Govt takes controlling stake in Cottco
TINASHE MAKICHI
Government is set to take over the majority shareholding in cash strapped Cottco after the country’s largest cotton producing company failed to pay farmers for cotton delivered, a Cabinet minister has said.
Information Minister, Monica Mutsvangwa said the government will increase its shareholding in Cottco, which is suspended from trading its shares on the Zimbabwe Stock Exchange, to 51% from the 16% stake currently held by the government’s pay as you go pension scheme, National Social Security Authority.
The government believes the move to take over the majority shareholding in the troubled entity would be a major step towards reviving the country’s cotton sector, which has over the years been facing severe challenges including lack of adequate funding after traditional financiers cut funding due to side marketing as well as abuse of imports.
“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,” Mutsvangwa said yesterday at a post Cabinet briefing.
Mutsvangwa said Cabinet has also agreed to increase its shareholding in Silo Foods Industries to 74% so as to guarantee availability of the basic commodities.
Mutsvangwa said Cabinet has also approved proposals on the rationalisation of subsidies in a bid to consolidate the government’s fiscal consolidation measures.
Government is currently financing several programmes in the agriculture sector including farm mechanisation, inputs and selling price support.
Crops under such support include maize, soya beans, cotton and wheat.
“Cabinet considered and approved proposals on the rationalisation of subsidies as presented by the Minister of Finance and Economic Development, Mthuli Ncube,” Mutsvangwa said.
She said such a framework was expected to ensure subsidies meet a specific public policy objective to remedy an identified market failure and are of the minimum size necessary to achieve such an objective.
Mutsvangwa said unmitigated and unbudgeted subsidies will need to be curtailed going forward as they undermine the government’s fiscal consolidation objectives under the National Development Strategy 1, while also crowding out critical developmental expenditures.
Subsidies that are being provided will have explicit identified funding sources with costs adequately quantified to determine fiscal sustainability.
The government has supported the agriculture sector with a subsidy component on both inputs and specific crop producer prices mainly to address food self-sufficiency, improve the welfare of the peasant farmers and make mealie-meal affordable to disadvantaged groups.
Mutsvangwa said government targets to provide input support for the vulnerable households to the tune of ZWL$4bn for grain production under the Presidential Inputs Scheme while banks provided funding for the Command Agriculture programme for the 2020/2021 farming season.
The government has continued to support the productive sectors of the economy by extending tax concessions as a way of improving viability, productivity and competitiveness. As a result, the government has foregone about US$2.3bn through tax incentives during the period 2011 to May 2019, Mutsvangwa said.
