COTTON, commonly referred to as white gold, is one of Zimbabwe's key foreign currency earners. However, the cotton sector has been experiencing a downward trend in recent years, with experts attributing the decline to climate change and poor payment systems. In this interview, Cottco Holdings chief operating officer Munyaradzi Chikasha (MC) speaks with our assistant editor Mthandazo Nyoni (MN) about the company's efforts to revive the sector. These initiatives include converting lint into yarn for the local market through a tolling arrangement with Afroran. This project enhances the company's competitiveness while supporting the growth of the domestic textile industry. Additionally, Cottco is exploring further value-addition projects, including an oil expression plant. Find below excerpts of the interview:
MN: What initiatives has Cottco Holdings Limited implemented to support local farmers, including training programmes and input supply schemes?
MC: We have managed to implement several initiatives to support local farmers. These include training programmes and input supply schemes under the Presidential Inputs Scheme. The company provides seeds, fertilizers, and pesticides to farmers, ensuring they have the necessary inputs for cotton production at zero cost. Additionally, Cottco has been involved in the Pfumvudza/Intwasa programme, which promotes conservation agriculture techniques. Farmers are provided with tillage services. We are targeting 70 000 hectares in 2024-2025 season.
MN: What efforts is the organisation making to increase value addition in the cotton industry?
MC: Cottco has made significant strides in value addition by converting lint into yarn for the local market through a tolling arrangement with Afroran. This initiative not only enhances the company’s competitiveness but also supports the growth of Zimbabwe’s domestic textile industry. The company is also exploring further value addition projects, including an oil expression plant that is to be set up in Gokwe next year and a solar project scheduled for Muzarabani, which will also feed into the national grid. A deposit for the oil expression plant has already been paid.
MN: How has the company navigated the challenges facing Zimbabwe's cotton industry, including climate change, input costs and market fluctuations?
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MC: As alluded to earlier on, some cotton farmers are receiving tillage services. This will in a long way enhance the crop’s tolerance to harsh weather conditions. The price of lint and ginned seed has not been stable over the last couple of years. Therefore, revenue streams have not been affected by price variability of products but low volumes as a result of climate change. However, high borrowing costs and having largely United States dollar-denominated costs has generally affected Cottco’s operating costs. This is being addressed by aligning costs to the level of activity on the ground. Cotton production inputs are provided by government through the Pfumvudza/Intwasa programme.
MN: What percentage of Cottco's cotton is exported, and to which markets?
MC: Approximately 70% of Cottco’s lint is exported. The primary markets are Europe, Asia, the Far East and South Africa
MN: What were Cottco's total revenues and profitability for the last financial year, and what are the projections for the current year?
MC: In 2023, Cottco managed to buy 69 700 metric tonnes of seed cotton which gave us about 27 800 metric tonnes of lint after processing. At the time, the lint was sold at prevailing market prices. A further 39 700 metric tonnes of ginned seed was also sold to the local market.
MN: What sustainability measures has Cottco adopted to reduce its environmental footprint?
MC: Cottco has adopted several sustainability measures to reduce its environmental footprint. These include promoting conservation agriculture practices through the Pfumvudza/Intwasa programme and investing in renewable energy projects like The Muzarabani Solar Project.
MN: What are Cottco's expansion plans, including any new projects or investments?
MC: Cottco intends to engage other players along the value chain for possibilities of tolling arrangements. There are plans to upgrade ginneries in order to improve ginning efficiency. This essentially reduces the overall costs of running the business. A trucking business being explored will also reduce the cost of logistics, essentially movement of seed cotton from Cotton buying points. The cost of logistics is so huge therefore affecting the profitability or otherwise of the company.
MN: We understand that the company has applied for a US$45 million facility from Afreximbank to finance cotton production and value addition. What progress has been made in securing this facility? What specific value-addition initiatives will this facility support?
MC: It is very unfortunate we cannot give details on the progress made in securing the facility. If secured, the funding will support specific value-addition initiatives, including the development of an oil expression plant and ginnery upgrades.
MN: For the 2024/2025 farming season, what cotton production target has Cottco set? How does the figure compare with the previous season?
MC: Cottco has maintained a target of 120 000 metric tonnes. As you are aware, we were largely affected by the worst drought in living memory. The output was the lowest one can remember. This current season target is also dependent on input availability, hence it is subject to revision at the end of the input’s distribution period.
MN: As a major player in Zimbabwe's cotton sector, what challenges is Cottco currently facing?
MC: Cottco is facing challenges of low production and low productivity, increased cost of doing business and threat of side marketing.
MN: What strategies does Cottco have to mitigate these challenges?
MC: To improve production, the input package was increased from 100kg per hectare of basal fertiliser to 200kg. For season 2024/2025, farmers were categorised according to potential. Their records of past deliveries were used in determining the level of support a farmer qualified for. Cottco is working hard to automate some of its processes.
This will, in the long-term, reduce overall costs of doing business. In general, focus is now on improving efficiencies. On side marketing, the regulator is using biometric registration. Cottco is working on geofencing contracted farmers’ fields. Our extension system is working on collecting co-ordinates of all contracted farmers’ fields.