In Malawi, agriculture is the dominant sector with agricultural products accounting for about 90 percent of Malawi’s exports and nearly 80 percent of the people work in the agriculture sector, according to the Ministry of Agriculture and Food Security.
Crops of potential value cultivated include tobacco, tea, sugarcane and cotton, which is mainly grown in the southern districts of Malawi. It is estimated that cotton production provides incomes, along its value chain, for about 200 000 farming families grown on about 50 000 hectares in cotton growing areas.
Experts have, over the years, argued that the crop has huge economic potential and could rake in substantial amount of foreign exchange, in excess of $500 million per annum, more than what the country gets from the main export crop tobacco, if the country gets down to serious business.
Almost all the cotton grown in Malawi, about 95 percent, according to available figures from the Cotton Development Trust (CDT), is exported as raw material with only five percent processed locally, largely because of the country’s insufficient processing capacity.
In many parts of the world, cotton is grown in large plantations, but in Africa and, Malawi in particular; it is almost exclusively grown by smallholder farmers.
The crop is grown alternately with other crops such as maize, soya or groundnuts, reducing leaching of soils and the occurrence of pests. More often, cotton is a complementary cash crop—it is grown for sale, alongside food crops grown in subsistence farming.
About eight percent of the cotton traded in the world market is harvested in sub-Saharan Africa, including Malawi.
Over the years, Malawi’s output for the crop, considered one of the crops to be taken seriously in terms of diversifying away from tobacco, has been fluctuation depending on a number of factors. On its part, government has engaged in a number of ways to ensure that cotton production increases, but it seems the interventions are not bearing any fruit.
For instance, from a high of about 100 000 tones in 2012, cotton production the year after dropped by 58 percent to 42 000 tones, and indications are that this year’s output will even be lower than of last year because most of the farmers did not manage to grow the crop.
In 2010/11 fiscal year, the Malawi Government through Parliament approved a K1.6 billion Cotton Development Fund meant to be revolving to assist cotton farmers with their inputs.
Before the fund was set up, individual ginners were sponsoring farmers but the resources were not adequate enough to mobilise farmers to grow cotton.
Cotton experts calculated that during the first year of the fund, it was projected that the country would produce 200 000 tones of seed cotton.
“On the basis of the fund and projected volumes, K8 per kg was worked out as cost of production. Every ginner was expected to pay back into the fund K8 per kg on volumes procured and delivered in the ginneries in order to replenish the fund,” said an official from one of the cotton ginning companies.
However, according to the expert, the season was not good as only about 50 percent of the projected volume was realised; hence, a reduction of the fund money. In the year, 96 000 tones seed cotton was produced and only K768 million was realised, leaving a shortfall of K832 million.
The arrangement was that every ginner would repay the funds before the beginning of every season.
However, it was noted that one of the ginners, which has 30 percent market share, had not paid the levy money, despite being given a buying licence for seed cotton for the following season. One of the conditions was that any ginner who does not pay its share would not be given a licence.
The levy money owed, excluding interest was in excess of K231 million, which would have gone into the procurement of inputs for the 2012/13 crop season. And because this shortfall, inputs in the following year were out of reach of most of the growers because the ginners did not have enough money to support the farmers; hence, a drop in output.
Besides that, the ginner had also not paid the 25 percent deposit money, about K57 million, into the fund and made no contribution towards pesticides for the 2012/13 season which was a requirement for one to get a buying licence.
“This has put the cotton development fund at risk as government is letting such ginners unpunished by giving them a buying licence at the expense of taxpayers’ money and the industry at large,” said the official, who did not want to be named because he is not authorised to speak on behalf of the ginners.
For example, due to this non-payment, inputs such as seed and chemicals were procured rather late, affecting the current hectarage, putting the whole fund into disarray potentially reducing foreign exchange that the country would have earned from the crop.
With fewer volumes, it also meant less money circulating within the smallholder farmers in the cotton growing areas.
Aumel Jamu, a long-time cotton grower from Kandengwe Village, T/A Nsamala in Balaka, is one of the many farmers who has suffered the consequences of high cost of inputs because he could not be sponsored by any ginner.
“I will not produce as much cotton as was the case the year before because of high cost of inputs. I was not lucky to have been sponsored by the ginning companies in terms of buying seed and inputs,” he said.
Jamu said being a labour intensive crop, cotton requires extra care and money to buy certified seed and pesticides.
