Cotton is considered one of the world’s greatest poverty alleviating crops, with 150 million people worldwide relying on it for income.
A crop that thrives in conditions in which many others cannot, cotton can be stored for long periods without deteriorating and is hypoallergenic, biodegradable and carbon neutral. According to the International Cotton Advisory Committee (ICAC), this drought-resistant crop creates five jobs for every ton produced, thus having massive potential in South Africa and the rest of the continent.
Local is lekker
In the 2018/19 production year, South Africa produced 51 000 tonnes of lint cotton, representing an 800% increase in the five years since the South Africa Cotton Cluster (SACC) was established. Due to capability and capacity limitations of local cotton spinning, weaving and knitting, 80% of the cotton lint is being exported for processing. Products in various tiers of the manufacturing process are then imported again. This situation seems counter-intuitive, especially when one considers that the possible opportunity cost to the economy of sacrificing local beneficiation amounts to around R20 billion, according to agritech company, IQ Logistica. This figure does not even take into consideration the potential employment and skills development opportunities that have also been lost.
Currently, local clothing retailers are using between 25% and 30% of locally produced cotton products in their ranges but, at Cotton SA’s Global World Cotton Day seminar held in October 2020, and in a recent article published in Business Insider, many pledged to increase their commitment towards localisation substantially. This begs the question, though, that if retailer demand increases, what are the implications for the value chain? Can we produce enough cotton for an increase in local demand and, if not, how many more hectares need to be planted and harvested to address this demand?
Based on research and historical crop statistics there is sufficient land suitable for cotton production available in South Africa to meet this demand. The cotton ginning capacity has also been upgraded over the past two years, with more than R300 million invested by the private sector. The bottlenecks to fulfil the full value chain within South Africa, however, lie with the spinners, knitters, weavers, dyeing, finishing, and to a lesser extent, garment manufacturing.
The shortage of specific spinning capacity means that most of the lint cotton is exported for processing and manufacture. Establishing a cotton spinning mill is very capital intensive, costing in the region of R600 million to set up, and further investment is needed to grow and sustain the local value chain. The changes in the government structures over the past two years brought a new strategic approach to the manufacturing industry, which led to the development of the Retail, Leather and Footwear Masterplan. The funding guidelines were changed and a second funding application, which the Cluster submitted to the Industrial Development Corporation in December 2018, was not successful. The economic impact of Covid-19 has reduced budgets and new applications will be considered again only after April 2021. With the decrease in the budget and the greater demand for increasing upstream competitiveness in the textile manufacturing industry, the possibility of government funding towards the local cotton programme is at risk. However, some private sector stakeholders, such as the MRP Group and Woolworths, are committed to localising the cotton industry. While much emphasis is currently placed on increasing the commitment towards local manufacturing, it unfortunately does not always include the use of local raw products.
Cotton goes way beyond clothing
Cotton is unique in that it is the only crop that is both a food and a fibre crop. A total of 60% of all textile and apparel products contain a cotton element, but cotton is so much more than the fibre we are so familiar with in our clothes, towels, bedding and linen - 100% of the plant can be used. Linters – the short fuzz on the seed – offer cellulose that is used in plastics, explosives, high-quality paper products such as banknotes, batting for mattresses and furniture, computer chipboards and flat-screen TVs. The cottonseed is crushed to separate it into three products. The oil is used in margarine, cooking oil, salad dressing, cosmetics, soap, candles, detergents and many other commodities. The meal is used in livestock, poultry and fish feed, as well as fertiliser, and the hulls are used in fertiliser, fuel and packaging. What is left of the plant – the stalks and leaves – is used for pressed paper and cardboard or ploughed back into the soil to enrich it.
Are these sectors as committed as the textile and apparel industries to supporting the South African cotton sector? For example, what percentage of margarine, cooking oil, salad dressing, cosmetics, soap, candles, detergents, livestock, poultry and fish feed, fertiliser and explosives is derived from South African cotton? Are South African banknotes made from South African cotton? Are there strategies in place to increase the use of locally produced cotton, as there are in the apparel and textile sector?
