Report on the Zimbabwe Cotton Marketing Season: The Farmer’s Experience

Foreword

The fundamental role that agriculture plays in Zimbabwe’s development has long been recognised, with sustainable development of agriculture being viewed as a key source of both industrial growth and structural transformation. Propelling this sector and empowering contributors along its value chains requires strong political commitment; and as officials elected by the people of Zimbabwe to protect the Constitution and to represent them, we are tasked with crafting policies that tend to our current local conditions but that are also forward looking, and consider the global context. This report, therefore, speaks specifically to the goals of our national development blueprint, Vision 2030, which articulates improved agricultural productivity and the movement of Zimbabwe to an upper middle-income economy as key goals. It also considers the emerging functions of agriculture in a globalised world of increasingly integrated value chains, climate change and rapid technological and institutional innovation.

Specifically, this report looks at the current experience of the Zimbabwean cotton farmer, in the face of inability to access funds from cotton sales, dwindling cotton production, and a disintegrating local cotton industry. It hopes to shed light on existing challenges within the sector, and the ways in which policy intervention can shape the current fortunes of the industry itself and the thousands of families that presently operate within it.

Recent reports of growing disaffection and despondency of cotton farmers emerging from the Cotton Producers and Marketers Association of Zimbabwe require a serious and measured but swift response given the value placed on cotton as a national strategic crop in the face of the threat of food insecurity. While a broader and deeper examination of the policy framework is required, short-term interventions are needed to halt further deterioration of the sector as well as any circumstances that materially disadvantage close to half a million Zimbabwean cotton growers.

It must be noted from the outset that this report is by no means an exhaustive examination of the industry; it serves as a stopgap measure to address pressing concerns as expressed by farmers. It goes without saying that with the shocking decline in national output of seed cotton, a cohesive stimulation strategy for the industry is indeed required but can only follow a more comprehensive study, and the participation of the entire stakeholder universe.

Introduction

The Cotton Producers and Marketers Association of Zimbabwe approached the Parliamentary Committee for Lands, Agriculture, Water and Rural Resettlement with two primary concerns.

Current Inability to access Funds on account of Bulk Line Suspension

In the first instance, between 2009 and 2016, Zimbabwean cotton farmers were always paid their full amount in United States Dollars cash for their produce. This model was changed following the adoption of the National Financial Inclusion Strategy where farmers were coerced to either open bank accounts or electronic wallet accounts. Opposed to this new method, many farmers felt they were either threatened or blackmailed by those in positions of authority, and following a serious mobilisation exercise, they grudgingly opted for electronic wallet accounts because of the long distances to the nearest bank and the lack of Point of Sale (POS) machines in rural shops. This resulted in all farmers, over 400,000 joining the e-wallet platform.  Regular fluctuations in the exchange rate, increasing inflation as well as a rampant parallel market for foreign currency meant that the earnings of farmers have been wholly unpredictable at best.

Most recently, the Permanent Secretary for the Ministry of Information and Broadcasting Services issued a statement suspending what are called ‘bulk lines’, then followed by the Reserve Bank of Zimbabwe’s directive leaving over ZWL300 million frozen in The Cotton Company of Zimbabwe Econet merchant lines. This means cotton farmers remain unpaid to date, and many who live hand to mouth are in a desperate situation requiring urgent redress. According to previous submissions by the regulator, Agricultural and Marketing Authority (AMA), The Cotton Company of Zimbabwe enjoys around 90% market share.

Volatility in cotton pricing

Secondly, it is custom for the Minister of Lands, Agriculture, Water and Rural Resettlement to announce prices before the Cotton buying season, and in most instances cotton is then bought straight away, however this has not been the case with the 2020 season. Consequently, farmers have been left in limbo and without any explanation as to the changes in approach. By their account, they are not receiving any satisfactory responses from the authorities. This is in the context of what is effectively ‘retrospective pricing’ due to inflationary pressures that diminish the value of their earnings in a short period of time.

Overwhelmed by uncertainty and in the absence of any cogent answers from the authorities, the Cotton Producers and Marketers Association of Zimbabwe sought our intervention, and consequently Members of Parliament embarked on a fact-finding mission to see first-hand the plight of farmers and develop recommendations to break the inertia. This report takes a closer look at these two specific issues that have a major impact on the livelihood and morale or farmers.

Context

The cotton industry in Zimbabwe has a complicated history that has affected both the modus operandi and perceptions of the industry. Ever since the formation of the Cotton Marketing Board (CMB) in 1969, the industry has been dependent on thousands of small-scale communal farmers and a few commercial farmers producing rain-fed dry land cotton. These two groups of farmers produced cotton on one to ten hectares for small scale communal farmers and ten to one hundred hectares for commercial farmers. The above scenario has resulted in the national production reaching a maximum of 350, 000 tonnes of seed cotton over the past 49 years.

The deregulation of the cotton sector as part of the structural adjustment programme of the 90s (ESAP) saw the lifting of the CMB monopoly which attracted a number of entrants to the cotton primary production sector.

