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©Hanyani News Online
RECENT exposés that only 124 000 cotton farmers out of the 372 600 who received inputs and technical support from Cottco for the 2022/23 cropping season have delivered their produce to their contractor’s depots in conformity to contractual obligations are disturbing to say the least.
In colloquial terms, the farmers ‘bit the hand that feeds them’ when they chose to sell the produce to someone else other than the one that sponsored the production process as demanded by the terms in their contracts.
From the deliberations that took centre stage at the second World Cotton Day commemorations held in Harare recently, it became apparent that Cottco is not taking the matter lightly.
This time around they will give first preference to those that delivered their crop to them when the distribution of inputs starts shortly.
And Cottco is justified to take such a stance towards the aberrant farmers because, if it was in religious circles, they have committed a misdemeanour analogous to an act of profanity in a great temple for which they must make amends.
In this case, the amends would mean reparations possibly through delivering the produce as agreed before the season rolled out or pay money matching the value of the inputs.
To begin with, these farmers have in essence, breached their contractual terms and delivered their crop to someone who did not sponsor the production process leaving them liable to legal action.
It seems the farmers may have done what they did to protest something with which they are or were not happy but they could have simply used other means to make their misgivings known.
Contractors that remain in business are those that manage to recover what they would have invested in the production of a crop, which enables them to keep their revolving fund alive for future projects.
In this case, Cottco will not recover the funding it invested in the production of the crop, which under normal circumstances can easily hound it out of business.
The basis of arrangements such as the one existing between Cottco and the farmers involves a commitment on the part of the farmer to provide a specific commodity in quantities and at quality standards determined by the purchaser and a commitment on the part of the contracting company to support the farmer’s production and to purchase the commodity.
Generally, this kind of arrangement is often referred to as ‘contract farming’ and entails a particular form of supply chain governance adopted by firms to secure access to agricultural products, raw materials and supplies meeting desired quality, quantity, location and timing specifications.
Contract farming arrangements usually cover a broad array of different agreements that include market specification in which the farmer is guaranteed with a marketing outlet and time of sale, and possibly a price structure, on the basis of a specified quantity and quality of produce.
It may also extend to cover resource-providing, which sees the purchaser also providing certain physical or technical inputs coupled with production management.
In this case the contractor cum purchaser stipulates and enforces conditions of production and farm-based processing.
A more restricted approach to the arrangement would also see the purchaser extending a degree of production support to ensure the project does not fail, which would mean losses for both parties.
The contractor would need to recoup money invested while the farmer would be pushing to reap enough to generate revenue that enables him or her to pay back the loan, fund a fresh season and take care of the family’s socio-economic needs.
It means both parties need to break even at the end of the day.
In the case of the farmers that chose to dump Cottco for another purchaser, it still remains to be seen how they will manage to pay back given that very few people have the guts to deduct money from what they would be having in their custody and dishing it out to settle a debt without a bit of a push.
It also takes someone who is straightforward to do but this group has also proved that honesty is not one of the virtues associated with its members.
This naturally sets the stage for a protracted legal battle in which the farmers are most likely to come out licking bruised egos because once Cottco takes the legal route, many will be found wanting in terms of mobilising the resources to repay the loans and most probably shoulder the costs of the legal process.
The sad reality is that the moment the cotton industry had just started building is most likely going to take a knock, as hectarage will inevitably fall given that restricted access to inputs has always been the farmers’ biggest undoing in recent years.
Contract arrangements had made resource mobilisation easier for the farmers so this tomfoolery will always come back to bite them.
Maybe it is too soon to conclude that they have defaulted, as they can easily produce the seed cotton and claim they were still getting it ready for the market or they may just march into Cottco offices and settle their debts using proceeds from the better paying purchaser they opted for but that will not erase the fact that they have successfully managed to keep the entire cotton industry guessing as to what exactly is happening.
But whatever the farmers are doing, the crux of the matter lies in that they have to make sure if they are dumping Cottco they do so honourably because if they are to court a new contractor, they should remember that contracts are all about rules and obeying them, period.
They will still need to comply with certain rules and regulations to make arrangement work and repaying their debt is one obligation they will also find waiting for them everywhere even if they change contractors daily.
Contractors on the one hand are also not saints. They have their own bagful of shortcomings that turn farmers against them and in most cases they demonstrate that by defaulting payments or unceremoniously pulling out of the deals.
Sometimes contractors need to put on a human face and regardless of the fact that they are in business, deal with farmers’ issues practically, for instance, try to understand why farmers would have failed to produce adequately to meet their obligations and work around that to find a solution.
After all, contract arrangements are meant to benefit both parties involved with the farmer gaining experience from the business partnership that can be valuable for future participation in related interactions.
The contractor will in the process cut on the process and costs of importing agricultural products when they are produced locally and to their specifications in terms of quantity and quality. The Herald