.
“By creating a level playing field for private companies and removing the burden of subsidised inputs, the Government can refocus its resources on infrastructure development and research, ultimately benefiting the entire cotton sector.”
Changing cotton landscape
Even if private companies were allowed to deduct the cost of inputs they provide to farmers, this could incentivise side marketing.
The prospect of selling their crop to Cottco for a higher price due to the input subsidy might tempt farmers to bypass their contracts with private companies.
The Zimbabwe Farmers Union executive director, Paul Zakariya, said industry stakeholders needed to work together to “re-energise” the cotton industry.
He emphasised the importance of developing an attractive and fair financing model for all participants, including farmers and merchants.
Zakariya also proposed a farm gate pricing model to ensure farmers receive a fair return for their crops while collaborative efforts are crucial to increase yields and restore industry viability.
“We need the landscape to change, we need a more sustainable cotton financing model for the country,” said Zakariya.
In 2014, the Government intervened to fund cotton production after yields plummeted to a record low of 28 000 tonnes, the lowest since the 1992 drought.
The Government claimed that ginners failed to finance cotton production and provided inadequate inputs, leading to declining yields.
The Government further alleges that ginners colluded to offer low producer prices while inflating input costs to maximise profits at the expense of farmers. In addition, they are accused of neglecting to pay differential prices based on crop grading, buying all cotton at the same price regardless of quality. However, merchants argued that financing cotton was no longer a viable investment due to low recovery rates caused by side marketing.
This situation led companies such as like Cargill to exit the country due to low profitability and recovery rates.
A blow to textile rebound
The decline in Zimbabwe’s cotton industry, once a major export powerhouse, poses a serious threat to the country’s nascent textile revival, particularly after the promising resurgence of David Whitehead Textiles.
Zimbabwe must prioritise lint import to feed its textile mills.
The decline will also have a devastating impact on thousands of households across the country, especially during this drought year, as many rely on cotton production for their livelihoods.