Malawi had a vibrant cotton growing sector for many years until it began to slump in the 1990s due in part to the decline in global prices and the increasing cost of cultivation, which eroded the profitability of cotton, particularly for small and marginal farmers.
By the end of 2002, the average income of the 100,000 smallholders growing cotton using family members and ganyu or piecework labour was less than US$1 per day. The annual export value of cotton lint was US$5.5 million and the cotton ginneries were operating at 20 per cent capacity. In addition, cotton seed for oil production and stock feed was being imported.
The Malawi cotton seed treatment programme began in 2003 with the potential of having a large scale impact on reducing poverty by improving the livelihoods of poor people involved in the cotton value chains.
This BLCF-supported project was designed to support the development of higher yield and higher quality cotton and to improve the competitiveness and income of cotton smallholders, as well as ginners, spinners and textile and garment manufacturers. The project could also become a replicable model for the development of a cash crop sector by introducing incentives to improve yields.
The lead project partner, Great Lakes Cotton Company, provided project management, training and the seed treatment plants with the partners supplying training, chemicals and plants and the National Smallholder Farmers Association promoting the new system.
The partners together with cotton smallholders increased Malawi's national cotton crop by about 256 per cent in the first season and productivity more than doubled in the first two years with accompanying increases in average income.
Cotton clubs were established as a support network to help with reliability, trust, security and safety issues arising from increased production. As peer education and early adopter demonstrations proved to be the most effective way of convincing farmers to register with the programme, Great Lakes began supporting farmers and club members training.
All Great Lakes 462 seasonal and part-time workers, including 154 women, are now permanent employees with health insurance and pension contributions. 438 of the jobs are skilled, 342 are field-based and all are paid substantially more than the minimum wage.
The company has added new inputs to the ones available on credit. The cotton clubs guarantee repayment of the input credits and over time the company subsidy will be removed.
In 2005–6, more than the target 200,000 farmers registered for inclusion in the second season programme, the lint value exceeded 13 million and the ginneries were operating at 75 to 80 per cent capacity.
The estimated number of farmers to participate in 2007 was 250,000 with an expected US$24 million export value of lint and ginneries operating at 100 per cent capacity. With the average farmer using the help of three to four family members or ganyu, there could be a 100 percent increase in part-time labour.
The increased availability of cash in the industry has helped improve diet, increase food security and pay school fees. Local businesses such as transport have benefited, many small traders have either set up new businesses or expanded existing ones and there are several new small bakeries and restaurants run by women.
Domestic seed crushers have begun to increase capacity, reducing dependency on imports. Great Lakes exports 100 per cent of the cotton it buys in Malawi to Zambia, South Africa, China, Swaziland and Thailand and is taking the Malawi experience to Zambia.
Despite government intervention in the cotton industry, Great Lakes Cotton Company remained profitable, although now competing with Clark Cotton under the new regulations. Both companies and agricultural input supplier Syngenta are discussing the potential for a change in the regulations with the government. At the same time, price fluctuations and the government subsidy for maize fertiliser may send the wrong signal to farmers and a drop in production will have significant financial consequences and possible negative social impacts.
For more information contact BLCF fund manager, the Emerging Markets Group at this address