Cotton farmers default on loans

Over 70 percent of cotton farmers are failing to repay about K1.6 billion ($2.8 million) in loans they took from ginners during the just ended season, a development which is likely to sink the industry despite its enormous potential as a forex earner.

Some ginners have since threatened to pull out if the tendency will continue because they are being forced to run below full capacity.

Cotton Farmers Association of Malawi (Cofam) vice chairperson George Nnensa told Business News on Tuesday that the Cotton Ginners Association of Malawi gave K2 billion ($3.5 million) loan to over 300 000 cotton farmers but most of them have defaulted on the loans. The loans, according to Nnensa, ranged from K15 000 ($26) to K100 000 ($172).

“It is a sad development for both the association and the economy at large. How can you borrow money and never even think of repaying when we all know that borrowing money is also a business to the lenders? How can we even grow the sector with that?” wondered Nnensa.

Nnensa said although this seems to be a challenge every cotton season, last season’s occurrence was exceptional as more farmers defaulted.

“We are faced with the very same challenge every year. But it was made worse this year because the crop did not do well, which forced some farmers to abandon cotton farming and concentrate on maize, as you know most of the cotton is grown by smallholder farmers. If this is to remain unresolved, the crop output is likely going to be negatively affected.

“You might wish to know that most of the cotton seeds grown here are imported from Zimbabwe and Zambia while pesticides are imported from India and China. A lot of farmers cannot afford these farm inputs by themselves, hence the need for financial boosts,” he said.

Cotton production has been going down despite Malawi having the potential to produce 300 000 metric tonnes (mt) annually.

During the 2011/12 season, Malawi produced a record 100 000mt of cotton before output fell by half to 45 000mt the following year.

The output last year was 45 000mt while this year registered a slight increase of 49 000mt.

Duncan Warren—one of the players in the cotton industry who spoke in his individual capacity—said the biggest challenge affecting cotton farmers is access to inputs, to which he proposed the involvement of agro-dealers in order to reduce the problem.

Meanwhile, government, through the Ministry of Agriculture, Irrigation and Water Development, on Wednesday invited cotton players to a meeting with the minister, Allan Chiyembekeza, where they were challenged to explain why the industry is sinking despite enormous efforts to revamp it.

Chiyembekeza confirmed on Thursday having met major players in the sector which included representatives from the Cotton Council, Ministry of Industry and Trade, Admarc, Ministry of Finance, Cotton Ginners Association of Malawi and Cofam.

A source who attended the meeting but declined to be named said Chiyembekeza asked the players to furnish him with a consolidated report of action within two weeks on the issues affecting cotton production.

According to the source, while some players proposed large scale farming and irrigation, others suggested that production of cotton could rise up to 2 000kgs/hectare from the current 600 to 800kgs per hectare if farmers had access to good seeds and chemicals on time.

During the discussion, the source said, it was noted that government’s allocation of K1.6 billion to the Cotton Council has not helped, since farmers did not pay back the loans they took from the fund which was meant to be revolving.

The cotton sector has over the years been guided by the Cotton Development Trust (now called the Cotton Council), a public-private partnership body, that was managing the K1.6 billion cotton fund approved by Parliament in 2010/11 fiscal year, which was meant to be revolving to help cotton farmers buy inputs.

This season, government set minimum prices of K190 per kg and K165 per kg for first and second grades respectively, but the price went up to K220 per kg in some parts of the country.

Cotton is mainly grown by smallholder farmers in the Shire Valley districts of Chikwawa and Nsanje and along the lakeshore.

Some of the major buyers include Malawi Cotton, Great Lakes, Toleza, ETG and Cotton Ginners Southern Africa.

Cotton is the fourth largest Malawi’s export after tobacco, sugar and tea in that order.