Did you know, cotton helps reduce imports by providing about 70% of the raw materials for local cooking oil production and all the cotton used in local yarns?

Zimbabwe’s cotton industry is an important part of the country’s agricultural economy. It supports over 300 thousand smallholder farms. The sector also contributes to a larger number of industries, including textiles, animal feed, and edible oils. Over the years, the government of Zimbabwe and the private sector both worked hard and contributed to strengthening the growth and resilience of this sector.

This article discusses the background of the cotton sector, including its growing areas, export and import, historical background, and key macroeconomic factors affecting the sector. This article also talks about government efforts to revive the cotton industry and its economic importance. So without further ado, let’s get into the details.

This blog will discuss

Historical Background of Zimbabwe’s Cotton Sector

Major Cotton Growing Areas of Zimbabwe

Export and Import of Zimbabwe’s Cotton

Key Macroeconomic Factors Affecting the Cotton Sector

Economic Importance of the Cotton Sector

Government Efforts to Revive the Cotton Sector 

Zimbabwe’s cotton industry plays a crucial role in its agricultural development. Since cotton is a drought-resistant crop, it grows well in rainfall levels between 400mm and 600mm per year. Over 600,000 families are supported because of the cultivation of cotton. Over 300 thousand smallholder farmers cultivate cotton, supporting these families. 

Cotton is important to many industries, including textiles, food (mainly cooking oil), animal feed (mainly cotton seed cake), and fiber production (mainly cotton lint). Moreover, paper money is produced through the linters, which are made from cotton. Cotton is also a great export crop. It generates crucial foreign revenue that strengthens Zimbabwe’s economic reserves.

Cotton farming in Zimbabwe started in the 19th century. They started with early research trials in the 1900s using the seeds from Peru, Egypt, Brazil, and the United States. In 1923, commercial production of cotton began. A research station was established in 1925 at Kadoma. Since 1997, various cotton and ginning companies have operated in Zimbabwe, including Cottco, Cargill, Olam Zimbabwe, and Parrogate. 

As of the 2021/22 season, five major contractors dominate the sector, with Cottco holding an 85% market share. The industry also includes seed suppliers, research centers, fertilizer producers, ginners, weavers, spinners, oil processors, and machinery distributors, making it essential to Zimbabwe’s economy.  

Cotton is grown in Zimbabwe’s 

1. Midlands
2. Mashonaland Central
3. Manicaland and 
4. Matabeleland North province.

Exports:

In 2023, the cotton exports of Zimbabwe were massive, with $23.5M in Raw Cotton, which made it the 29th largest exporter of Raw Cotton in the world. In the same year, Raw Cotton was the 20th most exported product in Zimbabwe. The main destinations of Raw Cotton exports from Zimbabwe are: Pakistan ($5.62M), Lesotho ($5.58M), Mauritius ($4.38M), Thailand ($2.26M), and China ($2.14M).

China ($1.75M) was the fastest-growing export market for Raw Cotton of Zimbabwe between 2022 and 2023. 

Imports:

In 2023, the import of Zimbabwe was $4.34k worth of Raw Cotton. It made Zimbabwe the 141st largest importer of Raw Cotton in the world. In the same year, Raw Cotton was the 1033rd most imported product in Zimbabwe. Zimbabwe imports Raw Cotton primarily from South Africa ($2.68k), the United States ($1.45k), China ($213), and the United Arab Emirates ($4).

South Africa ($2.22k), China ($209), and the United Arab Emirates ($4) were the fastest-growing import markets in Raw Cotton for Zimbabwe between 2022 and 2023.

The production and marketing of seed cotton in Zimbabwe has grown from a state of trust in the 1930s to deregulation in the mid-1990s. This is followed by re-regulation in 2009 in a competition environment. The 1990s reforms were part of the World Bank’s Economic Structural Adjustment Programme (ESAP). They aimed to address foreign currency shortages and low employment levels. Until 1994, the Cotton Marketing Board (CMB) controlled the industry, but its monopoly ended with the establishment of the Cotton Company of Zimbabwe (Cottco), which was privatized in 1997. 

The government encouraged export-driven growth by introducing Export Processing Zones (EPZs) with tax incentives. Multiple cotton merchants entered the cotton industry between 1995 and 2009. Thus, it creates competition but also disruption in the input credit scheme. Stakeholders formed the National Cotton Council (NCC) in 2006 to address these challenges in the industry. But self-regulation proved ineffective.

The government reintroduced legislation in 2009 to restore investor confidence and order. Despite this, the textile manufacturing was going down due to competition from cheap imports, mainly from China. In 2014, the Association of Cotton Value Adders in Zimbabwe (ACVAZ) replaced the NCC as the industry’s top body. However, economic challenges still remain, with Zimbabwe’s textile sector facing hardships against foreign competition and poor industrial activity.

Zimbabwe’s cotton industry has had a hard time with macroeconomic instability since 2001. They faced extreme inflation, cash shortages, fuel supply disruptions, and foreign exchange unpredictability. Inflation surpassed 1000% annually by 2006, forcing cotton companies to adapt by importing fuel, issuing temporary bearer cheques, and leveraging cotton exports for foreign currency.

