A PROFILE OF THE SOUTH AFRICAN COTTON MARKET VALUE CHAIN

Transcription

1 A PROFILE OF THE SOUTH AFRICAN COTTON MARKET VALUE CHAIN 216 Directorate Marketing Tel: Private Bag X 15 Fax: Arcadia MogalaM@daff.gov.za 7 1

2 Table of Contents 1. DESCRIPTION OF THE INDUSTRY Production Areas South African seed cotton production vs. consumption Production of cotton lint MARKET STRUCTURE Marketing arrangements Domestic Market and Prices COTTON EXPORTS FROM SOUTH AFRICA Share Analysis COTTON IMPORTS FROM THE WORLD INTO SOUTH AFRICA MARKET INTELLIGENCE MARKET ACCESS PROCESSING AND THE VALUE CHAIN TREE MARKET VALUE CHAIN EMPOWERMENT ISSUES AND TRANSFORMATION IN THE SECTOR BUSINESS OPPORTUNITIES AND CHALLENGES Other factors that constrain commercialization of emerging farmers GINNERIES ACKNOWLEDGEMENTS

3 Gross value (Rands) 1. DESCRIPTION OF THE INDUSTRY Cotton is the most versatile crop grown by mankind. It is noted for its versatility, appearance, performance and comfort and it provides useful products and used to create thousands of jobs in South Africa as it moved from field to fabric. However, this situation is changing over the years due to a substantial decrease in the local cotton crop size. In 21, Cotton SA established a formal program at the Lowveld College of Agriculture at Nelspruit where about 5 small-scale farmers were trained. The training capacity was increased in order to reach the production objective of the Cotton Sector Strategy Plan, namely the emerging farmers should contribute on average 25% of the national cotton crop by 27 and 35% by 214. The cotton gross value of production in South Africa was at approximately R139 million during 214/15 marketing season. The cotton gross value of production was estimated at R218 million by end of 215/16 marketing season. As far as the local outlook is concerned, the 7 th estimate for the 214/15 production year indicates a total crop of 1 37 lint bales, up 18% from the previous season and 2% more than last month s crop estimate. About lint bales are estimated to be produced from RSA grown seed cotton, up 121% from the previous season. The balance of 3 6 lint bales relates to expected Swaziland produced cotton to be ginned by the Swaziland gin. Figure 1 below indicates contribution of the cotton industry in South Africa to the gross value of agricultural production between 26 and Figure 1: Cotton gross value of production in South Africa '7 27'8 28'9 29'1 21'11 211'12 212'13 213'14 214'15 215'16 Source: Statistics & Economic Analysis, DAFF Period (Years) The graph further indicates that cotton gross value of production started to increase substantially in 21/11 marketing season and at the same time attained a peak at approximately R at first half of the ten year period. The graph also indicates that on average, the gross value of cotton production between 25/6 and 29/1 experienced low levels of growth of between R79 5 and R Between 21/11 and 214/15 marketing season, generally cotton gross value of production experienced an increase although a decline occurred in 212/13 due to cotton imports arising mainly from SADC countries and cheap textile imports from the East. Another factor was low international cotton prices due to subsidies in a developed world; and this depressed local cotton production. During the second half of the ten year period, cotton gross value of production to increase substantially in 3

4 215/16 marketing season and at the same time attained a peak at approximately R The figure also indicates that there was 56.8% increase in cotton gross value of production in South Africa in 215 as compared to the 214 marketing season Production Areas Traditional cotton production areas in South Africa are as follows: Limpopo Province in Loskop, North and South flats from Bela-Bela to Mokopane, Dwaalboom, Thabazimbi and Weipe. North West Province covering the areas of Taung and Stella/ Setlagoli. Northern Cape in the lower Orange River, Vaalharts, Douglas and Prieska District municipalities. KwaZulu-Natal covering Makhathini flats, Mpumalanga and Eastern Cape Provinces are also involved in cotton production although on a smallscale. This situation has slightly changed over the years with the result that during 215/16 production season in the North West Province, cotton is grown in Taung and Stella / Setlagoli. In the SADC region cotton is produced in countries such as Angola, Malawi, Mozambique, South Africa, Tanzania, Republic of, Zambia and Zimbabwe during 215/16 production season. Democratic Republic of Congo did not produce cotton in 215/16 season but managed to import and consume the product. Mozambique produced cotton however did not consume. This simply implies that Mozambique exported all cotton produced in 215/ South African seed cotton production vs. consumption As at the end of January 215 there were no seed cotton and 337 tons of cotton lint in stock at cotton ginners. No cotton lint was produced by ginners in January 215 whilst 186 tons of cotton lint was sold. Cotton spinners consumed tons of cotton lint in January 215 whilst 2 68 tons were in stock on 31 January 215. As at the end of June 215, there were tons of seed cotton and tons of cotton lint in stock at cotton ginners. South African cotton seed production and consumption volumes and trends are discussed in Figure 2 below over a ten year period (26/7-215/16). 4

