Ginnery Project in Dilemma

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By Wezi Tjaronda WINDHOEK A government moratorium on guarantees for private sector projects is delaying the establishment of a cotton gin-nery in the country. Guarantees on private sector loans have been frozen until cabinet is convinced of the government debt management servicing since one and a half years ago. “We will maintain the moratorium for the private sector because it is easier for them to access finance from the Development Bank and other commercial banks,” Permanent Secretary of the Ministry of Finance, Calle Schlettwein said yesterday. The Jireh Ginnery (Pty) Ltd applied for a loan from Agribank three years ago, which was approved on condition that the loan is guaranteed. The promoter will need close to N$30 million for setting up the infrastructure, buying the equipment as well as running costs. However, according to chairman of the Jireh Ginnery, Immanuel Dumeni, which is promoting a cotton ginnery for Namibia, the government has not yet guaranteed the loan. Schlettwein said there was no need for the government to cover all loans unless the project in question was of “strategic interest that it is over and above the economic feasibility”. He explained that strategic interest could mean anything from a national interest point of view, or from a resource point of view, adding that projects such as water or power supply and infrastructure for roads, among others, can fall into this category. Although a cotton ginnery would be very important for the textile industry and agriculture sector, Schlettwein said, “It is not per se of strategic interest.” He added that there was no compelling reason why the government should guarantee all loans because bankable projects must attract the interest of the financiers. Due to the delays in establishing the ginnery, the production of cotton in cotton growing areas has also fallen. At the time when the company wrote a proposal for the ginnery three years ago, the production of cotton was 6 000 tonnes between commercial and communal farmers. But as of now, the production has dropped to about 2 000 tonnes due to lack of a market. “Now, with no ginnery, production is falling because the farmers need a market. In order to produce cotton, they need a market,” said Dumeni, adding that if people know that there is a market, they will produce more cotton. The government wants the ginnery to be established in Rundu. Other areas that produce cotton are Grootfontein, Mariental, Caprivi and areas in the north. A draft annual report of the Agronomic Board noted that small-scale farmers were assisted in marketing their cotton by way of a pool scheme, but unfortunately cotton prices dropped substantially in 2004, to an extent that the farmers had to be given an upfront payment of 92 cents per kg to the final grading. Because of these disastrous prices, hardly any new cotton has been planted and the future of cotton growing in Namibia is doubtful, said the report. Another official who did some work on cotton also said the aim was to promote cotton growing and promote the cotton ginnery but as the situation is now, “you cannot tell farmers to grow cotton when there is no market for them”. Last year, the Ministry of Trade and Industry said the country was promoting the idea of establishing a cotton ginnery in the country due to the high costs associated with importing cotton from other African countries such as Cote d’Ivoire, Ghana, Niger and Togo. It was envisaged that this would stimulate the growing of cotton and also have a multiplier effect on the country’s textile industry, where the production cycle would be completed. Dumeni said as promoters of the project, they need to be backed by some guarantee to be able to borrow money from financial institutions. He said the only thing that would bring up the market of cotton is a ginnery. “We proposed to set up a ginnery but on our own we can’t do much,” added Dumeni. He said whenever the guarantee is in place, the project would not take long to start. With a ginnery in place, Namibia’s textile industry would be more competitive than it is at the moment. Although the country’s cotton is of a very high quality, it would not meet the demand of plants such as Ra-matex Textiles. “Namibia’s production can contribute but it won’t meet the demand of Rama-tex,” said Dumeni.