The good, the bad and the solution
According to Cotton SA, major advancements in agricultural innovation and technology combined with better crop management have contributed towards the increase in South African cotton production. The organisation is also driving an extensive consumer awareness campaign to encourage a greater appetite for locally produced cotton, with a South African Cotton Mark showing support for local cotton farmers. This growth cycle in fibre production has, over the past year, unfortunately been impacted by external factors, such as access to new seed technology (cultivars), weather conditions and some industry constraints at ginner level. These have resulted in a decrease in volumes over the past season as well as a forecasted decrease for the coming season and increasing the yield volumes remains critical.
In our view as a financier close to the cotton sector, a multipronged approach is what is needed to nurture this sector to reach its full potential:
- Foster financing and skills transfer partnerships. While the SACC is all about partnerships – with all stakeholders throughout the value chain committed to developing the sector – it is clear that the focus should be on building capacity throughout the value chain, with specific emphasis on the spinning process and beyond. This would include financing of spinning and manufacturing plants and upskilling of labour to power these facilities. It is thus gratifying to see that The Foschini Group’s factories in Maitland and Caledon in the Western Cape are currently running at 100% capacity, and that the group is looking to expand these facilities over the next five years. Similarly, Pep Clothing has four local factory divisions manufacturing basic school clothing, knitted underwear and, more recently, personal protective equipment. It is also important not only to focus on the local manufacturing of the products, but also to ensure the vertical integration of the local natural fibres.
- Develop the smallholder farming sector to further increase production capability while creating job opportunities. This is an area close to Nedbank’s heart, and the wheels are in motion to explore a blended finance solution specifically for smallholder farmers, in partnership with Cotton SA and other stakeholders. The MRP Group has also focused much of its energy on assisting with financing in this area and is heartened to see a strong increase in women under the age of 35 becoming involved, thus contributing to gender and youth development. Nedbank recently supported and sponsored the Agri Seta certificate award ceremony hosted by Cotton SA in Mpumalanga. Twenty-nine farmers from the Lebombo Agricultural Secondary Cooperative received their awards for completing the Agri Seta cotton training.
- Diversify the market for South African cotton. With the Green Deal that is driving economic recovery in Europe, Better Cotton Initiative (BCI)-compliant cotton will become more and more important in that market, and South African cotton is well placed to cash in on this demand. While 44% of the past season of South Africa’s cotton crop is currently BCI-compliant, the global average of BCI-compliant cotton is just 22%. Cotton SA is the BCI implementing partner in South Africa, driving the process of making 100% of South African cotton BCI-compliant within the next three to five years, which Nedbank is also supporting in collaboration with ISEAL and Cotton SA.
Cobus de Bruyn is Nedbank’s Northern Divisional Manager for Agriculture.
AFRIKAANS
Katoen: ’n Goue geleentheid vir Suid-Afrika?
deur Cobus de Bruyn
Katoen word beskou as een van die wêreld se gewasse wat die grootste bydrae tot armoedeverligting bied – 150 miljoen mense wêreldwyd maak daarop staat vir hulle inkomste. Dis 'n gewas wat floreer in toestande waarin baie ander nie kan nie, katoen kan vir lang tydperke gestoor word en is hipoallergenies, bio-afbreekbaar en koolstof-neutraal. Volgens die Internasionale Katoenadvieskomitee (ICAC) skep dié droogtebestande gewas vyf werksgeleenthede vir elke ton wat geproduseer word, wat beteken dit het reusepotensiaal in Suid-Afrika en die res van die vasteland.
Plaaslik is lekker
In die 2018/19-produksiejaar het Suid-Afrika 51 000 ton pluiskatoen gelewer, wat 'n 800%-toename is in die vyf jaar sedert die Suid-Afrikaanse Katoengroep (SACC) gestig is. Weens vermoë- en kapasiteitbeperkings in die plaaslike spin-, weef- en breibedrywe, word 80% van die katoenpluis vir verwerking uitgevoer. Produkte op verskillende vlakke van die vervaardigingsproses word dan weer ingevoer. Dié situasie lyk onlogies, veral as 'n mens in ag neem dat die geleentheidskoste vir die ekonomie wat verbeur word omdat katoen nie plaaslik veredel word nie R20 miljard kan bedra, luidens die landboutegnologie maatskappy IQ Logistica. Dié syfer neem nie eens die potensiële indiensnemings- en vaardigheidsontwikkelingsgeleenthede in ag wat ook verlore gaan nie.