5 Cotton seed prodn (tons) Consumption (tons) Figure 2: South African cotton seed production vs Consumption Period (Years) Cotton seed production (tons) Consumption (tons) Source: Cotton South Africa Figure 2 shows the domestic demand for cotton seed far outweighed production and supply of cotton seed in South Africa between 26/7 and 215/16. On the other hand, other SADC countries such as Malawi, Mozambique, Tanzania, Zambia and Zimbabwe produce far above their domestic demand. On average the production of cotton by South African producers has been declining over the same period (25/6 and 29/1), while at the same time is far below the domestic demand due to global economic downturn, which also resulted in a situation where global cotton consumption fell by 12% during the same period. The deficit shown in Figure 2 above is met through imports, mainly from SADC countries. Cotton consumption by local spinning mills has shown a similar decline as production, as can be seen from Figure 2. This trend can be mainly ascribed to the continued imports of low-priced textiles and apparel from Asia, and also to the relative strength of Rand against the US dollar, all of which impacts negatively on demand for locally manufactured textiles. The graph further depicts that the demand for cotton has increased dramatically in 25/6 season at more than 5 tons, compared to 214/15 season of about 25 tons. It is also important to note that while the demand is low for the product, cotton seed production between 212/13 and 214/15 production seasons has increased from approximately 14 tons to 24 tons. South African producers are unable to compete with their SADC counterparts as far as production of cotton is concerned due to different factors. These SADC countries can produce cotton much cheaper than South Africa because they do not have minimum labour wages, no high labour costs amongst other things. 1.3 South African production of cotton lint At the end of June 215 there were tons of seed cotton and tons of cotton lint in stock at cotton ginners. Local cotton ginners produced tons of cotton lint in June whilst 215 tons of cotton lint were sold. Cotton spinners consumed 2 34 tons of cotton lint in June 215, up 15% from June 214, whilst 3 72 tons were in stock on 3 June 215. The increase in cotton seed production over recent years can mainly be attributed to the following factors: to the perception that cotton is no longer 5

6 26/'7 27/'8 28/'9 29/'1 21/'11 211/'12 212/'13 213/'14 214/'15 215/'16 Production (tons) a viable option in view of the more favourable prices of other competing summer crops; cotton prices over recent years have not increased to the same extent as in the case of other summer crops; and the low international prices of recent years, which discouraged any growth in cotton production. Cotton faces stiff competition from crops such as maize and sunflower where prices offer farmers greater profitability whilst requiring less management inputs. According to Cotton South Africa, the following volumes (as shown in Figure 3) of cotton lint were produced over the ten year period starting from 26/7 to 215/16. Figure 3: Cotton lint production in South Africa Period (Years) Source: Cotton South Africa The graph further depicts that between 26/7 and 21/11, cotton lint production in South Africa was from a high base as compared to period between 211/12 and 215/16 although some serious consistent declines were experienced over the same period due to increasing cotton lint imports from SADC. In 26/7 and 211/12 production seasons, cotton lint production in South Africa attained a peak at approximately and tons respectively. In 212/13 production season, cotton lint production experienced a decline of about tons. Between 212/13 and 213/14 production seasons, cotton lint production experienced a consistent decline of about 5 35 tons in 213/14. During 214/15 production season, cotton lint production experienced a positive increase to levels of about tons. The graph further depicts that the increase in cotton lint production during 215/16 represents 45.3% increase as compared to 215/16 production season. Figure 4 below shows small scale cotton lint production against total cotton lint production in South Africa over the past decade (26/7-215/16). Source: Cotton South Africa The figure further shows that production of cotton lint by small scale farmers has followed a similar trend to total cotton production in South Africa between 25/6 and 214/15. Total cotton production 6