In many ways, the industry has gone full circle. With respect to production, from a record high of 353, 000 metric tons produced in 2000, the national cotton crop dwindled to as low as 27,000.  On the back of organised input support, national production increased once again exceeding 350,000 in 2012.  However, recently the crop has been on a free fall, dropping to its current output of 74,000. This drastic drop has been largely due to low producer prices, side-marketing, inputs diversion and climate. With the volatility of international lint prices, cotton farming has become a more and more challenging enterprise whose viability is under threat in Zimbabwe. It is ever more important, therefore, to ensure that the entire value chain is incentivised to increase productivity, and to act ethically in so doing.

Methodology   

A simplified approach was adopted in light of a more significant and wider impending inquiry that will cover the complete spectrum of stakeholders and investigate a broader set of issues. As such, The Ministry of Agriculture and the Ministry of Finance were not directly engaged. It is hoped that this report will in part provide basis of this wider investigation, in which both Ministries will play a significant role.

As such, in undertaking this enquiry, the Committee primarily engaged in interfaces with farmers and cotton companies.

Cotton Farmer Interfaces

2 July 2020

Nemangwe Business Centre, Gokwe South

The Committee had interfaces with cotton farmers at Nemangwe Business Centre in Gokwe South in the morning of Thursday the 2nd of July. It met various cotton farmers and received oral submissions from them and officials from Cottco, Zimbabwe Cotton Consortium, Southern Cotton, AMA, Chief’s Representatives and the Executive of Cotton Producers and Marketers Association of Zimbabwe.

2 July 2020

Chitekete Business Centre, Gokwe North

In the afternoon of Thursday the 2nd of July, the Committee proceeded to Chitekete Business Centre in Gokwe North and received oral submissions from cotton farmers and officials from Cottco, Zimbabwe Cotton Consortium, Southern Cotton, AMA and the Executive of Cotton Producers and Marketers Association of Zimbabwe

Submissions

Chitekete Business Centre Submissions

Mr. Edison Kalungwe, a celebrated and top farmer from Chitekete in Gokwe North managed to produce a whopping 224 bales on his plot.  He has five wives and thirty children whom he takes care of and most of whom are still in school. When the price of Cotton was announced he said he was extremely satisfied, and his family celebrated. Government had announced a producer price of ZWL43.9/kg translating into US$1.75/kg. An average bale weighs around 220kgs meaning he was going to rake in over ZWL$2 million or US$85,000.00.  In the end, the tears of celebrations were turned into tears of anger and desperation. If he were to be paid on the 2nd of July, the money remains the same in ZWL value but has drastically depreciated in US$ terms which is the currency used to benchmark almost all goods in the country.  From US$85,000.00, he now can only get US$31,000.00 at the 2nd of July’s interbank rate, let alone the day Cottco decides to pay him. He described this as pure witchcraft.”

We were confronted by Mr. Japheth Ngwenya who said after the producer price announcement, he went to Cottco and they did his calculations, at the day of announcement, his money was sufficient to purchase a 7 tonne Truck, 10 cows, a tractor and pay university fees for the whole year for his daughter and school fees for the year for the other 5 children but as of the 2nd of July 2020, the money was now only sufficient to purchase a third of his previous budget.

•    Some farmers then highlighted that it may be more profitable to sell Presidential Inputs and pocket money instead of toiling for almost 6 months with nothing to show for it.

•    The farmers are unsure as to the bank charges in the event that they were to open bank accounts and would rather not pursue that option since currently it is impossible to withdraw cash from financial institutions.

•    Farmers argued that their local rural councils that rely on cotton are on the verge of bankruptcy and would only be resuscitated if cash flows improve from improved levy collection.

•    They also noted that rural transporters that had parked their trucks and tractors would be given transportation contracts to move cotton from fields to buying points thereby increasing the network of both local economy and employment opportunities.

Nemangwe Business Centre Submissions

•    At Nemangwe Business Centre, farmers indicated that they do not want the e-wallet method of payment (commonly referred to as Ecocash due to the platform’s market dominance). Farmers categorically stated that they prefer cash as the only method of payment. They want cotton payments to be done in hard US$ cash payments and at the very least, the payment must track interbank rate.

•    A local farmer, Mr. Goodzi, was outraged by the treatment of farmers, going so far as to accuse committee members and all authorities of having a good life at the expense of farming communities.

•    Mr. Raymond Tonhorayi, a young farmer, expressed concern that cotton farming is now neither appealing nor lucrative and is a major cause of rural to urban migration as youths search for greener pastures. He also attributed the spiraling of theft cases and other misdemeanors to the idleness of the youth, who are no longer interested in cotton farming.

•    Mr. Mahachi, a successful cotton farmer, was clear that cotton farmers are only neglected because cotton farming is a venture for poor and marginalized citizens. He was of the opinion that if high ranking members of the society, especially Government Ministers and Senior Government Officials were to farm cotton as they do tobacco, prices would be fair and appealing.

