Cotton could patch Zim’s forex gaps

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IMPROVED cotton production could eliminate Zimbabwe’s cyclical foreign currency crisis, which is aligned to the tobacco selling season, business leaders have said.
In recent years, the country’s foreign currency shortages have persistently spiked around September, which coincides with the end of the tobacco selling season.
Earlier this month, in a rerun of events witnessed last September, prices of goods and services spiked following the firming of the US dollar on the parallel market.
“…after looking at this trend we have advised government that we need an injection that smoothens the trough which happens at the end of the year. We have seen government talking about a nostro stabilising injection which we believe is the right step but this can only be for now,” Sifelani Jabangwe, president of the Confederation of Zimbabwe Industries, said last week while addressing the Institute of Internal Auditors of Zimbabwe’s annual conference.
“It is actually cotton that used to smoothen that end of the year period. Cotton is ginned from around July to the end of the year and that is when it is exported and it would provide as much as $200 million during that period and we would not have this trough, so we are encouraged by the efforts to increase cotton production,” Jabangwe added.
Speaking at the same conference, Douglas Hoto, First Mutual Holdings’ chief executive officer, echoed Jabangwe’s sentiments, emphasizing the role that can be played by cotton production in the country’s foreign currency supply chain.
“We need to deal with cotton…when the tobacco season ends the cotton must kick in and the minerals will remain as your steady state condition.
“If the farmers in places like Gokwe and Sanyati go back to cotton, and all those in places like Chivi, we could have another $200 million to $300 million of exports to cover the lean period,” Hoto said
Last week, government announced a $250 million line of credit from Gemcorp Capital, for the importation of essential commodities. John Mangudya, a central bank governor, said the line of credit came at an appropriate time to shore up foreign currency liquidity after the end of the tobacco selling season.
Around this time last year, government started drawing down on a $600 million African Export Import Bank nostro stabilisation facility, which Mangudya later revealed saved the economy from a “collapse”.
“What people don’t know is that the economy almost collapsed in September. If it was not for the nostro stabilising facility, I don’t know what would have become of the system,” Mangudya told those in attendance when he presented his monetary policy statement for 2018 in February.