7 Total lint production (tons) Area planted (ha) started to increase in 26/7 and at the same time attained a peak at approximately tons within the first half of ten year period. Between 2781 and 213/14 production season, the figure also shows that the lowest levels of total cotton lint production were attained in 213/14 at about 5 35 tons. Similarly, production of cotton by small scale farmers also started to increase in 26/7 and at the same time attained a peak at approximately tons. Between 27/8 and 214/15, cotton lint production by smallholder farmers in South Africa experienced a continuous decline to lower levels of about 21 tons in 215/16 production season. On average, cotton lint production by small scale farmers has been below 1 tons per annum during the period under examination. In spite of increases in the total Republic of South Africa s cotton production in 26/7 and 211/12 production seasons, cotton production by small scale farmers did not follow the same trend. The figure also shows that during the period under scrutiny, total cotton production experienced a decline of about 45.3% in 215/16 as compared to 214/15 production season. The figure further shows that during the period under scrutiny, small scale cotton lint production also experienced a very slight increase of about 62.8% in 215/16 as compared to 214/15 production season. Figure 5 below illustrates the area that was planted with cotton lint as against the volumes of cotton lint produced between 26/7 and 215/16 production season. Figure 5: Total Cotton production vs Area planted with cotton /'7 27/'8 28/'9 29/'1 21/'11 211/'12 212/'13 213/'14 214/'15 215/' Total lint production Period (Years) Area plnted Source: Cotton South Africa The graph further illustrates that cotton lint production in South Africa started to increase in 25/6 production season and at the same time attained a 26/7 at approximately tons in an area planted of about hectares. Cotton production experienced a decline between 27/8 and 21/11 production seasons at approximately tons. The figure also illustrates that on average farmers have continuously decreased the size of land allocated to cotton production since it is easy to substitute cotton with other grain crops. There were production efficiencies in 29/1, 21/11, 211/12, 212/13 and in 214/15 production seasons, as the area planted was less but cotton production was relatively high. The area planted with cotton lint experienced a slight decrease in terms of the size of the land from hectares in 26/7 to approximately hectares in 21/11. The graph further illustrates that in 214/15 production season, area planted with cotton slightly 7

8 Production (metric tons) Consumption (metric tons) increased as compared to the previous year, and cotton production also increased slightly over the same period ( tons of cotton lint produced from hectares of land). The graph also illustrates that cotton production decreased at 62.7% in 215/16 as compared to 214/15 production season, while the area planted with cotton also experienced a slight increase of approximately 53.7% in 215/16 as compared to 214/15 production season. Figure 6 below depicts various SADC countries that are major producers of cotton as against the demand/ consumption of cotton during 215/16 marketing season. Figure 6: SADC production vs Consumption (215/16) Prodcution Consumption Source: Cotton South Africa The figure further depicts that Tanzania was the main cotton producer during 215/16 production season, followed by Malawi and Zambia. It is further evident from the figure that Angola, South Africa and DRC are the lowest cotton producing countries during 215/16 production season. When the demand and supply of cotton is compared during 215/16, countries such as Zimbabwe, Zambia, Malawi and Mozambique produced cotton in excess of their domestic requirements; making them exporters of the product to South Africa and DRC. On the other hand, the demand of cotton in South Africa and the DRC during 215/16 far outweighed their domestic production making way for imports from other SADC countries to meet domestic demand. The figure also depicts that cotton production in Tanzania attained a peak in 215/16 at approximately 68 tons, while Zambia attained a peak at approximately 4 tons over the same period under examination. As shown in figure 6, Angola is the lowest cotton producing country during the period under examination. The figure further depicts that production of cotton in Tanzania and Zambia during 215/16 far outweighed their domestic demand, making way for them to export to other SADC countries to meet their domestic demand. The figure also depicts that DRC did not produce cotton during 215/16 production season. 1.4 Employment 8

