"Side Marketing" Threatens the Future of Zimbabwe Cotton

By Jim.Robinson|June 26, 2013

While the global industry is still dealing with the painful fallout from so many contract defaults in the last few years, the rate of new defaults has slowed dramatically in most parts of the world. Unfortunately, Zimbabwe isn’t one of those places, and “side marketing” of cotton is a threat to the future of the industry, according to an article published by allafrica.com.

Virtually all cotton produced in Zimbabwe (98%) is done under contract schemes, which were created to ensure farmers had access to capital. All contractors must have signed agreements with individual growers, outlining the area covered and volume expected. The problems occur when non-contracted merchants approach growers and offer a significantly higher price than what was agreed upon by the original merchant. They can afford to offer a higher price because they didn’t provide the initial funding for the crop.

It’s a serious threat to the country’s industry because the original merchants lose their investment, making them less likely to fund a grower in subsequent years. And since few farmers in Zimbabwe have anything to serve as collateral, getting financing from a bank is rarely an option.

To read the full report, please visit www.allafrica.com.