Tans gebruik plaaslike klerekleinhandelaars tussen 25% en 30% van plaaslik vervaardigde katoenprodukte in hul reekse, maar by Katoen SA se Globale Wêreldkatoendag-seminaar wat in Oktober 2020 gehou is, en in 'n onlangse artikel wat in Business Insider gepubliseer is, het baie belowe om hulle verbintenis tot plaaslike aankope aansienlik te verhoog. Dit laat egter die vraag ontstaan: As die vraag deur kleinhandelaars toeneem, wat is die implikasies vir die waardeketting? Kan ons genoeg katoen vir 'n toename in plaaslike vraag produseer en, indien nie, hoeveel meer hektaar moet geplant en geoes word om aan dié vraag te voldoen?
Volgens navorsing en historiese gewasstatistieke is daar genoeg grond in Suid-Afrika wat vir katoenproduksie geskik is om aan die vraag te voldoen. Die kapasiteit van katoenpluismeule is ook oor die afgelope twee jaar opgegradeer, met meer as R300 miljoen wat deur privaat besighede belê is. Die knelpunte om die volle waardeketting binne Suid-Afrika te vervul, lê egter by die spin, brei, weef, kleur en afwerk van katoen, en in 'n mindere mate by kleremaak.
Die tekort aan spesifieke spinkapasiteit beteken dat die meeste pluiskatoen uitgevoer word vir verwerking en vervaardiging. Die vestiging van 'n katoenspinmeule is baie kapitaalintensief, kos sowat R600 miljoen om op te stel, en verdere belegging is nodig om die plaaslike waardeketting uit te brei en te onderhou. Veranderings in regeringstrukture oor die afgelope twee jaar het 'n nuwe strategiese benadering tot die vervaardigingsbedryf meegebring, wat gelei het tot die ontwikkeling van die Kleinhandel-, Leer- en Skoenmeesterplan. Die befondsingsriglyne is verander en 'n tweede befondsingsaansoek, wat die Katoengroep in Desember 2018 by die Industrial Development Corporation ingedien het, was nie suksesvol nie. Die ekonomiese impak van Covid-19 het begrotings geknou en nuwe aansoeke sal eers ná April 2021 weer oorweeg word. Met die afname in die begroting en die eise dat mededingendheid hoër op die produksieketting in die tekstielvervaardigingsbedryf moet verhoog, is die moontlikheid van regeringsfinansiering vir die plaaslike katoenprogram in gevaar. Sommige belanghebbendes in die privaat sektor, soos die MRP-groep en Woolworths, is egter verbind tot die ontwikkeling van die plaaslike katoenbedryf. Terwyl baie klem tans op ’n sterker verbintenis tot plaaslike vervaardiging gelê word, sluit dit ongelukkig nie altyd die benutting van plaaslike onverwerkte produkte in nie.
Katoen is veel meer as net klere
Katoen is uniek omdat dit die enigste gewas is wat sowel 'n kos as 'n veselgewas is. Altesaam 60% van alle tekstiel- en klereprodukte bevat 'n katoenelement, maar katoen is soveel meer as die vesel waarmee ons so vertroud is in ons klere, handdoeke, beddegoed en linne - 100% van die plant kan gebruik word. Die pluiskatoen, linters – die wollerigheid op die saad – bied sellulose wat gebruik word in plastiek, hoëgehalte-papierprodukte soos banknote, vulsels vir matrasse en meubels, rekenaarskyfiekaarte, platskerm-TV's en plofstof. Die katoensaad word fyngemaak en word dan in drie produkte verdeel. Die olie word gebruik in margarien, kookolie, slaaisous, skoonheidsmiddels, seep, kerse, skoonmaakmiddels en baie ander kommoditeite. Die meel word gebruik in vee-, pluimvee- en visvoer, asook in kunsmis, en die doppe word gebruik in kunsmis, brandstof en verpakking. Wat oorbly van die plant – die stingels en blare – word gebruik vir geparste papier en karton of teruggeploeg in die grond om dit te verryk.
Is dié sektore so toegewyd soos die tekstiel- en klerebedrywe om die Suid-Afrikaanse katoensektor te ondersteun? Byvoorbeeld, watter persentasie margarien, kookolie, slaaisous, skoonheidsmiddels, seep, kerse, skoonmaakmiddels, vee-, pluimvee- en visvoer, kunsmis en plofstof is afgelei van Suid-Afrikaanse katoen? Word Suid Afrikaanse katoen gebruik in die vervaardiging van Suid-Afrikaanse banknote? Is daar strategieë om die gebruik van plaaslik vervaardigde katoen te verhoog, nes in die klere-en-tekstielsektor?
