ZIMBABWE’S cotton industry value chain could be brought to its knees after it emerged that the sector is exporting 90% of lint, leaving processors with insignificant quantities, a new report by the Confederation of Zimbabwe Industries (CZI) has shown.
BERNARD MPOFU
According to a new CZI report titled Pricing Distortions as a Constraint to Smooth Value Chain Operations: The Case of Cotton Lint in Zimbabwe, there is an outcry over lint shortages faced by local spinning factories and this has led to problems in the downstream industries.
Experts say the pricing issue, which can be traced to the general exchange rate distortions in the country, remain at the core of having enough cotton lint for the well-functioning of the cotton-to-clothing value chain.
“CZI engagements with different players in the value chain have shown that there is a discourse and dialogue between spinners and ginners on the marketing of lint and the pricing model to be used. Spinners cited that about 90% of the lint is exported, leaving them with about 10% in a season (from May to September) which is insufficient to keep them spinning all year round. For example, during the 2020 season 45 000 metric tonnes (MT) of lint was exported and 4 500 MT was left for local spinners. In the 2021 season, 56 000MT of lint were exported and 6 000 MT was left for local spinners,” the report reads.
“The need to balance between quantities that can be exported and what can be left for local value addition was anticipated by policy. According to literature as well as players in the cotton value chain, there is a policy requirement that about 30% of the lint should be reserved for local players, while the remaining 70% can be exported by the ginners. Cotton lint had to be controlled to avoid the collapse of the textile industry.
“This means that the current practice goes against what policy had anticipated, calling for the need to interrogate the main reasons for this development. It is surprising, however, despite the general acknowledgement that there is a 70:30 ratio for exports and local usage of lint, all efforts to locate the policy statement or the regulations which specifically provide for this were not successful. In addition, engagements with spinners, ginners, the ministry of Industry and Commerce and the Agriculture Marketing Authority to get reference to the specific policy document or regulations through which this could be enforced were not successful. It therefore remains unclear whether this was a policy pronouncement which was not later followed by legislation and whether it was a temporary or permanent measure. This absence of the legal provisions could be what is emboldening ginners to disregard the provision.”
The report says while the resolution of the exchange rate remains a priority for both monetary and fiscal policy, there is an urgent need for an interim mechanism that is intended to bail out both the ginners and spinners by cushioning them against the effects of the parallel market premium.
Official figures show that the cotton value chain provides economic and livelihood synergies through vertical and horizontal linkages with the textile, apparels, yarn, fabric, oil processing, and stockfeed, among other industries.
According to the United Nations Conference on Trade and Development (UNCTAD), cotton production supports the livelihoods of over 500 000 families directly and is principally grown
in marginal low-rainfall areas of Natural Region 4. Cotton is also one of the cash crops in Zimbabwe that bring foreign currency and support job creation at different nodes in the value chain. Cotton and yarn exports from Zimbabwe increased from US$30.1 million in 2020 to US$85.7 million in 2021.
Lint is the major ingredient of the downstream value addition manufacturing processes in the textile industry. Spinning is the first process of the textile value chain and involves the conversion of cotton lint (produced at ginning), into spun yarn.
Official figures show that Zimbabwe has a ginning capacity of up to 700 000 metric tonnes per year against the yearly production of 195 991 metric tons and 101 000 metric tons in 2020/21 and 2019/20 season respectively.
