After the Cotton Company of Zimbabwe (Cottco) struggled to pay cotton farmers last year, the government said it will send direct payments to them.
When the 2019/2020 season ended, there was up to $1,5 billion (about US$18 million) in unpaid debt.
Thousands of farmers who rely on cotton have suffered as a result of the delays, and analysts warned this week that the government was nurturing conditions for the collapse of cotton cultivation in Zimbabwe by allowing the crisis to escalate out of control.
Farmers who did not get their funds were unable to re-capitalize their operations, and many were unable to return to their fields.
Thousands more turned to gold panning, where a thriving illegal market has provided work for over 1.5 million people. But for Zimbabwe, this massive switch to gold has come at a cost.
According to a research by Global Initiative, around 70% of bullion revenues are funnelled into the illegal market.
It has been revealed that payment gridlocks were far from ended when the current season began on May 18, compounding an issue that saw them forced to accept food on numerous cotton marketplaces last year.
As part of its new strategy to revive the cotton farming sector, the government will increase shareholding in Cottco to 51% from 16%, after which it will take over payment. Cottco, the biggest buyer of the country’s cotton output controls over 90% of the Zimbabwean market.
Last week’s post-Cabinet minutes revealed the new strategy, which stated: “Pertaining to cotton marketing, the nation is advised that the 2021 cotton marketing season commenced on 18th May 2021. Cabinet noted with concern the continued failure to pay farmers for cotton delivered to Cottco and has decided to institute measures to increase its shareholding in Cottco to at least 51% in tandem with its contribution in the company and apparent support to farmers and the need to spur rural industrialisation. To this effect, the government will be paying farmers directly”.
It was not clear if the government would live up to its promise to change things.
It has already struggled to keep a number of promises to speed up the clearing of $1.55 billion in arrears, which has been the most serious danger to a broad strategy to resuscitate cotton production.
Farmers earned US$10 for each bale and 38 percent of the value of a 200 kilogramme bale in Zimbabwe dollars last year, in addition to a fixed producer price, with the balance paid electronically to farmers’ mobile money wallet accounts.
Economist Takudzwa Chisango said the government must work flat out to deal with the worrying payment delays that are capable of scuppering cotton production in Zimbabwe. “It’s quite unfortunate that late payment of cotton farmers is now a permanent feature of every marketing season, and more worrying is that cotton farmers are facing a double crisis — the prices are low and the payments are being deferred,” he told businessdigest.
“Sadly, the situation is also going to be aggravated by recent policy announcements through SI 127 of 2021 as these cotton producers are more likely to succumb to exchange rate losses. These late payments make them vulnerable to inflationary headwinds which we are already seen being induced in the market by this statutory instrument,” Chisango warned.
Last year Cotton output was 70 000 metric tonnes and is expected to reach 150 000 metric tonnes this season. Total output was 76 691 000 kg in 2019.
After a decade of perceived lower prices averaging US$0,30 per kg, cotton production in Zimbabwe fell to an all-time low of 32 000 tonnes in 2016, down from 84 000 tonnes in 2015 and 143 000 tonnes in 2014.
Since 2015, the government has been financing Cottco, a free-inputs initiative to promote cotton production that has benefited approximately 400 000 farmers, or 90 percent of total cotton growers.
