Business / Companies

Chinese cotton firm harvests a bumper crop in Africa

By Wang Chao (China Daily) Updated: 2014-06-30 07:02

China-Africa Cotton has also bought a plant in Malawi from Cargill, the food, agricultural, financial and industrial products and services giant, to extract oil from cotton seed. Local people there generally use cotton seed oil for cooking.

Chinese cotton firm harvests a bumper crop in Africa

Chinese cotton firm harvests a bumper crop in Africa
Setting in train Africa's railways

The company now employs more than 3,000 people in Africa, and more than 200,000 farmers supply the company with cotton.

Last year it harvested 35,000 tons of cotton worth 500 million to 600 million yuan.

A small amount of the cotton is processed locally, with the rest being shipped back to China, Wang says.

But this is where the company faces its biggest obstacle: China has import and export quotas on cotton, so the produce collected in Africa cannot be traded inside the country, but only internationally.

"We are forced to compete with the giant multinational cotton companies in the international market, such as ADM, Bunge, Cargill and Louis Dreyfus," Wang says.

Given the situation, the company plans to extend its operation into downstream industries such as yarn, weaving and cloth-making, "but these are likely to be expensive and we are only gradually moving into them", Wang says.

To build a local company, Wang needs to start from scratch. "We need to ship literally everything, even the screws, from China, which can take months and adds greatly to the cost."

Wang says Chinese companies should learn from Western companies, which focus more on high margin operations like seed sales and grain reserve services.

Despite difficulties, Wang's company made a profits of $6.5 million last year. "Unlike the mining industry, for instance, which brings cash flow immediately after you start operating, we have only one cotton harvest every year and we need to fight with other companies for that cotton - so it is not easy to stay profitable."

Wang says China is making quick progress compared with its Western counterparts. "Many of the big Western companies established their cotton plantations in the colonial days, but China has only been involved in this business for the past decade. We can't expect to reach Western companies' scale overnight, but we can certainly borrow their management experience."

As the company keeps expanding in more African countries, funding also remains an issue for China-Africa Cotton's development, Wang says.

"Major European and US companies have invested billions of dollars over the past decade and developed a complete industry chain including seedling, procuring and processing - but so far we have managed to invest just $60 million.

"I hope the Chinese government can open up more financing channels to agricultural companies in Africa, so that we can perform better in this area," Wang says.

Chinese cotton firm harvests a bumper crop in Africa

Chinese cotton firm harvests a bumper crop in Africa

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