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Malawi paying debts for ‘dead’ project

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Gracian Lungu

By Deogratias Mmana:

Malawi is repaying a $50 million (about K40 billion) loan to India for three cotton ginneries that have become white elephants under the Agricultural Development and Marketing Corporation (Admarc).

In September 2013, former president Joyce Banda inaugurated Ngabu Ginnery that cost $20 million which was part of the $50 million Line of Credit granted by India to Malawi. The other ginneries are Nagara and Balaka.

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According to government information on the three ginneries, each plant had an output of 250 bales of cotton, with each bale of 250 kilogrammes per day.

The Ngabu ginnery was expected to add three times to the value of raw cotton which is being exported from Malawi, when operated at its full capacity.

The export of raw cotton was also expected to earn the country foreign exchange to the tune of $20m (K1.6 billion) per annum and provide employment opportunity to about 200 people directly and several hundreds more indirectly.

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In April 2014, Banda also commissioned Ngara Ginnery in the area of Traditional Mwairang’ombe in Karonga District where she said the coming of the ginnery was in line with the vision to recover the country’s economy by ensuring that it exports more agricultural products than before.

In January 2016, former president Peter Mutharika inaugurated the Balaka Cotton Ginnery where he described its opening as a symbolic return to Malawi’s path to industrialisation.

Balaka ginnery was expected to offer employment directly to around 3,000 people and indirectly to many from within Balaka and the entire eastern region.

The ginnery was constructed to the tune of K5 billion and was expected to produce 200 metric tonnes of cotton every day.

Five years down the line, the ginneries have become virtually white elephants, failing to serve their purpose while the government has no choice but to repay the loan.

Ministry of Agriculture spokesperson Gracian Lungu admitted in an interview that the ginneries are not productive as expected. He said Balaka is down at the moment.

“Indeed, total ginning capacity far exceeds the actual volumes that have annually been produced in recent years. Estimates indicate that we are only utilising no more than 20 percent of available ginning capacity,” Lungu said.

He attributed the failure by the ginneries to produce as expected to low seed cotton production and productivity.

“This has been the primary cause of underutilisation of the available ginning capacity and this is why the Ministry is working tirelessly to revamp the cotton industry,” said Lungu.

He said production is expected to pick up in the coming years as more farmers adopt new cotton seed technologies and more medium and large scale farmers invest in cotton production.

Asked if government is pleased to be repaying a loan for an investment that has effectively turned out to be a white elephant, Minister of Finance Felix Mlusu said: “As government, we are concerned about the non-activity of these investments.

Mlusu added: “We asked Admarc to come up with a turn-around strategy for all investments that are not productive.”

He said being a loan, government cannot avoid it but to repay. But he did not have the repayment figures at the time of the interview.

He said: “We cannot run away. If it is a loan, we will have to repay.”

Agriculture expert Tamani Nkhono Mvula said the ginneries will remain white elephants if government does not work on the pricing structure of cotton in the country and on production constraints.

“The ginneries will remain white elephants if farmers are not getting the benefits out of the cotton in general,” he said.

A report on crop production estimates by the Ministry of Agriculture in February predicted a significant drop in cotton production from 65,000 tons last year to 20,000 tons this year.

It said that Malawi’s cotton production has been declining since the 1980s cotton largely because of unfavourable weather, usage of low quality and unsuitable seed varieties, low usage of inputs, lack of credit available to farmers, shift from cotton production to other crops because of reduced international pricing and general inefficiencies in the sector.

The report said although Malawi’s estimated production capacity is 600,000 metric tonnes of seed cotton in a year, it couldn’t produce 100,000 metric tonnes of seed cotton despite various government interventions in 2019.

Cotton Council of Malawi also admitted that cotton production is low in the country and that the ginneries below production line.

The council’s Executive Director Cosmas Luwanda said there are several efforts being made to revamp the situation.

For example, he said, new high yielding cotton varieties have been introduced to spur productivity.

He said large scale production is also intensified in non-cotton growing areas such as Mchinji and Kasungu.

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