By MELISA CHATIKOBO
THE Zimbabwean government is set to revive cotton production by acquiring a controlling stake in Cottco Holdings Limited, the sole buyer of the white gold in the country.
This comes as the government, which is a 37 percent shareholder, seeks to gain 51 percent by the end of year as the company faces financial challenges to run its mandate.
In a cautionary statement to shareholders yesterday, Cottco acting company secretary Jacqueline Dube said the firm struggled to account for its arrears because of farmers not repaying their loans.
“The company applied for the voluntary suspension of trading in its shares from the Zimbabwe Stock Exchange in November 2014 following the company’s application for provisional judicial management on 5th November 2014.
“The application for provisional judicial management was necessitated by the company’s failure to settle debts amounting to circa US$56 million following its failure to recover the costs of inputs supplied to contracted cotton farmers due to massive side marketing,” Dube said.
She added that following the application for provisional judicial management, the State stepped in to keep Cottco running.
“The government intervened through the introduction of the presidential inputs scheme in 2015 in consideration of the withdrawal of the application for provisional judicial management by the company.
“In 2016, it facilitated the restructuring of Cottco’s debt through the Zimbabwe Asset Management Company.
“In support of the presidential input scheme and in order to buttress viability, the government introduced a cotton subsidy scheme in terms of which $1.5 billion and $2.5 billion were committed in 2020 and 2021 respectively.
“In view of the foregoing of the government’s socio-economic objectives in the cotton industry which have been key to the company’s sustainability over the years, shareholders are advised that the government is in discussion with specific shareholders as well as the Zimbabwe Stock Exchange to explore the possibility of the government acquisition of a controlling stake in the company.
“The company shall provide more information in due course once the aforesaid discussions have been concluded,” she said.
Meanwhile, Cottco chairperson Sifelani Jabangwe told the Daily News yesterday that Treasury had availed $1,4 billion and that outstanding payments would be cleared by end of this week although the amount would not be inflation adjusted.
“There will be challenges as farmers’ debt will be eroded by inflation, unfortunately we are just clearing the amount that is due.
“There is no capacity to adjust the amount. Cottco is still turning around and rebranding so there are financial constraints,” he said.
This comes as Cottco still owes farmers $320 million for 2020 deliveries while for 2021 the balance is $53 million and almost $310 million for grade adjustments for farmers who delivered high grades. – Daily News