Die goeie, die slegte en die oplossing
Volgens Katoen SA het groot vooruitgang in landbou-innovering en -tegnologie gekombineer met beter gewasbestuur bygedra tot die toename in Suid-Afrikaanse katoenproduksie. Die organisasie voer ook 'n uitgebreide verbruikersbewustheidsveldtog om 'n groter aptyt vir plaaslik vervaardigde katoen aan te moedig. 'n Suid-Afrikaanse Katoenmerk toon steun vir plaaslike katoenboere. Die groeisiklus in veselproduksie is egter die afgelope jaar benadeel deur eksterne faktore, soos toegang tot nuwe saadtegnologie (kultivars), weerstoestande en sommige bedryfsbeperkings op pluiskatoenvlak. Dit het gelei tot 'n afname in volumes oor die afgelope seisoen asook 'n voorspelde afname vir die komende seisoen, en die verhoging van die opbrengsvolumes bly van kritieke belang.
As 'n finansierder na aan die katoensektor, meen ons ’n benadering met meer as een invalshoek is nodig om dié sektor te koester om sy volle potensiaal te bereik:
- Vestig finansierings- en vaardigheidsoordrag vennootskappe. Terwyl die SACC gaan oor vennootskappe – met alle belanghebbendes dwarsdeur die waardeketting wat verbind is tot die ontwikkeling van die sektor – is dit duidelik dat daar op die bou van kapasiteit dwarsdeur die waardeketting gefokus moet word, met spesifieke klem op die spinproses en wat daarna volg. Dit sluit in die finansiering van spin- en vervaardigingsaanlegte en die verbetering van arbeidsvaardighede om dié fasiliteite aan te dryf. Dit is dus bevredigend om te sien dat The Foschini Group se fabrieke in Maitland en Caledon in die Wes-Kaap tans teen 100% kapasiteit loop, en dat die groep dié geriewe oor die volgende vyf jaar wil uitbrei. Net so het Pep Clothing vier plaaslike fabrieksafdelings wat basiese skoolklere, gebreide onderklere en, sedert meer onlangs, persoonlike beskermende toerusting vervaardig. Dit is ook belangrik om nie net op die plaaslike vervaardiging van produkte te fokus nie, maar ook om die vertikale integrasie van plaaslike natuurlike katoen te verseker.
- Ontwikkel die kleinboerderysektor om produksievermoë verder te verhoog terwyl werksgeleenthede geskep word. Dit is 'n veld na aan Nedbank se hart, en die wiele is aan die rol om 'n gemengde finansieringsoplossing spesifiek vir kleinboere, in vennootskap met Katoen SA en ander belanghebbendes, te verken. Die MRP-groep het hom ook toegelê op hulp met finansiering op dié gebied en dit is verblydend om 'n sterk toename in vroue onder die ouderdom van 35 betrokke te sien, en sodoende by te dra tot geslags- en jeugontwikkeling. Nedbank het onlangs die Agri Seta-sertifikaattoekenningseremonie wat deur Katoen SA in Mpumalanga aangebied is, ondersteun en geborg. Nege-en-twintig boere van die Lebombo Landbou Sekondêre Koöperasie het hulle toekennings vir die voltooiing van die Agri Seta-katoenopleiding ontvang.
- Diversifiseer die mark vir Suid-Afrikaanse katoen. Met die Green Deal wat ekonomiese herstel in Europa dryf, sal katoen wat aan die Beter Katoeninisiatief (BCI) voldoen, al hoe belangriker in daardie mark word, en Suid-Afrikaanse katoen is goed geplaas om finansieel by dié vraag baat te vind. Terwyl 44% van die afgelope seisoen se Suid-Afrikaanse katoengewasse aan BCI voldoen, is die wêreldwye gemiddeld van katoen wat aan BCI voldoen net 22%. Katoen SA is die BCI-implementeringsvennoot in Suid-Afrika, wat die proses dryf om alle Suid-Afrikaanse katoen binne die volgende drie tot vyf jaar aan BCI te laat voldoen, iets wat Nedbank ook in samewerking met Iseal en Katoen SA ondersteun.
Cobus de Bruyn is die Afdelingsbestuurder van Nedbank Landbou se Noordelike streek.
