Chinamasa unhappy with cotton

Cotton field

By Daniel Chigundu

FINANCE Minister Patrick Chinamasa says he is unhappy with the way farmers are dumping cotton in favour of the high paying tobacco.

The number of farmers who are turning to tobacco farming has been on a sharp increase in the past three farming seasons, and the increase has been attributed to competitive prices being paid for the “golden leaf”.

Tobacco Industry and Marketing Board (TIMB) a few weeks ago announced that 23 000 more farmers have registered to grow tobacco in the 2013/2014 farming season, taking preliminary figures of tobacco farmers somewhere in the region of 87 000.

Just in the past selling season close to 161 million kilograms (Kgs) of tobacco went under the hummer compared to 142 million Kgs sold in the 2011/2012 season.

Minister Chinamasa said the situation cannot not be allowed to prevail arguing that cotton provides more opportunities for the country, than any other crop.

 “…we are most unhappy about what is happening cotton industry; the Minister of Agriculture is going to look into that issue about cotton production. We are very unhappy that traditional cotton growers are migrating from cotton to other crops such as tobacco; this is a very unsatisfactory development.

“It’s something we should not accept, why because cotton throws up more opportunities for us, because it has more value chain. If you are talking about serious industrialisation, it should be along cotton value chain.

“So we would want to see that the growing of cotton is not collapsed and so we are going to formulate and come up with a policy to see that we do something and see what interventions we can make in cotton.

“We have to look at each value chain, who are the players, and what are they doing, who is abusing who and the necessary interventions have to be made,” he said.

Although cotton prices were increased early in the year from a minimum of US$0.35 per Kg to a maximum of US$0.58, farmers still feel the prices are low and not attractive enough compared to US$ 3.50 fetched by tobacco.

Statistic from the Cotton Ginners Association indicate that production of cotton has been on the retreating side failing to meet the 2012/2013 target of 250 000 tonnes and only settling for something in below 145 000 tonnes.

The increase in tobacco farming has not only taken its effects to cotton farming but also the critical maize production.

Zimbabwe recorded its all-time peak of 353 000 tonnes of cotton in 2000 and from that time production has been on a downward spiral.

The downward trend in cotton production and side-marketing by some unscrupulous farmers has also been attributed for causing the collapse of the country’s textile industry.-

Duty increase dangerous

Some imported goods being offloaded

By Daniel Chigundu

 MARKET watchers Tetrad Securities have warned government on the dangers associated with increasing import duty as it embarks on efforts to revitalise the country’s crumbling industry.

In its weekly market watch Tetrad said while clamping down on imports through duty increase will be good for local industry, the move is inflationary and will only serve to increase prices of goods.

“… regarding the influx of imports coming through the normal channel we are of the view that increasing duty is not a sustainable measure to ease the industrial challenges.

“Our view is that with the local industry capacity utilization shrinking, hiking import duty will be inflationary.

“This is explained by the fact that Zimbabwe is a net importer of most goods mainly from South Africa; hence hiking duty will only increase the cost of accessing imports.

“An increase in imports will ultimately see the consumer feeling the impact through increased prices which with static and declining disposable incomes will see citizens becoming worse off.

“The only long term solution to the challenges being faced in the sector is recapitalisation,” said the report.

Tetrad added that recapitalisation is the only sustainable root compared to protectionism in the form of hiking import duty; arguing that retooling will help corporates to buy updated plants and equipment which will improve quality whilst lowering overall costs of production.

Former Prime Minister Morgan Tsvangirai had also expressed concern over what he termed “absolute equipment bought in 1963” which he had said must go.

Economists are also of the view that with the current status quo, Zimbabwe cannot compete with imported goods as the country is relatively a high cost producer compared to regional peers.

Thus recapitalising will be a step in the right direction.

The only impediment however to solving the recapitalisation woes in the sector relates to how long term affordable capital can be unlocked considering the illiquidity in the economy.

Zimbabwe is facing serious liquidity challenges since the adoption of the multi-currency regime in February 2009 at the consummation of the now defunct inclusive government.

So dire is the financial situation in the country that banks are literary refusing to finance businesses on long term basis arguing that they have no capacity owing to the unavailability of the lender of last resort, a role normal played the central bank.

Bankers Association of Zimbabwe president George Guvamatanga has even made it abundantly clear that banks have no money of their own to lend on long term basis highlighting that majority of deposits are “money of call” and can be demanded at any time.

Former Minister of Finance Tendai Biti was in the process of trying to privatise the lender of last resort role when his term came to an end.

Zimbabwe is also said to be lacking clear economic policies and investor protection laws which are critical drivers in attracting foreign capital.