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The Southern India Mills’ Association

Committed to Foster the Growth of the Textile Industry

10pc export incentive for cotton farmers

The Reserve Bank of Zimbabwe (RBZ) has extended its export incentive to cotton farmers who are set to receive an additional 10 percent over and above proceeds for the crop delivered to registered private companies who provided them farmers with inputs.
Since 2016, the central bank has been paying out some incentives to tobacco farmers as a way of encouraging them to increase its production.
In a statement recently RBZ governor Dr John Mangudya said: “In preparation of the full swing cotton marketing season, the Reserve Bank of Zimbabwe wishes to advise cotton growers, cotton merchants and other stakeholders on the marketing and financing arrangements for the 2018 season.
“Cotton growers shall be paid an export incentive of 10 percent, which shall be paid on a monthly basis through bank accounts or mobile money services.
“In this regard, cotton merchants shall submit to Reserve Bank, the list of growers and their respective account details every month by the 7th of every month following the one for which the incentive is being claimed.”
The Governor said in line with international best practice and the need to promote use of plastic money, cotton growers shall be paid in cash, a maximum of $40 per each bale sold, with the balance being deposited into grower’s bank account or mobile wallet account.
Furthermore, seed cotton shall continue to be purchased using offshore lines of credit and in this regard, cotton merchants are required to secure offshore lines of credit prior to purchasing seed cotton.
Dr Mangudya said for the avoidance of doubt, only those cotton merchants who were financed by Government and those who financed cotton production using their own resources shall buy seed cotton.
RBZ is paying out these incentives to ramp up production in the economy, which will result in increased exports and job creation.
Already textile company, David Whitehead Limited (DWTL), received a $2 million capital injection in January this year, as such there has been a ready market for cotton farmers both locally and internationally.
DWTL had ceased operations about two years ago due to working capital constraints, but after being bailed out it now requires more cotton than before.
In a bid to improve productivity, over 400 000 cotton farmers have benefited from over $62 million worth of inputs under the Presidential Input Support Scheme. Apart from RBZ incentives, it is believed that farmers who deliver Grade A and B cotton would receive their adjusted amounts after being paid for Grade C yields.
Farmers who deliver or delivered Grade B cotton will receive 50c per kilogramme, while those who had Grade A will be paid 55c per kg. The Grade C cotton fetched 47c per kilogramme. This year’s cotton marketing season opened on the 10th of this month. The development follows reports that the number of cotton farmers registered for the scheme had doubled from 37 000 to 77 000 this season.
Cotton output is expected to improve to around 170 000kg from 130 000 last year.