9 During 212/13 marketing season, it was estimated that the primary cotton industry employed on average an estimated 1 workers, excluding the ginners of cotton and seasonal workers. During 213/14 marketing season, it was estimated that the primary cotton industry employed on average an estimated 16 workers, excluding the ginners of cotton and seasonal workers. During 215/16 marketing season, it is estimated that the primary cotton industry employed on average an estimated 16 workers, excluding the ginners of cotton and seasonal workers. 2. MARKET STRUCTURE 2.1 Marketing arrangements Since deregulation, local seed cotton and cotton lint are marketed in the following three ways: The seed cotton is sold by the producer to a ginner who gins the cotton and in turn sells the cotton lint for his own account to spinners and the seed to processors, either directly or indirectly by making use of agents. The gin determines the price the producer obtains for his seed cotton and the producer relinquishes ownership of the cotton. The producer may decide not to sell his seed cotton to the ginner, but contracts the ginner to gin it on his behalf on payment of a ginning fee. The cotton lint and seed remain the property of the producer who then either market these products himself or contracts the gin or someone else to market the cotton lint (and seed) on his behalf. Producers can gin their own cotton in their own gins. They then either market the cotton lint and seed themselves or contract someone else to do it on their behalf. Seed cotton is ginned by the cotton gins where the seed is separated from the fibre the ginning process. The purchase of seed cotton takes place in terms of the grading standards applicable to handpicked and machine picked cotton and linked to the South African Grading Standards for lint. The latter serves as a norm for the sale of the cotton lint. In the event of any disputes arising during the delivery of the seed cotton that cannot be resolved to the satisfaction of both parties, the Quality Control Department of Cotton SA is accepted as an impartial body in the role of arbitrator. In the event of a dispute that may arise during the delivery of cotton lint, international organizations such as the Liverpool Cotton Association and the Bremen Cotton Exchange will fulfil this role. 2.2 Domestic Market and Prices Figure 7 below illustrates cotton lint average producer prices in South Africa between 26/7 and 215/16. 9

10 26/'7 27/'8 28/'9 29/'1 21/'11 211/'12 212/'13 213/'14 214/'15 215/'16 Average Price (c/kg) Figure 7: Cotton Average producer prices in South Africa Period (Years) Source: Cotton South Africa & Statistics & Economic Analysis, DAFF The figure further illustrates that cotton lint average producer prices in South Africa experienced an increase between 26/7 and 215/16 marketing season. In 26/7, the cotton industry experienced improvement in cotton lint average producer prices which began increasing in 28/9 and at the same time a peak was attained a small peak at approximately R1 235 cents per kilogram in response to improvement in international cotton prices. In 29/1 marketing season, there was a slight decline in prices of cotton lint due to low production levels and low demand for South African cotton lint. During the second half of the period under review, cotton lint average producer prices started to increase again until a peak was attained in 215/16 at approximately R2 cents per kilogram. The figure further illustrates that the increase in cotton lint average producer prices during 215/16 represents 7.8% as compared to 214/15 marketing season. 3. COTTON EXPORT VOLUMES FROM SOUTH AFRICA Figure 8 below indicates volumes of cotton exports (not carded or combed) from South Africa to various regions of the world over the past decade (26-215). 1

11 Export quantity (tons) Figure 8: Export volumes of cotton (not carded or combed) to the world Africa Americas 5 12 Asia Europe Oceania 22 Source: Quantec EasyData Period (Years) The figure further indicates that South Africa exported most of its cotton (not carded or combed) to Asia, followed by very minimal volumes to Africa, Americas, Europe and Oceania. The figure also indicates that South Africa exported very few of its cotton (not carded or combed) to Africa due to the fact that African countries like Zambia, Zimbabwe, Tanzania and Mauritius lately are big producers and exporters of cotton. The figure further indicates that export volumes of cotton (not carded or combed) from South Africa to Asia increased substantially in 211 until a peak was attained in 212 at approximately tons. Export volumes of cotton (not carded or combed from South Africa to Asia experienced a dramatic decline in 214 and 215 to low levels of about 687 and tons respectively. The analysis also indicates that in 215, export volumes of cotton (not carded or combed) from South Africa to Asia declined by 687 tons and that represents a 1 decline as compared to 214 marketing season. Figure 9 below depicts the export volumes of cotton (not carded or combed) from South Africa to Africa between 26 and

