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March 08, 2011

Chinese firm to provide US$500 million for cotton cultivation in Zimbabwe

by George Chisoko

Massive seed cotton production is anticipated in the 2010/11 growing season after the Cotton Company of Zimbabwe)(Cottco) and Chinese firm Sinotex struck a US$500 million deal to finance local production and purchases through a contract growing scheme.

This should be good news to farmers who have struggled to produce seed cotton, owing largely to Cottco's inability to grow the inputs scheme to cater for a huge pool of farmers.

The deal is being bankrolled by Ch-na Development Bank, which has already provided US$10 million as pre-shipment finance for the sale of lint by Cottco to Sinotex.

Cottco managing director, Mr David Machingaidze, was not at liberty to divulge details of the partnership, but impeccable sources said that the memorandum of understanding between Cottco, Sino-tex and CDB would be signed anytime this month.

The deal would enable Cottco, which presently contracts 200 000 farmers to grow seed cotton, to provide inputs support to additional 100 000 growers. This should result in a massive increase in seed cotton output and have a similar effect on lint production. There would also be job creation for about 5 000 people, especially during the cotton intake period.

Industry sources said in the partnership, Sinotex would, through CDB, provide the money for Cottco's operations while in turn Cottco, will provide local knowledge, the farmers and skills in risk management but would also hugely benefit through technology transfer.

Chinese farmers produce at least 2 000kg of seed cotton per hectare against local farmers' yield of 800 kg.

The benefits accruing from the partnership will be more than just inputs provision to farmers but also grower training, technology transfer in that the Chinese will bring their farming methods, which should hopefully increase local seed cotton yields.

"This is a massive economic empowerment project for our farmers. We have always had the farmers but they did not have full access to inputs for production. It is an exciting partnership in which we will use Chinese money to grow our capacity,'' said some sources close to the deal.

Cottco will sell all the lint from the contracted crop to Sinotex and the indicative quantity to be sold under the agreement is 5 000 tonnes. From last season's seed cotton production of 300 000 tonnes, Cottco was able to extract 120 000 tonnes of lint. Sinotex has the capacity to buy 800 0000 tonnes of lint, which is about six times more than national production.

Sinotex's capacity is thus a big challenge to Zimbabwe farmers to increase their production. Cottco has the potential, through its input scheme, of producing about 500 000 tonnes while the nation cotton production potential has been estimated at around 1 million tonnes.

The huge financial injection into Cottco's operations should go a long way towards making local farmers viable.

Cottco, which has suffered from side marketing of the contracted crop, has however, been able to achieve an inputs support recovery rate of between 65 and 95 percent last season, as farmers began to understand the importance of adhering to contracts.

The cotton crop is largely grown under contract with ginners who provide inputs and buy the seed cotton. From a high of 330 000 tonnes produced in 2004, the national crop dwindled to 207 000 tonnes in 2009 largely due to inadequate investment in inputs owing to the risks associated with funding cotton production.

It is hoped that the partnership between Cottco and Sinotex will result in an increase in seed cotton production as a result of the further increase in the provision of inputs.

The Herald

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