As companies throughout the supply chain continue to look for ways to better manage their risk, they are increasingly turning to one of the most tried-and-true rules of running a company: Do business with people you know and trust.
That’s the approach adopted by The Cotton Company of Zimbabwe (Cottco), which has begun registering farmers across the country for its input credit scheme. The company will only renew contracts for those farmers who participated in the credit scheme last year (and whose debts have been paid in full), Petros Piki, an accountant and financial analyst with Cottco, told Cotton International.
“Cottco regrets to advise that it is not able to register new growers (for next season) except current participants – provided they do not owe the company any money,” Piki says. “We urge growers to go to their nearest depot and register now to enable us to disburse inputs to you in a timely manner.
“The reason we’re only working with farmers we worked with last year is not limited funds or lack of available inputs – it’s a credit management strategy,” he explains. “The decision was made purely from a business point of view. As a company, we want to minimize our risk exposure to side marketing – and ultimately, defaults on extended credit.”
Growers in Zimbabwe are evaluating their risk as well. The rollercoaster ride of extreme volatility that the entire cotton supply chain went through last season could result in a significant reduction in cotton acreage in the coming year.
“Farmers in Zimbabwe have the option to grow other crops if they feel that cotton production is no longer viable for them,” Piki says. “They can grow tobacco, maize, soya beans, and wheat, among other crops.
“However, sometimes the crop options are more limited, depending on where the farmer is located. Some crops are not suitable for certain areas, and there are places where farmers rely on cotton production as their main source of livelihood due to the local climate.”
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