Even though the sector was facing economic instability, it attracted newcomers wanting foreign exchange, which made the competition harder. High seed cotton prices and record profits were enabled in 2001-2002 due to currency depreciation. But inflation went up again in 2003, which led to government interventions like foreign exchange auctions. 

By 2005, the inflation had increased and exceeded a huge 1000%, causing further exchange rate fluctuations. Government policies on foreign exchange retention have introduced uncertain problems, with companies required to remit part of their earnings at the official exchange rate. 

Some firms theorize on currency devaluation, paying high cotton prices, and recovering costs through lint sales. Regular inconsistencies, such as EPZ firms retaining full foreign earnings while others faced restrictions, have created an uneven playing field.

Overall, Zimbabwe’s cotton sector remains vital to the economy but is vulnerable to inflation, currency instability, and inconsistent policies, where financial guidance often exceeds technical expertise in shaping competition.

The cotton industry of Zimbabwe has experienced massive growth since independence in 1980. Smallholder farmers are now becoming the dominant producers. They contributed initially 20-25% of national output in the early 1980s. This was because smallholder farmers accounted for 85% by 1999/2000, as large-scale commercial farmers went to more profitable crops. 

By 2002/2003, large-scale productions had decreased to less than 1% of the total output. The expansion of smallholders was supported by many. Mainly through credit schemes from companies like Cottco and government initiatives. This was particularly in Gokwe. By 2001/2002, up to 300 thousand smallholder farmers, about 20% of frugal households, were engaged in cotton cultivation. However, larger A2 farmers faced challenges due to capital and labor shortages.

Even though the cultivated had an overall increase, cotton yields have remained inconsistent. This was influenced by economic conditions, land policies, and resource availability. The fast-track land redistribution program in 2001 further reduced large-scale commercial farming. The number of commercial cotton producers went from 55 in 2001/2002 to just 14 by 2002/2003. 

Different farmer surveys and group discussions for the topic marked disruptions in land allocation and yields. They showed that resource-rich farmers achieve more and higher productivity. Access to better input, creditworthiness, and better farming infrastructure has greatly impacted yield. This at last reinforced the gap between well-supported farmers and farmers facing hardships.

Cottco and Cargill maintained their position of dominance, domination in seed cotton purchasing and ginning due to their commitment to high-quality lint, following Zimbabwe’s cotton sector liberalization. Cottco led in pricing to incentivize farmers’ input investment, while smaller ginners, though present, had limited market influence.

However, the sector changed a lot post-2000 as new firms entered, which increased competition. Economic problems and foreign exchange shortages led businesses to venture into cotton as a means of securing foreign currency. 

By 2006, many firms were involved in ginning, pushing utilization rates to only 50%. Market share data shows that Cottco’s dominance began declining after 2001, falling below 60% in 2002/03, with the combined market share of Cottco and Cargill dropping to around 80%. By 2006, Cottco’s share fell to 50%, signaling heightened competition.

This market shift affected input credit systems and quality control. While the sector remains concentrated, price competition for seed cotton is now fierce, altering the market dynamics that once ensured uniform, high-quality lint production.

The Zimbabwean cotton sector went through important changes following liberalization. Initially, Cottco and Cargill dominated the industry. They maintained high seed cotton prices and strict input credit systems. However, competition increased with the entry of new ginning firms, such as Cotpro and FSI Agricom, leading to a decline in Cottco’s market share from 70% in 2001/2002 to 50% in 2006. 

Lint exports played a vital role in Zimbabwe’s agricultural economy, accounting for 12-17% of exports. However, after the 2001 land reform program, tobacco exports declined, and some sources suggested that cotton exports surpassed tobacco for a short period. 

Key export places for Zimbabwean cotton between 2000 and 2005 include South Africa, Thailand, Italy, Portugal, and Taiwan, while Indonesia, China, and India gained fame post-2003.

Cottrade is an initiative of the Cotton Ginners’ Association. This initiative is aimed at supporting smallholder farmers by facilitating contract-based ginning and identifying international buyers. Farmers selling through Cottrade at first earned higher prices than those selling to major companies. 

However, with exchange rate corrections in 2003, Cottrade’s price advantage disappeared, leading to the stop of its operations for the time being. In 2005/06, Cottrade had emerged again as a conventional cotton production company, contracting smallholders for production and ginning.

Zimbabwe’s textile industry, initially developed during the UDI period (1965-1980) to supply the domestic market, has struggled in the post-independence era. In the 1980s and early 1990s, it was protected by a policy that required the Cotton Marketing Board (CMB) to supply lint at subsidized prices. But after the liberalization of the cotton sector, the policy was abandoned. This led to the downfall of lots of textile firms, including Cone Textiles

Continuous restructuring saw Cone Textile acquired by Modzone Textiles. Modzone Textiles is an Iranian Zimbabwean firm, while Cottco acquired Sk Textiles in 1988, forming Scottco. Scottco produces knitting yarns. Most of them go to South Africa and Europe while supplying a small portion to local manufacturers. Between 2000 and 2004, textile exports, including yarn, woven fabrics, and clothing, accounted for 33% of the value of lint exports.

