Cottco seeks US$45M Afreximbank war chest
COTTCO Holdings Limited has applied for a US$45 million facility from the Pan-african bank, Afreximbank, to bankroll cotton production and valueaddition, businessdigest can exclusively reveal.
The move comes at a time when Cottco has been struggling to pay cotton farmers due to lack of funding.
Sifelani Jabangwe, board chairperson at Cottco, told businessdigest that the application was made last year.
“Banks should give Cottco loans to pay farmers and then when Cottco processes the crop and the money comes, it pays for the loans,” he explained.
“Unfortunately, what has been happening is that banks have either not been able to give adequate facilities to pay for the crop or sometimes they have the facilities but don't have the liquidity.
“As a long-term solution, we have gone to make an application to Afreximbank to raise money to help pay our farmers. Unfortunately, the process for such applications takes a long time. We started last year.
“We are hoping that this year it will be attended to and we will have the facility. This funding cannot come from one bank. Not one bank in this country can be able to support that type of liquidity. It just shows you that it is a significant requirement on the banking sector itself.
“That is why we are going to Afreximbank to get this facility of about US$45 million, which will be partly for the farmer and part of it is going to be for the value-addition projects,” Jabangwe said.
The organisation is set to invest US$3,5 million on two new projects, an oil expression plant and a solar farm, as it seeks to improve efficiency as well as value-add the crop and generate more revenue.
For this year, Jabangwe said they have engaged local banks "to give us the facilities and today (April 25, 2024) we actually just had a meeting with one of the banks and they indicated that they will avail the facilities in time for our main crop intake”.
“On the back of this support, we believe this year delays will be minimised, if not totally eliminated. At the same time, there is 10% that is owed (to farmers). So, we have paid 90% that was owed for the current season.
“We initially hoped that it would be cleared, but with the availed liquidity that is also coming from banks, we have only managed to get to about 90%. Hopefully, when we clear this, we are able to then be up to date with the farmers,” he added.
Jabangwe indicated that lack of power during the current season contributed to late payment.
“We had delays because of power and the late crop, so we are actually still ginning. This crop that we should have paid to the farmers is still in the country. It is still here somewhere,” he noted.
“So, you see the need for the banking sector to effectively support the crop. We cannot hide the fact that the farmer has to be paid on time so that they can go back to the field. We need all systems to then kick in.
“It is something that we have been engaging with stakeholders so that banks understand what support is needed. We need to make it work for farmers.
“You find that when there is more crop, the problem becomes even bigger. But it is a good problem because the country is going to benefit and more farmers are going to be paid," Jabangwe added.
Cotton is one of the biggest sources of foreign currency in the country.
The sector recorded a 61% increase in production to 90 085 metric tonnes (MT) in the 2022/23 agricultural season.
This was against 56 044MT from the 2020/21 season.