Source: Regulatory capture threat to recovery of cotton industry | The Herald March 22, 2017
Business Reporter
WHILE Government has moved in to revive the cotton industry through a three-year free input support programme, inadequate regulatory enforcement, particularly during the marketing season remains a threat to the sustainable recovery of the sector.
The Presidential Input Support Programme, which began last season has seen the Government providing free inputs to farmers, largely small scale in a bid to revive the industry.
Cotton has been a source of livelihood for 200 000 families, making it a strategic national priority.
During the past two seasons, Government has spent in excess of $70 million on inputs. Analysts said the intervention by the Government was timely as it has helped to lure back many farmers who had abandoned the crop due to inadequate funding from merchants.
However, the sustainable recovery of the industry remains under threat, largely due to side marketing resulting from inadequate regulatory enforcement to curb the practice.
Based on the established crop, a national crop size of about 110 000 tonnes is expected this year.
Analysts said since opening up the industry as a result of the International Monetary Fund dictated Economic Structural Adjustment Programme there had been a failure to control side marketing.
This killed the investment case for cotton as regulatory control has been largely ineffective due to “regulatory capture.”
They are of the view that the Agricultural Marketing Authority, which is the regulatory body charged with enforcing cotton legislation in the form of Statutory Instrument 142 of 2009 has “totally” demonstrated a total reluctance to enforce effective deterrent measures or penalties, resulting in chaos in the marketing of the crop.
The regulator is empowered to cause the arrest and prosecution of unscrupulous merchants for non-compliance and promoting side marketing, suspend licences for errant merchants and to cancel licences for continued breach of cotton marketing regulations.
“We have not seen much of these things happening despite clear evidence of serious breaches (of regulations) by some players,” Mr Nhamo Muchapondwa, an agricultural economist said.
“What is disturbing is that the Government is laying a solid foundation for the recovery of the industry but this will not be sustainable if such breaches continue to happen.
“What people need to understand is that, the crop is only coming back because of Government intervention.
“Almost everything is being funded by the Government but come marketing season; the bigger size of the crop will be bought by private players.
“It happened last season. Out of about 30 000 tonnes produced, Government only bought a third.”
A senior official with AMA said the authority would ensure Government adequately recover its investment, adding licenses would be issued on the basis of investment made.
“We are working with all stakeholders including the Reserve Bank of Zimbabwe to ensure that all loopholes that may promote side marketing are eliminated,” said the official.
“This year, private players have not invested much . . . most of them have only provided seed. So ideally, Government should buy the bulk of the crop. In any case, these middle man should be removed because their investment model is not production oriented.”
Some farmers contracted by private players in Gokwe-Nembudziya and Sanyati areas told The Herald Business last week that the support from private payers had been inadequate.
Farmer, Mr Moses Muzingiti, 32, said he was contracted by Alliance and received only seed.
“I established 4 hectares with the seed I got from Alliance and there was no further help,” said Mr Muzingiti, also chairman of 150 farmers contracted by Alliance in Sanyati.
Mr Rangarirai Siyai, also from Sanyati and represents 37 farmers contracted by Olam expressed dissatisfaction with the inputs they received from the company. He said he joined Olam’s scheme under the impression that Cottco and Olam were merging.
“We have been short-changed for a while and we wanted to join the Government input programme. But we were told that Olam was going to merge with the Cottco,” he said.
Late last year, Olam made a failed bid to acquire an exclusive management contract for Cottco.
Mrs Kudzai Muleli, 40, from Gokwe said she was contracted by Grafax and only received little chemicals and seed. “They promised to bring fertilisers but they did not,” she said.
Many farmers who benefited under the Presidential Input Scheme told a totally different story as they expressed satisfaction with the level of input support.
Those interviewed in Sanyati and Gokwe all expressed satisfaction with the level of support.
Chairperson for Vere area in Sanyati Mrs Silibaziso Makovere, 30 said she was expecting a good yield after receiving enough inputs from the Government.
“I have about 76 farmers under me and I can tell all happy with what Government did for us,” she said. “Since I started growing cotton after leaving school in 2005, this is my best year.”
Cottco area managers for Nembudziya and Sanyati Mr Tichaona Mamutse and Mr Cloud Kanhema said the crop situation was “good” and the mid-season drought would enhance output and quality.
Economist Dr Gift Mugano said crop losses were being caused by merchants paying higher prices as they would have not made any meaningful investment in inputs finance or infrastructure.
“Government support is only limited to three years and the possibility of the industry ‘collapsing’ again is very high if there is no proper regulatory enforcement especially during marketing season,” he said.
A former senior executive with a leading cotton company said there was an urgent need for “immediate and drastic intervention” in the cotton industry to stop the continued hemorrhaging from the scourge of side marketing.
“This issue of side marketing has been happening for a long time and this has largely resulted in the decline in cotton production and to a certain extent, pulling out of some serious investors,” said the executive.
“When merchants invest in production they are taking risk and the return on making that risk is the crop volume they get from the farmer.
“But side marketing has been allowed to prevail and the collapse of cotton industry is evidence of that.”
United States based company, Cargill closed its cotton business in Zimbabwe in 2014 citing high levels of farmer’ defaults resulting from side marketing.
The company said the practice had resulted in the company failing to operate profitably.
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