Tanzania: Us-China Trade War 'To Blame for Tanzania Cotton Woes'

(file photo).

Dar es Salaam — The ongoing trade war between the US and China has been partly blamed for the current cotton marketing crisis in Tanzania, which has resulted in farmers withholding their produce over pricing concerns.

Tanzania Cotton Board (TCB) director general Marco Mtunga has confirmed the problem, adding that the government was taking remedial measures.

"This has been a tough season because of the volatility of prices in the world market," he said in an interview with The Citizen yesterday.

According to Mr Mtunga, out of 340 million kilogrammes (340,000 tonnes) of cotton harvested this season, the disputed quantity is only 50 million kilogrammes (50,000 tonnes), which is mostly in Simiyu Region.

He said the trade war between the US and China has caused the crop's price in the world market to drop to 61 US cents (Sh1,400) per pound from 77 cents (Sh1,800).

Mr Mtunga added that this was also being reflected in the domestic market, but the government, through the Bank of Tanzania (BoT), has established a mechanism to mitigate effects of the price volatility.

President John Magufuli set an indicative cotton price of Sh1,200 per kilogramme, but traders says the maximum price that can ensure them profits is Sh1,100.

Mr Mtunga said the government has directed BoT to take measures, including exempting a number of banks of the statutory reserve threshold.

Banks involved in issuing payments for cotton purchases are CRDB Bank, NMB Bank, National Bank of Commerce (NBC), Tanzania Agricultural Development Bank (TADB) and Azania Bank.

Another measure is to reduce interest rates charged on loans issued to commercial banks involved in financing the cotton value chain.

The measures were applied following a meeting that brought together the government, cotton buyers and financial institutions in August, according to Mr Mtunga.

Cotton stakeholders say that unless immediate remedial measures are taken, the sub-sector faces a bleak future.

Farmers have been reluctant to sell their produce at what they say are unrealistically low prices offered by buyers.

"While strategic interventions can resolve the marketing crisis in the short-term; without long-term action to put the interests of farmers first, such crises are likely to be repeated in the future," said Mr Gasper Kileo, vice chairman of the Tanzania Cotton Association (TCA).

Mr Boaz Ogola, general manager of Alliance Ginneries Limited in Simiyu Region, said ginners and other buyers were unable to buy cotton from farmers at the indicative price of Sh1,200 per kilogramme and were instead ready to offer Sh1,100.

He said the price would enable ginneries to cover transport and ginning costs and turn a modest profit.

Mr Maduhu Suguta, a farmer in Ng'alita Village in Bariadi District, said he has been unable to sell his cotton.

"I can neither buy food for my family nor pay school fees for my children," he said, and appealed to the government to urgently intervene in the matter.

Another farmer, Mr Samuel Kubagwa of Salaria Village, said he has been unable to sell his cotton since May.

"Since we harvested our crop in May, we have not been able to sell it. I don't know for how long this will continue."

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