New Agreement Sews Thread Between Smallholder Farmers, Textile Industry

The Metema Cotton Producers’ Union and member associations are guaranteed to be able to sell a kilogram of cotton at a minimum price of 24 Br if they produce 50,000qtls of cotton in the 201415 harvest season.

This is according to an agreement they signed with the Ayka Addis Textile amp Investment Group – one of the biggest textile producing companies in East Africa, with an accumulated capital of 2.5 billion Br – on Friday, March 7, 2014, at the Elilly Hotel, located on Guinea Conakry Street around the Kasanchis area of Kirkos District.

Ayka Addis, whose plant is located in Alemgena town in the Southwest Shewa Zone of the Oromia Region (26km from Addis Abeba), has the capacity to spin 40 tonnes of cotton, knit 38 tonnes of thread, dye 50 tonnes of cloth and produce 80,000 pieces of garment in a day. With 7,500 permanent and 100 temporary workers, the Company exports its products mainly to Germany.

The Company consumes around 15,000 tonnes of cotton for its annual production and is expecting to satisfy 30pc of this demand from the Metema Union through the agreement.

Cotton farmers in Metema woreda, located 900km from Addis Abeba in the North Gondar Zone of the Amhara Region, will be relieved of the issue of getting buyers on time, according to the agreement signed by Yusuf Aydinzy, owner and president of the Ayka Textile, and Bawdi Ayele, the Board chairperson of the Union.

The two parties have agreed to set the price at the time of harvest based on domestic and international prices of the product, establishing 24 Br as the floor price.

The amount of cotton stated in the agreement is estimated to be worth between 150 million Br and 180 million Br at current prices, according to the statement distributed at the time of the signing ceremony. A metric tonne of cotton is currently being sold at 1,435 dollars in the international market.

“The price offered by Ayka Addis is not far from the actual price of this harvest season, which was around 30Br,” Assefa Aga, general manager of the Ethiopian Cotton Producers, Ginners amp Exporters Association (ECPGEA), told Fortune.

The deal is designed to create a solid linkage between Ayka Addis and local smallholder farmers, and give them the chance to eliminate middle men, and supply to Metema Union, says Amare Teklemariam, CEO of Ayka Addis. It will also give the farmer’s market a price guarantee, enabling them to focus solely on production”.

The farmers in the Union, numbering 6,000, will start supplying cotton to Ayka Addis from October 2014, according to the one year contract – part of a program by the Cotton Made in Africa initiative (CmiA). The CmiA is an initiative of the Aid for Trade Foundation (AfTF), which is based in Hamburg, Germany, and is aimed at enabling people to help themselves through trade, by improving the social, economical and ecological living conditions of smallholder cotton farmers and their families in Sub-Saharan Africa. Through training programs, the CmiA teaches the cotton farmers about modern, efficient and environmentally friendly cultivation methods that help them to improve the quality of their cotton, yield higher crops and thus earn a better income. The local implementing partner for CmiA is the ECPGEA.

“We will train the farmers and hire up to 18 personnel to help the framers produce the required output,” says Assefa.

The project has also given a guarantee of one million Birr to Abay Bank S.C for the Union to access loans for the purchase of different inputs for the harvesting season, Fortune learnt.

“Aika Addis is also open to engage with other unions in similar modalities,” Amare told Fortune.

For Yared Mesfin, Cotton amp Textile Marketing director at the Textile Industry Development Institute (TIDI), the deal is expected to set the trend for future engagement in the industry. The Institute has plans to implement similar projects in the future.

“For now, however, none have yet matured,” Mesfin said.

Problems of low productivity, shortage of inputs, land related bottlenecks and concentration of ginners around Addis Abeba are some of the obstacles that the cotton industry continues to face, the marketing director at the TIDI told Fortune.

During the harvest season in the year 201213, 55,000ha of land was covered with cotton and 35,000 tonnes of produce was collected, according to data from the ECPGEA. Total cotton production stood at 79,710tns in the 201112 harvest season. Ethiopia expects to import around 20,000 tonnes of cotton during the current fiscal year to cover the growing demand from the textile industry, according to the TIDI

Source : Addis Fortune

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