COTTCO Holdings Limited is looking to unlock $800 million to clear outstanding dues to farmers as costs driven by the parallel market continue to impact on the company’s revenue.
In a trading update for the third quarter ended December 31, 2021, Cottco acting company secretary Jacqueline Dube said the company was looking to complete the payment of farmers, having already paid out $3 billion.
“While Cottco was able to pay farmers $3 billion from funding raised during the season, the company is looking to unlock a further $800 million to clear outstanding dues to farmers after the payment of the outstanding 2020 subsidy by government,” she said in the trading update.
Dube revealed that in order to ensure that cotton farming remains viable, the government had committed an additional $22 per kilogramme delivered by farmers as a subsidy payment.
“The total subsidy for 2021 is $2,53 billion and $500 million was released and paid to farmers during the period under review. The balance is anticipated shortly from Treasury,” she said.
Dube said the third quarter signified the end of Cottco’s buying season with the final intake standing at 116 052 metric tonnes compared to 82 479 metric tonnes in 2020.
She said that while the marginal movement in the interbank rate was a welcome development, local costs which increased as a result of movement on the parallel rate continued to squeeze the company’s margins.
Cottco’ ginning schedule, she said, was delayed by power availability with 93% of the seed cotton intake having been ginned by December 31, 2021. Production is now set to end this month.
“Zimbabwean hand-picked cotton is in high demand and the company’s order book exceeds production volumes,” Dube said.
She said the company was publishing quarterly trading updates pending the imminent finalisation of the outstanding external audits
Dube said the late onset of rains had resulted in a sizeable crop being established one to two months later than normal.
‘Depending on the length of the season and available heat units, this could affect the maturity and fibre length of the output. Cottco’s ground staff is working with farmers in order to achieve the best possible results under the circumstances,” she said.
“The adoption of precision agriculture under the Cotton Pfumvudza/Intwasa programme is also expected to improve the
Dube added that the company was reviewing projects for value addition and increased use of technology in its processes to enhance operational efficiencies,
Cottco Holdings Limited is the largest cotton producing company in the country, with an 80% market share.