He said over the years since he has been growing the crop, his life has completely changed, signifying that the crop has the potential of transforming people’s lives.
Balaka is one of the districts in Malawi that faces perennial hunger because of dry spells.
Chairperson of Balaka Cotton Growers Association Steven Dodoma believes the prices farmers are offered have not helped the cotton sector to grow and realise its full potential.
“Over the years, the prices the ginners have been offering have not been satisfactory. Besides that, there is no seriousness on the part of government to take the [cotton] industry to another level.
“As a strategic crop, cotton should have given the maximum attention it deserves to ensure that the earnings increase,” he said.
Reduced cotton yield in Malawi and increased global demand will likely push up the crop’s price on the local market, according to the Cotton Development Trust (CDT), but Dodoma argues this seems not to be the case taking into account the prices buyers are offering at the moment.
This year’s minimum price for the crop has been put at 43 cents (K177.59, at the current exchange rates) per kilogramme (kg), agreed to by the Cotton Farmers Association of Malawi (Cofam), government and ginners.
But Dodoma told Business Review that the prices buyers are offering in Blantyre, ranging from K150 to K187 per kg, are not that favourable in view of the cost of production.
“Most of our colleagues did not grow the crop this year due to not so good prices last year. The cost of inputs was also way beyond most farmers which has also affected production,” he said, stressing that for the farmers to break even this year, the crop should be bought at above K250 per kg.
But CDT chairperson Patrick Khembo countered, saying that although the farmers will never be satisfied with the set minimum price, they were party to the discussions when coming up with the pricing structure.
He hoped that with the anticipated drop in output, prices will likely be higher because of heightened demand.
Of late, there have been a number of investments in the cotton industry. Government has built three ginneries in Chikhwawa, Salima and Karonga which are all operational, but the fear is that the facilities will just turn out to be another white elephant because of low output of the crop the country produces.
A Chinese-owned Balaka-based cotton ginner, Malawi Cotton Company Limited (MCCCL), which has invested over $20 million in ginneries, is also helping farmers by giving them certified chureza cotton seed and pesticides.
MCCL, a subsidiary of China Africa Cotton Development Limited, makes full use of hi-tech equipment and carries out a number of different businesses, including cotton seed breeding, distribution, planting, processing, marketing, oil processing and sale of cotton by-products.
The company’s agriculture manager, Trueman Kachale, said their core business is cotton ginning at Balaka and the recently-acquired plant in Salima previously owned by Cargill, an international producer and marketer of food, making MCCL one of the biggest cotton companies in Malawi.
“Malawi farmers are encouraged and supported to grow the crop. We operate over 350 rural markets/depots in predominantly cotton growing areas through which we make available to farmers farm inputs and provide extension services and also use the same outlets to procure seed cotton, after harvest,” he said.
MCCL has introduced improved farming technologies in cotton production through the Salima Chinese Agricultural Training Centre.
The company has managed to increase the average yield per hectare, currently at 650 kg to 3.5 metric tonnes per hectare.
It also makes available to farmers Chureza cotton seeds at the most convenient time when supply of certified seeds has been a challenge. The company expects that once the agriculture centre in Salima is ready, it will help in ensuring that certified cotton seeds are readily available to the farmers in Malawi at an affordable price.
The company is emphasising on value addition in line with Malawi Government’s policy to spur export growth by processing cotton locally through their facilities into lint, textile, edible oils and animal feed.
It also wants to help in increasing farmers’ yield per hectare to reduce unit production costs through the provision of certified cotton seeds.
In the 2012/13 season, the company commissioned a crush plant to full operational capacity, and plans are underway to prepare for the installation of textile plant while at the same time improving the operational efficiency of existing gins at Salima and Balaka to internationally accepted standards.
The textile plant will change the exporting of raw cotton and low profit products and elevate the Malawi industry significantly, accelerating the country’s industrialisation.
Last year, there was stiff competition on the market, according to experts, such that 16 ginners available were scrambling to get a fair share of the produce. This means that out of the 42 000 tones produced, each ginner bought more than 2 500 tones which was not enough to cover their overhead costs.
In Malawi, cotton is grown in the Shire Valley districts of Nsanje and Chikhwawa, Balaka, Salima, Phalombe, Blantyre, Mwanza, Neno and Karonga and there have plans to introduce the crop in some districts.
Meanwhile, the country is doing trials for BT cotton in an attempt to increase the crop’s production.