Cottco management proposal ‘shot down’ Cotton

2610-1-1-COTTONBusiness Reporter

GOVERNMENT has expressed strong reservations over the proposal by international commodities company, Olam to manage Cottco Holdings. The Government is understood to have “shot down” the proposal and insisted on the ongoing recapitalisation of the company. Olam had submitted the proposal to manage the former Zimbabwe Stock Exchange company, through its local unit.Olam’s operations in Zimbabwe began in 2005 and the company runs an integrated cotton ginning model that provides inputs including seeds, fertilizers and chemicals on credit to farmers.

It is understood that the Singapore-headquartered company was poised to collect about $300 000 in management fees had the transaction sailed through.

“We took the deal to the relevant authorities but there was strong resistance mainly because of two things. First, the country has adequate skills to competently run the company and secondly, why giving them (Olam) a management contract when they are not bringing any money to recapitalise the business,” said a board member who declined to named.

“The authorities also felt that there could have been some elements who were trying to fast track the transaction for reasons, which would be established through an investigation.”

A source, who requested not to be identified said “it was surprising that the deal was taken to authorities without prior consultations” as is the case with other transactions of similar nature. No official comment could be obtained from Cottco and Olam by the time of going to press yesterday.

As reported last week, some stakeholders, farmers in particular, felt awarding a management contract to Olam would have eroded progress already made by the Government in reviving and restoring sanity in the industry. They blamed the entry of multiple players in the industry as a major source of the current problem facing the sector.

Already, there is a general feeling among key stakeholders that the opening up of the cotton sector to new players was the death knell for Zimbabwean cotton. From being one of global cotton’s top quality producers the sector had virtually collapsed.

Some key stakeholders also felt awarding Olam the management contract was tantamount to recreating “a price fixing cartel, which had operating under the guise of the Cotton Ginners Association.”

Cottco pulled out of the CGA this year. Ironically, Cottco paid the highest price per kilogramme this season at 45c while other CGA members paid an average of 36c per kilogramme.

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