Reviving Uganda's cotton sector
Cotton and cotton textile industries are the engines of economic growth both in developed and developing countries. ...
TRADE | COTTON
On January 17, 2018, The trade ministry signed a memorandum of understanding with SSA Investments, a Turkish company at the ministry's headquarters in Kampala, to revive cotton growing and industry in Uganda. Below is the speech of Adnan Sarihan, the chairperson SSA Investments.
Ladies and Gentlemen,
It is a great pleasure to meet you all. It is an added pleasure to talk to you in the presence of honourable government members and our ambassador who will witness the signing ceremony of the memorandum of understanding between our company and the trade minister on behalf of Government of Uganda.
I trust these signatures may open a new door in Ugandan economy by way of aligning Turkish experience and Ugandan potential for growth.
This journey has started with a fact-finding visit in October 2014 to see and assess if we can have any chance to invest in cotton spinning here in Uganda. I particularly recall my heartfelt interactions with cotton farmers in Mutumba in Iganga district during my visit. This was followed by our study to structure a specific business model to serve the needs of those farmers to touch the lives of roughly 200,000 people. It took more than three and half years to reach a level of understanding. Together, we have had several rounds of discussion starting with His Excellency President to many officials in government offices. I never forget the factory and agricultural sight visits I have made with Vincent Ssempija and Michael Werikhe in Turkey to explain our model. Today again, I can see lot of energy and enthusiasm in this hall. I believe we are going to have quick steps from thereon to reach a final agreement for meeting the expectations of all.
Brothers and friends from the fields, SSA Investments is a business platform to make investments in textile manufacturing, agro-business and in healthcare solely to selected East African countries where opportunities should have strong development potential and export led growth taken as "modus operandi".
It has been proven that cotton and cotton textile industries are the engines of economic growth both in developed and developing countries.
They are considered to be the early phase of industrialisation and export-led growth. We also know that Africa has traditionally been considered as an important cotton production base, where Uganda was Sub-Saharan Africa's largest cotton producer in 1960s. However, this sector went into spiral dive by then due to uncertainties that have been encountered.
Even the cotton industry in Uganda has made great moves in research and studies, the sector lags behind its potential today. Market-oriented culture and direct market linkages with clients have not been developed in Uganda. As market-related aspects have been handled outside of Africa in general, feedback from spinning mills to ginners and to producers has not been provided.
Following the liberalisation and restructuring of the cotton industry in Uganda, the institutions that regulate cotton trade among farmers, ginners and traders become weak and control are lost. In an entirely open system, producer prices, collection marketing and export marketing are entirely free. Controls are managed by private industry structures in which the ginners and traders have a major say. Obviously, ginners are playing a critical role in ensuring cotton because they are the interface between farmer/cotton purchasing agent and the broad market.
Ugandan ginners' practices in purchasing raw cotton mainly through local agents, are mostly discouraging farmers to switch cultivation of other cash crops. Thus, would only result in the reduction of acreage under cotton and may force significant number of households to give up cultivation of cotton altogether. Last but not least, a low level of domestic value-addition, which exposes cotton farmers to fluctuations in the world market lint cotton prices has also been noted as a major weak point for potential capacity building efforts.
I am coming from 3,000 miles away, from a country of "Pamba". Turkey has a wealth of experience in cotton growing and cotton textile industry and has started her journey to development by launching cotton and cotton textile industries after 1920s. After making great strides in manufacturing to reach a developing country level where Turkey is ranked 16th largest economy in the world today, cotton is still the basic income source for millions of people considering its direct and indirect employment effect with yearly revenue of $30b being generated out of cotton and cotton related industries.
According to the US department of agriculture's recent reports, Turkish cotton planting estimate is 450 thousand hectares and lint production is up to 900 thousand tons for this season. Domestic cotton consumption is projected to be 1.6 million tonnes. Imports are expected to remain the same as last year at 800,000 tonnes, in spite of the increasing local availability of cotton. These numbers mean 75 times more of production than in Uganda.