•    We met an elderly woman, Mrs. Masukume who narrated how they moved to Gokwe in search of better yields in the 1970s and cotton was a huge venture but now they are the laughing stock among the youths who have now turned to crime. She was adamant that there is a deliberate effort to disempower farmers.

•    The farmers argued that if prices were correct, cotton companies and other enterprises would employ from their cotton communities and business activities would have been revived in the rural areas with shops that had closed down reopening.

•    Food security would be enhanced for the rural communities who in the past have been forced to sell maize to finance their cash flow needs but would be able to finance their day to day needs from cotton proceeds.

Findings

·      Policy inconsistency amongst different Government departments is the major cause for distrust of the financial sector. There is no clear policy framework from the Government on how to manage the policy consistency.

•    Farmers have lost their life savings more than 3 times within a decade and without recourse. As such, the banking system is distrusted and now viewed as a method of stealing from poor farmers and enriching the crooks.

•    Farmers have consistently complained that they are being overcharged by shop-owners and other service providers who demand a punitive premium on their pricing for accepting the use of e-wallet funds.

•    The 2020 marketing season has seen the price being announced followed swiftly by the e-wallet merchant lines suspension, just as payment to farmers commenced. This has resulted in a total standstill to the cotton marketing season and cotton farmers are stranded as no cotton companies are disbursing payments given their e-wallet method of payment to farmers have been suspended by the Reserve Bank of Zimbabwe.

•    Farmers are practically being robbed as the country fails to recognise the impact that our current hyper-inflationary situation has on them. In effect, they are being paid using retrospective prices that would have been gazetted several months prior, resulting in immeasurable losses in value of their income before they have even received any payment. This has brought untold suffering to this marginalised group of members of the society.

•    Farmers resort to side market their crop as a desperate measure to recoup expenses and this greatly affects the financiers of the Presidential Input Schemes.

•    Cotton farmers are being both neglected and abused.

•    While the Reserve Bank may have noted some serious abuse of the e-wallet system and rightfully imposed a suspension, the blanket ban has resulted in grave unintended consequences effectively stalling the process of cotton buying and the ability of farmers to earn an honest income. 

Recommendations

·      The Committee strongly recommends that The Minister of Lands, Agriculture, Water and Rural Resettlement in consultation with relevant stakeholders, reviews the price of Cotton in line with market dynamics since the last price announcement. This process must be accomplished within fourteen (14) days of presenting this report to Parliament and every farmer who had received an advance payment must receive an adjustment according to the new and current price. A workable and permanent framework must be put in place before 2021 buying season to ensure that prices are indexed to the global lint price.

·      The Committee directs all cotton companies registered with AMA to approach all interested banks in Zimbabwe and initiate the process of account openings for every farmer on file within 3days of presenting this report to Parliament. This should be done at no cost to the farmer.

·      The Reserve Bank of Zimbabwe must absorb the cost of account openings and ATM/Debit cards issuance for the farmers and must waiver charges for transferring money from farmers accounts into their registered e-wallet accounts.

·      The Reserve Bank of Zimbabwe must within 48hrs of presenting this report to Parliament, unfreeze over ZWL$300million trapped in the Cotton Company of Zimbabwe Econet merchant lines which is meant to pay for farmers’ cotton. RBZ may institute investigations into the past usage of COTCCOs merchant lines and if any abuse is detected, punitive and corrective measures must be taken while at the same time protecting all innocent farmers.

·      The Ministry of Finance must with immediate effect; issue a waiver to all cotton buying companies registered with AMA not to deduct 10% Withholding Tax from the payments to the cotton farmers.

·      The Committee recommends that disbursement of funds to farmers is initiated and completed within 24hrs of selling of their bales.

Conclusion

This report concludes, with no reservation, that the above interventions need to be made, forthwith, to correct grave policy oversights made in recent days. It is unacceptable that no explanation has been offered to mostly poor and vulnerable farmers who have been stranded without pay on account of the decision to suspend bulk mobile lines.

The shortchanging of our poorest and most vulnerable citizens could not be condemned more categorically by the Committee. Farmers have lost confidence in Treasury’s handling of their payments to the extent that even if Prof. Mthuli Ncube were to employ his famed ‘Sophisticated Algorithm Formula’, the farmers’ appetite for ZWL without attempting to at least benchmark to the recently adopted Reuters Forex Auction Platform would most likely be rejected unless there is an unfair aggressive mobilisation and manipulation.

The observations made on the ground were deeply concerning to all Members of the Committee as we saw first-hand the financial and material hardships faced by farmers as a result of recent policies and decisions. There is a sense that the Executive and the broader government are out of touch, and unconcerned with the suffering of its most vulnerable citizens. The Government would be ill-advised to overlook these sentiments as the prospect of over 400,000 disillusioned and marginalised households throughout the country with an average of 4 adult members per household could have very real consequences in the ballot box.

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