LIVINGSTONE MARUFU
The Cotton Company of Zimbabwe (Cottco) is scrambling to raise about ZWL$800m to cover its debt to farmers, Business Times can report.
In trading update for the third quarter to December 31 2021, Cottco’s company secretary Jacqueline Dube said high costs driven by the parallel market exchange rates continued to squeeze the company’s margins.
“Whilst Cottco was able to pay farmers ZWL$3bn from funding raised during the season the company is looking to unlock a further ZWL$800m to clear outstanding dues to farmers after the payment of the outstanding 2020 subsidy by government,” Dube said.
She said the government generously committed an additional ZWL$22 per kilogramme delivered by farmers as a subsidy payment in order to ensure that cotton farming remains viable.
The total subsidy for 2021 was ZWL$2.53bn and ZWL$500m was released and paid to farmers during the period under review.
The balance is anticipated shortly from the Treasury.
Dube said cotton deliveries increased 40% to 116 025 tonnes in the reviewed period from 82 479 tonnes delivered in the prior comparative period.
She said the international lint prices continued on an upward trend.
“Lint prices peaked at 119.2 USc/lbs on November 15 2021 compared to average prices of 56 USc/lb that prevailed in 2020,” Dube said.
The third quarter typically signifies the end of white gold’s buying season.
Dube said Cottco’s ginning schedule was delayed by power availability and 93% of the seed cotton intake had been ginned by the end of December.
Zimbabwean hand-picked cotton is in high demand and the company’s order book exceeds production volumes.
Cottco could not release the operations information pending the imminent finalisation of the outstanding external audits.
Cottco’s Checheche branch in Chipinge South suffered severe damage following a fire incident last year.
Dube said the loss assessor was in the final stages of assessment of the insurance claim which is not expected to be lower than the initial estimates reported in the last trading update.
The late onset of the rains, Dube said, has resulted in a sizable crop being established a month or two months later than normal.
Dube said depending on the length of the season and available heat units this could affect the maturity and fibre length of the output.
Cottco’s ground staff are working with farmers to achieve the best possible results under the circumstances.
The adoption of precision agriculture under the Cotton Pfumvudza/lntwasa programme is also expected to improve the outlook.
The business experienced some disruptions due to an increase in Covid-19 cases at the end of the quarter although the impact was minimised through remote working.
As an additional precaution, Dube said farmer training was conducted through smaller farmer groups.
She said Cottco was reviewing projects for value addition and increased use of technology in its processes to enhance operational efficiencies.