Despite these exports, the industry continues to face hardships. To support local textile firms and prevent job losses, cotton companies were required to sell 30% of their lint domestically, often below cost. Some firms tried to dodge this rule, while others just sent low-quality lint to domestic spinners. In 2006/2007, five companies were denied export licenses for failing to meet domestic sale requirements.

Until recently, Zimbabwe’s edible oil market was dominated by three local processors- Olivine, National Foods, and United Refiners– producing high-quality refined oil mainly from soya and cottonseed. Before 2001, imports supplied about 20% of the country’s annual oil consumption of 90,000 tons. Soya production peaked at 175,000 tons in 2001, produced mainly by commercial farmers. 

But this declined sharply after the land redistribution programs, averaging 90,000 tons, finalizing from 2002-2005. Cotton production also fell, which led to raw material shortages for the established oil producers, who had struggled to import due to foreign exchange problems.

Thus, there was a shortage of cooking oil. Expensive imported alternatives were there to fill the gap. To address the shortage, new cotton firms such as Grafax, New Cabb View, and Parrogate entered the oil processing market, challenging the established firms. While they claim their oil matches the quality of the traditional producer, consumers have remained skeptical. However, consumers bought what was available due to limited options.

Future competition can lead to three situations: consumers returning to established brands, new firms improving quality to compete in the long term, or a market split, with lower quality, affordable products serving low-income consumers. Aside from that, newcomers profit from the scarcity by selling oil at a lower price than imported alternatives.

Cotton is a major economic part of Zimbabwe. It aligns with the government’s ZimAsset strategy, which promotes value additions, employment, and poverty solutions. 

1. The cotton sector supports thousands of smallholder farmers. Up to 300 thousand households got involved at their peak in this sector. This provided income to nearly 2 million people.  It thrives in regions where alternative economic activities are scarce.
2. The cotton industry builds employment across many sectors. This includes ginning, spinning, weaving, and oil processing. The ginning sector once employed 10,000 workers. But now it has only 5,000 due to declining production. Likewise, the textile industry had 24,000 workers. But now it had shrunk down to 4,000 with only 8 out of 100 textile firms remaining operational. Installed ginning capacity stands at 600 thousand metric tonnes, but low production has reduced operational levels to 15%.
3. Cotton farming remains steady due to low start-up costs, credit-based input availability, guaranteed markets, and free technical support. However, production decline has been ongoing for years, and it threatens the economy of Zimbabwe. 

Historically, the cotton industry has supported nearly a million jobs, directly and indirectly. This was mostly across various industries like transport, insurance, and retail. Revitalizing the sector could boost employment, rural income, and economic development massively

To solve the situation of the struggling cotton industry, the Zimbabwean government has introduced many initiatives. This included input subsidies, regulated market structures, and climate-smart agricultural measures.

1. In the 2021/2022 season, farmers benefited from a Presidential Climate-Proofed Programme, which provided important inputs to promote good cotton farming. A smart and creative payment system was created by the government. In this system, farmers received part of their earnings in U.S. DOLLARS ($0.30 per kg) and the rest in Zimbabwean dollars (ZWL34.50 per kg, approximately $0.07). This pricing strategy was made to incentivize farmers and encourage increased production in the 2022/2023 season.
2. Additionally, the government promotes contract farming, offering farmers guaranteed markets, agronomic training, and easier access to production inputs. These efforts aim to stabilize the industry and ensure that cotton remains a key economic contributor. 
3. The country’s cotton sector report provides insights into production, marketing, and trade trends from 2012 to 2022, assessing the impact of these interventions and the overall performance of the industry.

Through these measures, Zimbabwe aims to restore cotton farming as a profitable and sustainable enterprise for thousands of smallholder farmers and industry stakeholders. 

To learn the investment challenges in Zimbabwe’s cotton industry and its investment opportunities, you can read, Zimbabwe’s Cotton Industry: Challenges & Investment Opportunities

Zimbabwe’s cotton industry remains an important part of the country’s agricultural and economic landscape. It provided livelihoods for thousands of farmers and supported industries like textiles, oil processing, and animal feed production. By supporting the livelihoods of thousands of people and maintaining economic stability, the cotton industry will continue to play a crucial role in Zimbabwe’s economy. 

Despite its immense potential, it faces continuous challenges, including economic instability, declining production, and competition from cheaper imports. However, government initiatives, contract farming, and investment in value addition continue to offer hope for revival. Ensuring a stable policy environment, improving farmer incentives, and strengthening local textile manufacturing will help restore Zimbabwe’s cotton industry as a competitive and sustainable industry. So as an investor to earn profit and contribute to the developing community, Zimbabwe’s cotton industry can be one of your best choices!

To learn more about several investment opportunities in Zimbabwe’s cotton industry, check more details here: Investment Opportunities of Zimbabwe’s Cotton Industry