‘Cotton sector facing challenges’

THE cotton sector is facing a myriad of challenges in Zimbabwe. There has also been a debate over the viability of the country’s major cotton ginneries model. The Zimbabwe Independent chief business reporter Taurai Mangudhla (TM) last week interviewed agriculture economist Professor Mandivamba Rukuni (MR) to discuss these issues. Below are excerpts;

TM: The old cotton ginneries model exemplified by parastatals such as Cottco used to be viable but now it’s less than ideal. In your view, what went wrong and does the current model have a future?

MR: The model for these large ginneries was viable during the time when cotton enjoyed good world market prices, but now the market prices have plummeted and are not likely to go up significantly ever again because of the availability of many cotton substitutes. It’s not going to come back. TM: What then needs to happen?

MR: What needs to happen now is to change the basic business model. The real market in the world is you go back to small ginneries which make it possible to place many of them in the countryside. If you go to Gokwe, for instance, you can have 10 to 15 micro-ginneries which are at business centres. These micro-ginneries can gin cotton for the farmer under toll ginning instead of what big ginneries do, which is, they buy your cotton at cheap prices and keep everything else after they add value for themselves. They add value and once you process, the value jumps to about US$0,80 or US$0,90 per kg. Then they retain the seed which can be sold for extraction of cooking oil and so on. They also keep cake which they sell for animal feed. These ginneries were making a killing; but that model is dead. It’s dying, so the microginneries now pass on that same model at a small-scale to small farmers.

TM: Please explain how this will work? MR: The small farmer can sell his or her five or six bales of cotton after they are processed at a micro-ginnery. They then leave the micro-ginnery with their lint and cotton seed. They can sell the lint at a higher price and then sell the cotton seed to some other small oil producers and those who produce animal feed.

More importantly, if we do it correctly, that lint which is toll ginned can go into the local industry where it is spun on a smallscale and then they make handmade garments from pure cotton. That is what sells now globally; it’s a niche market but big enough for a small country like ours which has got cotton. It’s better than just to export cotton as we are doing right now, that model is dead.

TM: Does this model really work and what can be done to get the maximum value?

MR: It’s better if the farmer is taught to grow the cotton organically so that they don’t use that many chemicals or they can use green chemicals; that cotton fetches the highest price in the world. Garments made from that cotton are very good, they are expensive. We have to think completely differently instead of just thinking big. Big only makes it when you have high level manufacturing heavy industry, but when you are talking of ginning cotton it’s still primary.

The large-scale idea is dead, there is no money and the prices have plummeted so now the small-scale entrepreneurs have to take over.

TM: What does it take to set up a micro-ginnery?

MR: A micro ginnery only costs about US$40 000 to US$60 000 whereas a big ginnery, say Cottco’s, and its competitors are talking about US$5 million to US$$10 million. At US$40 000 you can put two or three of them in Gokwe, for example, at growth points and they can serve 200 to 300 farmers so they can start a weaving industry, looming industry and garment making industry.

You will now industrialise at a local level, that’s where we should be going rather than continue with this old model of behaving like an international company which is extracting value from small farmers and selling internationally. It's dead.

TM: Can you illustrate the benefits of toll ginning?

MR: Cotton farmers now are being paid US$0,30 per kg but if you toll gin that cotton for US$0,10 to US$0,15 per kg, your lint that comes out of there can sell at US$0,80 internationally instead of getting US$0,20 per kg for your cotton. But more importantly, you don’t even sell the lint to them; you take it to the local looming industry, weaving industry, or make garments and so on.

Now you are adding slowly from US$0,20 and going into US$0,60 per kg. By the time you make a garment from locally hand weaved cotton you are probably talking US$3 to US$4 equivalent because somebody in Germany is prepared to pay for a pure hand weaved, handmade cotton shirt tailor made by small tailors in Gokwe for US$200 or even US$300. This is opposed to buying a normal cotton shirt at US$10US$12 anywhere.

We have to start from the bottom and the bottom is where ginneries create money and employment, buy small machines and so forth. You will have small looming machines, small weaving machines and you can actually start garment manufacturing. That’s industrialising from one sector like cotton. That’s why you find countries like Mauritius who don’t even grow 1kg of cotton doing everything I am telling you now. You know Mauritius is the leading cotton garment or textile making country in the region, but they don’t even grow 1kg of cotton. They just take your raw cotton at these cheap prices of US$0,20 per kg.

TM: The cotton industry has been heavily subsidised by the government and farmers are still owed for 2020. In your view, is this viable?

MR: This government is trying to be more economically savvy than the previous dispensation but they are also stuck in old ways which they are finding difficult to come out of. When you are used to subsidising small farmers, you try to underwrite Cottco, for instance, but the Cottco model does not make money. It means the government will spend money subsidising Cottco, money which will not come back.

So what’s missing is they, the Zanu PF government, cannot run away from continuing to support farmers because that’s what gets them the vote; so they cannot drop support to farmers but what they can do is change the model of supporting farmers. That is where they are missing it, they continue to support Cottco in ways that the money won’t come back so they are perpetuating the same old fiscal indiscipline.

What this government has done is they may have failed on the monetary policy, but on the fiscal policy they have not done that bad, they have brought back some kind of discipline.

What they can do is instead of subsidising the old way, they can put money in creating a new model which can be micro-ginneries. They should put money into that, not in Cottco. They should not even sell Cottco to some foreign company which will then continue to exploit our small farmers. They should just tell Cottco to go through a major transformation process which makes them break down their technology into something more suited for small-scale industry. Small adds up to big because if you have 200 micro-ginneries, 300 looming and another 500 small scale garment makers, then you have gone big. Economies of scale does not mean size, it can be many small players adding up to one big industry.