Cotton Ginners Board has said high loan default may compel them to stop giving loans to smallholder cotton farmers.
The board’s chairperson, Amos Chipungu, said in an interview on Wednesday they are failing to recover their loans largely due to low cotton output this year.
He said: “As of Friday last week, ginners had bought about 13 000 metric tonnes [MT] of cotton and it is doubtful if we are going to reach 15 000 MT as the season has already come to an end.
“This is against the ginners’ capacity of 250 000 MT. This means that no ginner is going to make money because operational costs are also high in the sector.”
Chipungu said out of eight ginners, four—Great Lakes Cotton Company Limited, Toleza, Malawi Cotton Company and ETG—quit the market this year.
This means that the four ginners did not recover their loans given to farmers.
“The situation has left ginners with no money and no possibility of recovering their loans amid an environment of high operational costs. We are yet to establish the amount of money owed to ginners,” he said.
Cotton Farmers Association of Malawi (Cofam) president George Nnesa said because of low output and diseases which had attacked the crop, many cotton farmers are finding it hard to repay the loans as they have no other means of earning an income.
“As farmers, we are stuck. We just hope that cotton council will engage us together with the ginners on the way forward otherwise our livelihoods are at risk,” he said.
Nnesa said the development has forced some farmers to opt out of cotton farming business, a move that will worsen the situation for ginners in terms of loans recovery.
Cotton Council of Malawi interim secretary Bartholomew Ngauma while confirming the developments in the sector, said they have engaged the ginners on the way forward.
He said only a few ginners had issued out loans this year as some opted out due to last year’s scenario in which farmers had defaulted K1.3 billion.
“We are currently discussing with them how to deal with this situation. We understand there are challenges in the sector both for farmers and the ginners.
“We are now trying to address how we can deal with the issue of default and inadequate inputs which has contributed to low production,” said Ngauma, who is also director of crops in the Ministry of Agriculture, Irrigation and Water Development.
Cotton is one of the high value crops that has a number of benefits along its value chain.
Figures show that smallholder farmers currently produce between 800 to 900 kilogrammes per hectare.
This year, Malawi is expected to produce less than 20 000 MT of cotton.