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The Competition and Tariff Commission has urged the Ministry of Agriculture, Mechanisation and Irrigation Development and the Agricultural Marketing Authority to put in place a pricing model for seed cotton to ensure fair producer prices for contract farmers.
The commission made the recommendations after concluding investigations into allegations of unfair practices by the Cotton Ginners’ Association of Zimbabwe resulting in some farmers opting to leave cotton growing for other crops. The investigations followed a complaint by the Zimbabwe National Farmers’ Union in July 2010 alleging that cotton merchants and ginners, through the association, were engaging in collusive agreements that resulted in them operating like a monopoly.
In a statement, CTC director Mr Alex Kububa said a pricing model would help improve and promote competition in the cotton industry.
“The pricing model should take into account the total value of seed cotton sold by farmers and should not only be based on market values of cotton lint but should also take into account the value of other cotton by-products, such as cotton seed, cotton oil and cotton cake,” he said.
The issue of pricing has continuously been a sore point in the cotton industry, with farmers remaining resolute in their push for higher prices while ginners argued that they were price takers since cotton prices were determined internationally.
Last season farmers were forced to withhold their crop to force ginners to increase cotton prices but in the end, most farmers had to sell a 200kg bale of cotton for as little as US$60.
“The main issues that arose from the representations made at the stakeholder hearings related to collusion on the selling of price inputs used in the growing of cotton and the selling price for the produced seed cotton and the effects of Statutory Instrument 142 of 2009 (Agricultural Marketing Authority Seed Cotton and Seed Cotton Products) Regulations of 2009) of institutionalising seed cotton buyers and contractors into a powerful cartel against cotton farmers,” Mr Kububa said.
He said although actions by the cotton ginners constituted unfair business practices in terms of the Competition Act, they had, however, been acting in accordance with the SI142 of 2009.
“The commission has therefore recommended to the Ministry of Agriculture, AMA that Statutory Instrument 142 be reviewed and amended to remove those provisions that promote anti-competitive collusion among members of the CGA, and thus to be in harmony with the country’s competition law and policy,” he said.
Mr Kububa added that the commission had also ordered the CGA to stop setting uniform unfair prices of seed cotton bought from farmers which had resulted in the restricted production and distribution of cotton.
He said this had contributed to the low cotton production as farmers were frustrated by the low and uncompetitive prices of seed cotton offered by ginners leading to some farmers opting to move out of cotton growing to other crops such as tobacco.
“The facilities available for the production or distribution of cotton were also limited due to the fact that members of the CGA agreed on the prices to charge farmers on the inputs, and usually the prices were too high for the farmers. The CGA also agreed on the inputs package to give to the farmers, which resulted in the farmers being given less cotton growing inputs than they should have got,” he said.
He said CTC had also recommended that the Cotton Marketing Technical Committee established under Section 3 of the Agricultural Marketing Authority Regulations, 2009 needed to be restructured to ensure that its membership was balanced between cotton farmers and ginners to avoid dominance, and possible abuse by cotton ginners.
“The committee should also perform its statutory function of ‘ensuring that fair trade practices prevail in the cotton industry’ in an objective and transparent manner in consultation with the commission,” he said.
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