Cotton Marketing: Go the Uganda Way

Source from:  The Herald (Harare) COLUMN February 16, 2006  02/16/2006

THE projected rise in cotton production from about 200 000 tonnes achieved last year to between 350 000 and 400 000 tonnes this season will see it outpacing tobacco as Zimbabwe's major foreign currency earner. Tobacco, the traditional foreign exchange cash cow, has been on a steady decline in the years with only 70 000 tonnes expected to be produced this season. However, the potentially lucrative sector faces a serious challenge with the emergence of a new breed of cotton buyers, both local and foreign, who want to reap where they did not sow. The fly-by-night players pose a formidable threat to the high quality lint that the country is famous for, resulting in the decline in the quality cotton produced in the country. Some major cotton producing countries in Africa, notably Uganda, faced a similar challenge in the 80s following liberalisation of the industry. Uganda's production took a dip in early 80s and the removal of the regulatory framework saw the entry of many cotton processors with little or desire to invest in its production. As is the case with Zimbabwe, the "vultures" did not want to take the risk of financing farmers but only wanted to buy at higher than the prevailing market rates. Bold steps were, however, implemented and in 1998 Uganda came up with the idea of industry regulator -- the Cotton Development Organisation (CDO) -- an affiliate of the government. The CDO was tasked with ensuring that every merchant contributed to the national production through a quota system while providing extension services to farmers. It was responsible for the registration of cotton merchants. The setting up of this regulatory board had the effect of flushing out predators in the system and saw the dawn of players committed to production. The catchword of the regulatory board was "you buy equivalent to what you have invested". In other words, for a merchant to buy, say, 12 000 tonnes of cotton he would need to finance production equivalent to that tonnage. The regulatory board was also responsible for ensuring inputs such as seed and chemicals were available. And there was a massive rebound in production -- from a mere 20 000 tonnes to around 300 000 tonnes in 1999. The industry was now brimming with players willing to enhance production, forcing the predators to look for other markets to prey on. In recent years, those "vultures" appear to have found a new playing ground in Zimbabwe where they are enjoying brisk business. Some have migrated from Tanzania while others are flying in from as far as India and other Asian countries. They flock around during the selling season only to disappear soon after and re-emerge the next year. Zimbabwe industry players have for some time been mulling for the creation of a regulatory framework to compel every merchant to contribute to production but very little ground has been covered in this respect. Out of about 15 cotton houses in the country, only a handful are doing something to address the situation. Sadly those companies which are investing billions of dollars in the industry, with a view to boosting productivity levels and maintaining quality are repeating little from the farmers. The farmers are tempted to breach their contractual agreements with merchants, opting to sell the crops to fly-by-night merchants in return for higher prices. Their grading system is also a source of worry as it makes a mockery of traditional quality standards. In this regard, it is crucial that Government together and other relevant stakeholders move fast to establish a regulatory framework. The regulations should be crafted in a such a way that competitors are not pushed out of the sector altogether, but to ensure that the long-term interests of the industry are safeguarded. It should ensure that the goal of producing at least 700 000 tonnes annually is realised through greater investment by all industry players. The proposed Agricultural and Marketing Authority could be given task to ensure quality of cotton destined for the export market is maintained. On the other hand, the National Cotton Council should assume the role of registering players and monitoring those contributing to national production. Industry players -- ranging from farmer organisations, the National Cotton Council, merchants, Ministry of Agriculture among others -- should start taking the initiative seriously. Cotton is presently the country's biggest foreign currency earner and tight but market-friendly restrictions will certainly go a long way in helping farmers to produce more of the "white gold". Enditem