Cotton industry on verge of collapse
The country’s cotton industry risks collapsing due to continued dwindling of output over the past five years, which is costing government billions of kwacha and huge debts shared among the sector’s key players.
A position paper on cotton production produced by the African Institute of Corporate Citizenship (Aicc) shows that key players-farmers, ginners, suppliers and banks, owe each other close to $1 billion (K733 billion).
According to the paper titled Cotton Sector at the Crossroads in Malawi: A Business Case for Government Investment and Inputs, the current system of allowing smallholder cotton farmers to source inputs on their own without any organised input supply system results in all sectors losing out.
“The cotton sector is operating below capacity as result of outstanding debts owed by various actors within the sector which has affected the financial position and overall value chain performance.
Reads the report in part: “Cotton ginners owe various commercial banks about $21 million (K15.3 billion), accumulated over a period of five years
as loan that was used to facilitate procurement of inputs and capital items crop buying and export of lint.
“Cotton farmers are owed about $684 953.43 (K501 million) in premiums from seed production while input suppliers are owed $725 725 301.03 (K531 million).”
Worse still, AICC notes that the country lost a whopping $60 million (K44 billion) in the 2016/17 growing season due to poor production.
The country produced less than 10 000 metric tonnes (MT) of the crop during the 2016/17 season, down from 100 000MT in the 2011/12, a year government injected K1.6 billion to scale-up seed production.
“The decline in cotton production levels to less than 10 000MT in the 2016/17 growing year resulted in loss of foreign exchange in excess of $60 million by government, shrinking of economic activities within the sector and reduction in employment levels.”
“Furthermore, around 150 000 farmers remain underemployed whereas their annual earnings of $26 million is lost. Additionally, there is loss of business, in allied industries such as chemical and seed suppliers due to reduction in production levels of seed cotton.”
“The cotton seed crushers were operating below optimal capacity due to scarcity of cotton seed which is a raw material. The companies have resorted to supplement domestic cotton seed by importing crude oil for further processing, thereby exporting jobs and draining the much-needed forex,” reads the report.
Even cotton seed producers, Quton, confirm that seed production has drastically gone down because not many farmers are into production, which is threatening the industry.
Quton Malawi Limited general manager John Lungu said a number of factors have contributed to this.
“Some of the reasons why cotton has gone down is that there are no ginners interested in supporting farmers with inputs.
“Farmers themselves have also defaulted loans they got from ginners. So, farmers have been left to source inputs on their own,” he said.
In an earlier interview, Minister of Agriculture, Irrigation and Water Development Joseph Mwanamveka said the cotton industry is about to collapse.
He said his ministry has since put up a number of strategies to revamp the industry such as training farmers. n
