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JOHANNESBURG, South Africa — The African textile industry has suffered since the abolition of global quotas in January 2005.
Factories have closed throughout the region, and investment has significantly weakened as demand has slackened and China has emerged as the world’s manufacturing superpower.
While textile manufacturers throughout the African region complain that China’s dominance has hurt not just the textile industry but the entire supply chain, John Hewlett has been overseeing the farming of cotton by peasant farmers over a 143,000-acre sprawl consisting of smaller plots in Mozambique, one of the poorest countries in Africa.
Last year, his company, Plexus Mozambique, a subsidiary of Plexus Cotton Ltd., based in the U.K., purchased from farmers a harvest of around 30,000 tons of seed cotton, making it by far the largest cotton concessionaire in the country. Its nearest competitor produced about 15,000 tons. Plexus’ harvest yielded more than 12,000 tons of cotton fiber, ginned at the factories in Montepuez in Cabo Delgado province, northern Mozambique; 8,000 tons were delivered to its biggest customer, China, for milling.
“China as a producer is a huge consumer of raw materials,” said Hewlett, adding that while cotton is grown in China, “their manufacturing requirements are such that their textile mills still need to import cotton fibers from other suppliers.”
Global consumption of cotton last year amounted to about 25 million tons and China accounted for almost half of that with consumption of 10 million tons, according to industry authority Cotton Outlook. China’s total yarn production for 2005 was about 14 million tons.
The volume of cotton fiber exported by Plexus Mozambique to China seems a pittance when one takes into account the total volume China requires. For Mozambican cotton farmers, however, the growing demand from China is a welcome development.
Mozambique is a country with a population of 14.5 million and per capita income of $1,300, based on purchasing power parity, situated along the southeastern coast of Africa. With the Indian Ocean to the east, it shares a border with Tanzania on the north, South Africa on the south, and Zambia, Malawi and Zimbabwe on the west. Once a colony of Portugal, Mozambique has recently emerged from decades of civil war and has steadily embraced tourism, agriculture and manufacturing.
This story first appeared in the May 16, 2006 issue of WWD. Subscribe Today.
Parent company Plexus Cotton Ltd. was formed in 1990. Last year, Plexus posted sales of close to $500 million. Chris Harman, a U.K. director, noted that while Plexus is mainly a cotton merchant, since 1999 it has invested in cotton production in Africa with operational partners, “as the operational partner provides managerial expertise” to the cotton farmers. In this way, Harman said, “we are able to secure our own source of supply of upland cotton to sell to the textile mills.”
Plexus is also active in Uganda, Zambia, Zimbabwe and Malawi. In Mozambique, Hewlett explained, the company does not own any farmland, but has 65,000 individual registered growers, mostly peasant farmers who cultivate their own land as allocated to them by the village chief. Each farms an area of anywhere from 1.25 acres to 12.4 acres. The largest registered grower is known as a privado, a single owner with about 200 acres.
In addition to financial and technical assistance, Plexus provides the planting seeds, chemicals and pesticides to the farmers on credit, and buys all the cotton harvest. The cotton is planted from November to June, then handpicked from June to August.
“The size of the individual farms prohibit machine picking, and in any event, the labor input is a family task,” said Hewlett. “In this way, it results in the fiber retaining its optimum state.”
Picking starts as soon as the rains end and the cotton bolls begin to open, and farmers are encouraged to pick three times a season so that each stage of development of the cotton plant is thoroughly checked and picked. Crops are sprayed up to six times to control pests.
After the cotton is picked, it is placed into a dryer that has two compartments, which allows the cotton to be graded. The seed cotton is then separated into three grades, which are classed by quality and bought by Plexus.
During the ginning process, the cotton is separated into seed and fiber. The fiber is sold to textile mills to be transformed into yarn and the seed is used for oil and feed.
“Typically, there is more seed than fiber, as seed is heavier,” Hewlett said.
Plexus buys the cotton seed back from the farmers at a fair market price based on the Cotlook Index, published daily by Cotton Outlook, a Liverpool, England, private consultant.
The cotton industry is Mozambique does not have the advantage of being heavily subsidized, as it is in Spain, Greece and the U.S. Considering the conditions under which cotton is planted, harvested and ginned in Mozambique, the cotton fiber production estimate for 2006 is, according to Cotton Outlook, a respectable 24,000 tons, compared with 75,000 tons for Spain. The total production estimate for the southern and eastern African countries where Plexus operates is about 280,000 tons. Almost half of that output will be produced by Zimbabwe, where small farms have so far escaped President Robert Mugabe’s capricious and destructive agricultural policies.
“Remember that, apart from South Africa, agriculture in most of Africa has not yet reached a high level of industrialization,” Harman said.
Hewlett added that in the Cabo Delgado province where Plexus operates in Mozambique, “our ginning factories still run on diesel-fired power generators. We hope to be connected to mainland power later this year.”
Plexus does not farm organic cotton, but Harman said the firm is seriously considering a shift to organic. For cotton to be certified as organic, it would have to be planted from untreated seed, grown in land free from chemical input for the last three years and not be sprayed with pesticides or any chemicals. Hewlett believes this is possible to achieve with the conversion of bush land into farmland.
Apart from the obvious benefits to the environment, Harman said, “the upside is, of course, that premium prices are paid for organic cotton, up to 30 percent over the standard price. There is no difference in quality between organic cotton and cotton grown with pesticides and herbicides. There is, however, a reduction in yield, as organic cotton is more susceptible to diseases and infection.”
Uganda and Tanzania are already producing organic cotton on a small scale.
Critics argue that concentrating on cotton production, particularly following the model espoused by Plexus in Mozambique, condemns Africa to remaining a supplier of raw materials, a backward agricultural economy with a quasi-feudal system. The African Growth & Opportunity Act enacted by the U.S. in 2000 was supposed to encourage the industrialization of sub-Saharan Africa, and the quota-free access granted to its products entering the U.S. markets was instrumental in developing the manufacturing industries in the region, where the textile industry reaped most of the benefits.
However, the dismantling of the Multi-Fiber Agreement by the WTO in 2005 and the end of certain provisions in AGOA that would have allowed the least-developed countries to import fabric from third-country sources have contributed to the industry’s stagnation.
“What Africa has,” Hewlett said, “is land, fertile land that yields beautiful crops. I don’t see why that shouldn’t be maximized.”
Although the system may seem feudal, Harman said, “the reality is that Mozambique is still a rural economy, and we help to build, sustain and improve that economy.”
The 65,000 farmers registered with Plexus Mozambique support almost 500,000 people in a province with a population of 1.2 million who depend on the income from the cash crop.
“We have a socioeconomic responsibility to the community,” Hewlett said. “We have helped to build medical centers and provide schooling for the families of our farmers. This is by far the best thing that can happen to peasant farming and the rural population.”