eBusiness Weekly
Martin Kadzere
Singaporean agro-processing giant, Wilmar International’s local unit, Surface Wilmar Investments, has launched a bid to acquire a majority shareholding in The Cotton Company of Zimbabwe to secure guaranteed supply of feedstock for its edible oils plant in Harare, it has emerged.
Sources at Surface told Business Weekly that a proposal to acquire 51 percent equity in Cottco has been presented to the Government, the principal shareholder in the local agro-processing firm.
The deal would also see Wilmar, whose parent firm employees more than 90 000 workers, has over 500 manufacturing plants across the world and an extensive distribution network in China, India, Indonesia and 50 other countries, assuming the management contract for Cottco.
The Zimbabwean edible oils manufacturing company’s parent firm is listed on the Singapore Stock Exchange and turned over $1 billion last year and $428 million in the fourth quarter of 2017. While the company appears to have strong financial muscle, it remains unclear to what extent it will maintain support to smallholder cotton farmers.
While sources said the company would explore ways to increase cotton production, there was no mention of whether financial support, if provided as has been the case, would cover all the country’s cotton growing regions, including the remotest parts of the country.
Cottco, formerly listed on the Zimbabwe Stock Exchange runs the country’s largest cotton out grower scheme of 380 000 smallholder farmers, making it a strategic company in Zimbabwe.
This season, the majority of farmers benefited under the Presidential Input Scheme. Last year, Cottco, distributed inputs to about 155 000 cotton growers, pushing the national production to about 75 000 tonnes from 28 000 tonnes, Zimbabwe’s least output, ever.
The cotton company operates six ginneries in Kadoma, Chiredzi, Sanyati, Gokwe, Muzarabani and Chiredzi with combined annual processing capacity of about 130 000 tonnes.
“Top officials from our parent company were in the country recently and presented their proposal to the authorities,” a senior official at the company said.
“Basically, we are looking at buying 51 percent of Cottco. And to protect our interests, we have also proposed a management contract so that our investment is safeguarded.
“We have offered $30 million as a starting point but obviously that is subject to the outcome of the negotiations. Cotton production is key to our value chain considering that we already have a plant that produces edible oils. Having a cotton business in our value chain will ensure guaranteed supply of feedstock to our oil plant.”
Surface Wilmar Zimbabwe chief executive Sylvester Mangani however said his company was “only more” interested in cotton seed for their edible oil and stock feed plant.
“We are not interested in the production of cotton, but cotton seed which use for producing cooking oil and stock feeds. So we have engaged government on how Cottco could increase production of cotton,” said Mangani without elaborating.
The Government recently assumed control of Cottco through the Zimbabwe Asset Management Company, the Reserve Bank’s special purpose vehicle created to hive off non-performing loans that were threatening the stability of the financial services sector and to rescue debt ridden local entities, after taking over its $56 million debt.
The transaction has been concluded and now awaits approval by the board to be appointed by the Government, ZAMCO chief executive Dr Cosmas Kanhai told Business Weekly.
“It will then be up to the board to decide on the strategic direction that they would want the company to take,” said Dr Kanhai. “It may choose to bring in equity partners or re-list on the Zimbabwe Stock Exchange; that will entirely depend on the board.”
RBZ governor Dr John Mangudya said the process of appointing the board was already underway.
“The Minister (Lands, Agriculture and Rural Resettlement) is seized with the matter and very soon Cottco will have a board,” central bank governor Dr Mangudya said.
In 2016, global commodity giant Olam International made a failed bid to take-over the management contract of Cottco after the Government shot down the proposal.
Olam’s operations in Zimbabwe began in 2005. It runs an integrated cotton ginning model that provides inputs including seeds, fertilizers and chemicals on credit to farmers.
Some of Wilmar’s business activities include oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, manufacturing of consumer products, specialty fats, oleo chemicals, biodiesel and fertilisers as well as flour and rice milling.
At the core of Wilmar’s strategy is an integrated agribusiness model that encompasses the entire value chain of the agricultural commodity business, from cultivation, processing, merchandising to manufacturing of a wide range of agricultural products.
Cotton has been a source of livelihood for thousands of families, making it a strategic national priority.
