GOVERNMENT says it is to dispatch direct payments to cotton farmers after the Cotton Company of Zimbabwe (Cottco) struggled to pay them last year.
Up to $1,5 billion (about US$18 million) was outstanding when the 2019/2020 season closed.
The effects of delayed payments have been dire for thousands of farmers who depend on cotton, and analysts warned this week that by leaving the crisis to spiral out of control, the government was cultivating conditions for the collapse of cotton farming in Zimbabwe.
After farmers failed to receive their funds, they failed to recapitalise operations and many failed to return to their fields.
In addition, thousands more took to gold panning, where a robust black market has given livelihoods to over 1,5 million people.
But for Zimbabwe, this massive switch to gold has come at a cost.
About 70% of revenues generated from the bullion is being channelled into the black market, according to a report by Global Initiative.
It has emerged that when the current season kicked off on May 18, payment gridlocks were far from over, compounding a problem that saw them being forced to accept groceries on several cotton markets last year.
As part of its new strategy to revive the cotton farming sector, the government will increase shareholding in Cottco to 51% from 16%, after which it will take over payment.
Cottco, the biggest buyer of the country’s cotton output controls over 90% of the Zimbabwean market.
The new plan was contained in last week’s post-Cabinet minutes, which said: “Pertaining to cotton marketing, the nation is advised that the 2021 cotton marketing season commenced on 18th May 2021. Cabinet noted with concern the continued failure to pay farmers for cotton delivered to Cottco and has decided to institute measures to increase its shareholding in Cottco to at least 51% in tandem with its contribution in the company and apparent support to farmers and the need to spur rural industrialisation. To this effect, the government will be paying farmers directly”.
It was not clear if the government would live up to its promise to change things.
It has already struggled to honour numerous undertakings to expedite the clearance of the $1,5 billion arrears, which has become the biggest threat to a broad plan to revive cotton farming.
In addition to a fixed producer price, farmers last year received US$10 for each bale and 38% of the value of a 200 kg bale in Zimbabwe dollars, while the balance was transferred electronically to farmers’ mobile money wallet accounts.
Economist Takudzwa Chisango said the government must work flat out to deal with the worrying payment delays that are capable of scuppering cotton production in Zimbabwe.
“It’s quite unfortunate that late payment of cotton farmers is now a permanent feature of every marketing season, and more worrying is that cotton farmers are facing a double crisis — the prices are low and the payments are being deferred,” he told businessdigest.
“Sadly, the situation is also going to be aggravated by recent policy announcements through SI 127 of 2021 as these cotton producers are more likely to succumb to exchange rate losses. These late payments make them vulnerable to inflationary headwinds which we are already seen being induced in the market by this statutory instrument,” Chisango warned.
Last year Cotton output was 70 000 metric tonnes and is expected to reach 150 000 metric tonnes this season.
Total output was 76 691 000 kg in 2019.
Cotton production in Zimbabwe declined to an all-time low of 32 000 tonnes in 2016, from 84 000 tonnes in 2015, and 143 000 tonnes in 2014, after a decade-long spell of perceived lower prices averaging US$0,30 per kg.
From 2015, the government moved in to start sponsoring a free-inputs scheme to boost cotton production through Cottco, which has seen nearly 400 000 farmers constituting 90% of total cotton farmers benefit.