By Taurai Mangudhla
As debate around the viability of Zimbabwe’s largest cotton dealer, Cottco Holdings’ business model continues with experts proposing micro-ginneries and toll ginning, our chief business reporter, Taurai Mangudhla (TM) last week sat down with the firm’s chief executive officer, Pius Manamike (PM) to understand his vision.
Pressure to review Cottco’s model increased as the firm initiated a pilot toll ginning project.
Management says the establishment of micro ginneries was already among the company’s future plans.
Cottco is on an expansion drive that will see it entering the textile and oil processing markets and the move is part of a broad regional expansion drive meant to transform the state-run firm into one of Africa’s biggest cotton dealers within 10 years.
The vision is to have a textile company that processes products from cotton, another oil company that processes oil from seed.
Cottco says the lint side, which relates to textiles, has a great opportunity for investment given that the local industry only takes about 10 000 tonnes of lint which is a far cry from the 30% reserved for local value addition.
Below are excerpts from their discussion…
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TM: Your sector has been concerned about the late rains this season. We imagine cotton farmers are no exception. What has been the impact of late rains so far?
PM: The first crop assessment that is based on the actual hectarage planted began on 24 January 2022 because this can only be done once the planting season has ended.
As you may be aware, the summer cropping season started late as we received the first effective rains on December 15, 2021.
Consequently we had to ask our farmers to plant until 15 January 2022 for the rest of the country and 31 January 2022 for the South East Low Veld.
The prescribed planting cut off time is 25 December.
TM: Before the beginning of the current season you indicated that all inputs would be available ahead of the season to ensure farmers work efficiently. Was the target met?
PM: Cotton inputs are provided by the government under the Presidential Inputs Scheme and I am happy to report that we received the first tranche of inputs, which is required for planting on time.
TM: Although inputs came on time, I believe the late rains could be a challenge for farmers.
PM: Given the late start to the season and the short season that is ahead of us we expect to produce around 120 000 metric tonnes (MT) all things being equal.
To get optimum yields, cotton requires a lot of heat units over six months.
With climate change we are now witnessing a late start of the rain season and early start of winter giving us a very short season.
This is a challenge that our seed breeders must tackle head on.
TM: Cottco still owes farmers some $800 million or so for the 2020 season. What is being done to clear arrears?
PM: We are reliably informed that government is about to release the funds to clear the outstanding farmers’ subsidy money that was part of the producer price, which was meant to stimulate production and ensure that the farmer is cushioned from low international lint prices where we are price takers.
TM: Given the volatility of the Zimbabwe dollar, what is being done to make sure farmers are fully paid on time so that they keep producing cotton?
PM: Funds will be availed on time to ensure that farmers are paid promptly on the spot as has been the practice in the cotton sector for the past 25 years.
TM: In our previous articles about the cotton industry, experts proposed the establishment of micro ginneries. What is your comment on this?
PM: The experts’ views in this regard are in line with our own strategic thrust.
As we replace our very old ginneries we are going to devolve and put up right sized ginneries at strategic rural business centres in line with the government’s devolution thrust and our parent ministry’s rural development mandate.
TM: How is the Pfumvudza programme performing so far?
PM: The crop is still very young.
As a result, we will only be able to assess the performance of the Pfumvudza cotton at a later stage.
TM: There have been concerns previously around accountability. What measures have you put in place to plug leakage in this programme and account fully and timeously?
PM: Our entire cotton production value chain has enough safeguards that ensure accountability.
Our inputs are received and verified with the suppliers, then we issue out our inputs at designated Common Inputs Distribution Points (CIDPs) which are manned by our staff and staff from the regulator, the Agricultural Marketing Authority (AMA) who ensures that bona fide contracted farmers receive the inputs and they also keep a record.
When it comes to the buying and marketing of cotton all buying takes place at Common Buying Points (CBPs) where again AMA clerks will be present to ensure that we only buy from our contracted farmers and are paying the announced producer price.
That stock will immediately go under the control of the banks’ collateral managers who takes total charge of the stock, its movement to the ginnery and also the movement of lint and ginned seed to the customers.
We are one of the few companies that have such stringent controls to ensure accountability.
TM: Finally, you spoke of your intent to start processing internally and possibly make fabrics, what has been the progress there?
PM: This is still work in progress.
But suffice to say that we have started toll processing our lint into yarn with a spinning mill in Norton and we are looking at other entities with idle capacity that we can use while our project to have our own is being implemented.