Cotton ginneries are seeking to keep 80 percent of their foreign currency earnings, people familiar with the matter have said.
Currently, cotton ginneries retain 50 percent of their foreign currency earnings with the remainder being surrendered to the Reserve Bank of Zimbabwe at the ruling official exchange rate.
Last week, the Government set the cotton producer price at $43,94 (US$1,75) per kilogramme. The producer price is a combination of US dollars, Zimbabwean dollar cash and electronic money.
Farmers will be paid US$10 per each bale of cotton delivered, 38 percent of the value of a 200kg bale in Zimbabwean dollars cash and the balance transferred electronically to farmers’ mobile money wallet accounts.
“Retaining 80 percent of foreign currency will help ginneries pay for the foreign currency component to farmers,” said one-person familiar with the development.
The season, which normally begins at the end of May to September, was delayed due to prolonged consultations on the producer price after global lint prices crashed due to coronavirus.
About 85 percent of Zimbabwe’s cotton is exported.
Early last month, global lint price plunged to lowest levels since the global financial crisis in 2008 due to coronavirus, denting growth prospects of Zimbabwe’s cotton industry, which has been on a recovery path since 2015.
The lowest price was in 2008 during the global financial crisis when prices fell to US$44 per pound.
This year, cotton production is estimated at 101 000 tonnes, an increase of 32 percent from 77 000 tonnes produced last year, according to the 2020 Second Round Crop and Livestock Assessment Report.
This was due to increased coverage of the Presidential Inputs Scheme. The scheme was introduced in 2015 after the Government moved in to revive the cotton industry.
After peaking at 352 000 tonnes in 2011, output declined to 28 000 tonnes three years later, the lowest in nearly two decades partly due to lack of adequate funding and poor prices.
With the coming in of the Presidential Inputs Scheme, coupled with renewed interests by private players to finance the crop, who last year financed about 30 percent of production, the sector has recorded a significant recovery.
In light of climate change, some farmers are also increasing acreage as the crop is generally less water intensive.