Turkey's increasing young population and disposable income, an increased number of tourists visiting Turkey from neighbouring Middle Eastern countries are contributing to this surge in local sales of textiles. Turkish textile producers are increasing their store numbers in export markets, such as the Middle East, North Africa, and Europe, to penetrate more to the markets that they are already in. The rise in exports to Turkey's traditional markets, such as Europe and Russia, and also in new markets such as Iran, will help to support the cotton consumption in the future as well.
Turkish mills have been investing in new machinery and technology to increase quality and to lower costs to get ahead in the very competitive but massive international textile trade.
Turkey sourced about 47% of their imported cotton from the UStates, despite anti-dumping surcharge on U.S. cotton. Brazil, Turkmenistan and Greece were the other leading suppliers during the same period. About 26,000 metric tonnes of Syrian cotton also found its way to the Turkish market, despite turmoil in that region.
During the first two months of 2017/18 season, which are August and September, total imports were 165 thousand tons; of which 82 thousand tons was U.S. cotton. Australia, Brazil, Burkina Faso (11,000 tonnes) and Benin (8,000 tonnes) were the other leading suppliers. I would like to draw your attention to the last two African countries being ranked in Turkey's supplier list recently along with main exporters of cotton.
PIC: State minister for trade Michael Werikhe, Ambassador of Turkey to Uganda Sedef Yavuzalp and Adnan Sarihan after signing the memorandum of understanding between the trade ministry and SSA Investments at the trade ministry offices in Kampala recently. (Credit: Nancy Nanyonga)
Lint cotton is the most important raw material and primary phase of textile value chain. Our project starts with establishing the base for producing high quality lint cotton with global standards using state of art ginning technology by exercising Turkish know-how starting from agricultural practices to marketing.
Once we start to produce and export lint cotton, the global recognition of Ugandan cotton will be emerged shortly. With the availability of substantial quantity and internationally accepted quality local lint cotton, initially international and in time local industrialists will take their part to exploit Uganda's potential in textile supply chain, starting from spinning ending up to ready to wear production as an ultimate goal. This model is specifically structured for equally serving the needs of all actors in Uganda to establish a strong and sustainable supply chain to aim for exports of Ugandan textile products, as primary focus.
As we will be linking up the market from the beginning and engaging with buyers in already identified priority markets through our sales network, a win-win partnership could easily be created.
We are prepared to play our part as to materialise aforesaid global goals on Ugandan soil and link Uganda to Turkey for a direct access to international textile world for a long term benefit. However, it is also evident that no economy can achieve its true potential without creating local heroes.
I also learn that any industry can only flourish with endeavours of local people and growth of any sector anywhere in the world, may only be catalysed through a range of fiscal and non-fiscal promotion policies. Governments may act as facilitator and regulating body to promote and subsidise sectors which will eventually bring significant returns to the nation in terms of increased employment, foreign exchange earnings, growth of allied sectors, less dependence on imports and increased tax collection. Across the globe, different states have focused on different sectors and formulated policies to aid the sector growth - like China & Turkey- manufacturing, India-services, Singapore-financial, Malaysia-tourism. Hence, unless Government of Uganda takes a decisive role to determine the outcome in cotton textile industry, the expectations will not be realised.
Considering the necessity and benefits of cotton and cotton textile industry to the country, the Government can take up various development plans to be implemented in short-term, medium-term and long-term and then phased out successively after achievement of desired results. We are confident that once we kick off and reach our first milestone soon, many companies will start to explore your potential based on our footprints. With a view to help potential foreign investors, I humbly suggest you to consider a fast track mechanism to resolve all issues sincerely in one-stop shop and to show them that you value their participation a lot with an alert judicial system to ensure safety of investments.
Our project in-its limited capacity; can only ignite Ugandans awareness to accomplish their true potential in entrepreneurship with a lot of hard work. To achieve this broad goal, I feel privileged to have learnt that we will be granted with required financial and human resources as well as safe working environment under this memorandum of understanding, in today's signing ceremony.
I am grateful to Her Excellency Mdm. Sedef Yavuzalp and Werikhe for their determination to have the chance of reaching a conclusion after a long period.
It is heartening to address a crowd where eyes are wide open to see if there is a real chance of making a business together. We feel responsible.
As the African proverb says… "Walk alone if you want to walk fast, walk with others if you want to go far." I always take this as the motto and will be happy to learn from my brothers during our new journey.