Impact of struggling cotton sub-sector

Thursday November 14 2019

 

By Halili Letea @hletea news@tz.nationmedia.com

Shinyanga. Cotton processors in Tanzania are facing a pile up of cotton yarn, as the crop is countering the export market crisis, due to the ongoing trade war between China and the US.

As China is the main market for Tanzania’s cotton yarn exports, cotton ginners are finding it difficult to sell their goods due to slowing demands.

Tanzania Company Limited (JOC), one of the cotton processing factories based in Shinyanga, says it worries about the future of cotton sector, due to market collapses.

“Despite buying an average of 5,000 tonnes of cotton lint each year (full capacity demand 8,000-10,000 tonnes, at least 24,000 tonnes of raw cotton), the company has not made it this season,” said JOC’s assistant managing director, Mr Marco Kyaruzi.

He said the company is currently having a stock of at least 2,000 tonnes of cotton yarns un-exported.

“During the previous years, we could only have less than 500 tonnes of yarns at our warehouse compared to this amount we have now,” he said.

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He then said they have bought at least 4,000 tonnes of cotton lint from two ginners only compared to at least five ginners during the previous years.

The processing based in Kizumbi ward, Shinyanga Municipal Council, is also facing several challenges and the biggest one is the trade war between the United States and China which cut down the volume of garments exported to the US and hence from Tanzania to China.

Mr Kyaruzi said since its establishment they have employed at least 147 people on contracts.

JOC managing director Mr Meng Liu said the firm has been operating well since its inception in October 2014, despite several challenges including this year’s huge textile marketing crisis.

“We are currently facing a huge market challenge in the global market, but we are still struggling to operate our factory” he said, adding that this made them cut down demand for cotton lint from ginners and also the amount of the yarns they export.

He mentioned other challenges as transportation challenges due to the introduction of a new policy by the Tanzania Revenue Authority (TRA) which needs cargo to be transported by the truck with only C40 documents.

To get its required input and help farmers, JOC launched training sessions to them so that they could improve their productivity.

For his part, Shinyanga Municipal Executive Director Geofrey Mwangulubi said JOC is a very renowned company for supporting people around them and is cooperating well with the municipality.

“The company plays a role in social responsibility like organising seminars for farmers and constructing classrooms among others,” he said.

Tanzania Cotton Board (TCB) director general Marco Mtunga has confirmed the exports market challenge, adding that the government was taking remedial measures.

“This has been a tough season because of the volatility of prices in the world market,” he said in an interview with The Citizen.

According to Mr Mtunga, over 400,000 tonnes of cotton were harvested this season.

He reiterated that the trade war between the US and China has caused the crop’s price in the world market to drop to 61 US cents (Sh1,400) per pound from 77 cents (Sh1,800).

Mr Mtunga added that this was also being reflected in the domestic market, but the government, through the Bank of Tanzania (BoT), has established a mechanism to mitigate effects of the price volatility.

Mr Boaz Ogola, general manager of Alliance Ginneries Limited in Simiyu Region, said ginners and other buyers were unable to buy cotton from farmers.

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