Cotton lint policy framework explained

Word from the Market
Peter Mudzamiri

COTTON is largely the second most important cash crop in Zimbabwe. It is cultivated by thousands of smallholder farmers in the summer rainfall growing season (November to April). The cotton plant is grown for a host of purposes and products.

Cotton lint refers to the fibrous coat that covers the cotton seed. In essence, cotton lint is ginned cotton. The lint delivered to the spun industry usually contains a variety of extraneous materials, including seed pieces, dust and motes (trash). It is then transformed into yarn through the spinning process. The yarn is then further processed by weaving into the required fabric or cloth.

The spun industry heavily relies on cotton ginners for the provision of adequate and quality lint. Excess lint is also exported by ginners. The Government, therefore, seeks to balance the interests of the viability of ginners on one hand, and the access to raw materials by spinners, on the other hand, through the necessary policy and legislative interventions.

Cotton is ordinarily grown under contract farming arrangements where contractors (ginners) supply production inputs (seed, fertiliser and chemicals) to farmers on credit. At harvest, the contractor purchases back the contracted cotton, deducts costs of the inputs and pays the contract farmer the remaining balance. In 2015, the Government introduced a free inputs support scheme in order to revive and boost cotton production.

As the regulator, the Agricultural Marketing Authority (AMA) recognises the importance of cotton as a vital crop for sustaining rural livelihoods in Zimbabwe, especially for the smallholder farmer, as it is drought-tolerant and contributes immensely to income generation, employment creation and foreign currency generation. It is also a source of raw material for the oil expressing industry, as well as the spun cotton and weaving industries, in addition to supplying the stockfeed manufacturing industry with cotton cake.

Lint policy framework

AMA is the regulator of the production and marketing of agricultural produce and products in Zimbabwe. AMA’s mandate extends to the control of the marketing of cotton and cotton products, including playing a supportive role in the export of cotton lint.

It is important for stakeholders to appreciate the policy framework for cotton lint as it relates to export and local industry requirements.

The current policy framework is designed to ensure that, while the country earns the much-needed foreign currency through the export of lint, the local industry must also be prioritised to enhance economic development.

The current Government policy stipulates that 30 percent of lint production by ginners must be reserved for the local industry, while 70 percent can be exported.

The Ministry of Agriculture, Lands, Fisheries, Water and Rural Development and that of Industry and Commerce, as well as AMA, implement this policy through the issuance of export permits and support letters.

The spinners negotiate volume-based contracts with ginners to secure their lint requirements. Parties freely negotiate their terms and there is currently no price regulation. In general, payment terms often follow the production prices.

The Government pegged the producer prices for the 2021/2022 season for cotton at US$0,30 plus $32,50/kg.

Thus, largely, farmers were paid in foreign currency.

There was an impasse between the ginners and the spinners with regard to the payment modalities, where the former preferred payment in hard currency. As per the norm, engagements were done to find common ground and, as per policy, AMA has always ensured that the local industry is catered for in terms of lint reservations.

Lint production statistics

In the 2021/2022 agricultural season, 11 companies owned 21 ginneries with a total ginning capacity of 599,600 tonnes of cotton. Total lint production for 2019/2020, 2020/2021 and 2021/2022 seasons was 31 443, 37 180 and 22 978 tonnes, respectively, out of which 12 000, 11 154, and 6 893 tonnes were reserved for the local spinners, as per the current policy.

During the 2021/2022 season, despite 7 000 tonnes of lint being reserved for the local spinners, by early December 2022, only about 800 tonnes, representing 11 percent, had been taken up by the spinners.

Continuous engagements key

AMA remains committed to assisting all stakeholders in the cotton value chain for the benefit of mutual interests and to spur the economic development of the country as underpinned by the National Development Strategy 1.

◆ This article was written by Peter Mudzimiri, AMA head of compliance. It promotes market-driven production. Feedback: [email protected] or WhatsApp/Call +263781706212