Zimbabweans Sell Cotton in Mozambique

Source from:  Agencia de Informacao de Mocambique (Maputo) November 29, 2005 Maputo  11/30/2005

Zimbabwean peasant farmers are crossing into the central Mozambican provinces of Manica and Tete to sell their cotton - an unexpected turn of events which is exhausting the bank credit intended for the cotton marketing campaign. The company that is buying the cotton relied on a bank loan, and has run out of money. The cotton markets have thus ground to a halt. A source in the Mozambican government's Cotton Institute (IAM) told AIM that more farmers than initially expected had brought their cotton to the markets "since Zimbabwean peasants crossed the border, wanting to sell in our country, thanks to the strength of the metical against the Zimbabwean dollar". Something similar had happened further north. Malawian farmers had crossed the border into Mozambique because the Malawian kwacha has depreciated against the metical: the Malawians were selling tobacco and preferred to receive meticais rather than kwachas. Ironically, the loan taken by the Zambezi Cotton Company (EAZ) comes from a Zimbabwean branch of the African Banking Corporation (ABC), and is guaranteed by EAZ's partner, the Cotton Company of Zimbabwe (COTTCO). COTTCO cannot obtain any further loans for the current marketing campaign, because of the Zimbabwean government's restrictive banking policies. For the same reason, COTTCO has been unable to invest in Mozambique so that EAZ would have some assets which would serve as collateral for loans from Mozambican banks. The top management of the Mozambican government's Zambezi Planning Office (GPZ) is trying to deal with the problem, and has been explaining the situation to the provincial governments. "The situation on the ground is tense", said the IAM source, "and the Zambezi Cotton Company has been unable to do anything except call for patience from the producers and transporters affected, telling them that everything will be paid for as soon as possible". COTTCO wanted an extra 20 per cent to make the additional payments. If it does not obtain this, said the IAM source, then the cotton markets will only reopen in three months time, when revenue from cotton exports becomes available. Mozambican production from the 2004/05 campaign is estimated at 87,000 tonnes of raw cotton. This is processed down to 31,000 tonnes of cotton fibre, which the IAM says will be sold for 31 million US dollars. Assuming there is no repeat of this year's drought, then it is hoped that the 2006 cotton harvest will reach 110,000 tonnes of raw cotton. If the FOB price remains unaltered at 1,000 dollars per tonne of cotton fibre, then export revenue should rise to 39.6 million dollars. Enditem