12 Export quantity (tons) Figure 9: Export volumes of cotton (not carded or combed) to Africa SADC (excluding SACU) SACU (Excluding RSA) Source: Quantec EasyData Period (Years) The figure further depicts that over the past ten years, the greatest market share for cotton exports from South Africa to Africa went to SACU excluding South Africa, followed by very minimal export volumes to SADC Region. Over the past ten years, the major source of cotton lint in particular was from SADC countries with cotton import volumes increasing every year to more than 2 tons. The figure also depicts that export volumes of cotton from South Africa to SACU excluding South Africa attained a peak in 213 at approximately tons between 26 and 215. The SADC Free Trade agreement as well as closeness between South Africa and other SADC countries is the main reason behind such a huge flow of cotton exports and imports from the region to South Africa. Other SADC countries such as Zimbabwe, Tanzania and Zambia have a comparative advantage in cotton production, and this allows them to produce more cotton at a lower cost and intensifies their potential to export to less producing countries in the SACU Region such as Botswana, Namibia, Lesotho and South Africa. South Africa exported very low levels of cotton volumes to SADC Region between 26 and 215 due to the fact Zambia, Zimbabwe and Tanzania are the major producer and suppliers of the cotton. Also important to note was that between 26 and 29, South Africa did not export cotton volumes to the SACU Region mainly due to increases in exports of other products from South Africa as a result of trade negotiations that took over at the time. The figure also depicts the decline in export volumes of cotton (not carded or combed) from South Africa to the SACU Region during 215 represents 2.3% decline as compared to 214 marketing season. Over the past ten years (26-215), Figure 1 shows export volumes of cotton (not carded or combed) from South Africa to SACU Region excluding South Africa. 12

13 Export quantity (tons) Lesotho Swaziland Source: Quantec EasyData Figure 1: Export volumes of cotton (not carded or combed) to SACU (excluding RSA) Period (Years) The figure further shows that export volumes of cotton (not carded or combed) from South Africa to SACU Region landed primarily in Lesotho, followed by minimal export volumes from South Africa to Swaziland between 26 and 215. The figure also shows that between 26 and 29, South Africa did not export cotton volumes to Lesotho and Swaziland, until an increase was experienced during the second half of the ten year period and a peak in 213 at approximately 2 92 tons. Producers in Zambia and Zimbabwe are paid considerably lower prices than South African producers and thus ginners in these countries can be aggressively competitive when selling into the South African market. Many SADC governments are providing some form of support to their cotton growing sectors and this is opposite with South African producers. In 212, there was a notable decline in export volumes of cotton (not carded or combed) from South Africa to Lesotho of about 339 tons, while in 213 exports of cotton from South Africa to Lesotho attained a peak at about 2 92 tons. Export volumes of cotton (not carded or combed) from South Africa to Lesotho experienced a slight decline to lower levels of about 5 tons. The analysis also shows that the slight increase in export volumes of cotton (not carded or combed) from South Africa to Lesotho during 215 represents 4.5% as compared to 214 marketing season. Figure 11 below illustrates export volumes of cotton (not carded or combed) from South Africa to Asia between 26 and

14 Export quantity (tons) Source: Quantec EasyData Figure 11: Export volumes of cotton (not carded or combed) to Asia Eastern Asia South-central Asia 484 South-eastern Asia Period (Years) Asia is the leading role player of cotton exported from South Africa during the period between 26 and 215. The figure illustrates that export volumes of cotton (not carded or combed) from South Africa to Asia landed primarily in South-eastern Asia, followed by minimal export volumes from South Africa to by Eastern Asia and South-central Asia between 26 and 215. The graph further illustrates that export volumes of cotton from South Africa to South-eastern Asia were from a low base during the first half of the ten year period under scrutiny attaining a maximum of tons in 26. During the second half of the ten year period ( ), export volumes of cotton from South Africa to South-eastern Asia were from a high base attaining a peak in 212 at approximately tons. Export volumes of cotton (not carded or combed) from South Africa to Eastern Asia attained a peak in 211 at approximately tons. Between 26 and 211 and again between 213 and 215, South Africa did not export its cotton (not carded or combed) volumes to South-central Asia due to strong domestic production in Asia. Between 214 and 215, export volumes of cotton (not carded or combed) from South Africa to South-eastern Asia declined substantially to low levels of about 687 and tons respectively. The analysis further illustrates that in 215, export volumes of cotton (not carded or combed) from South Africa to South-eastern Asia declined to approximately 687 tons and that represents 1% as compared to 214 marketing season. Figure 12 below depicts export volumes of cotton (not carded or combed) from South Africa to Southeastern Asia between 26 and

15 Export quantity (tons) Indonesia Singapore Thailand Source: Quantec EasyData Figure 12: Export volumes of cotton (not carded or combed) to Southeastern Asia Period (Years) The leading role players of cotton (not carded or combed) exported from South Africa to South-eastern Asia was Indonesia, followed by Thailand and Singapore between 26 and 215. The graph further depicts that export volumes of cotton (not carded or combed) from South Africa to Indonesia attained a peak in 212 at approximately tons, while Thailand attained a peak in 21 at approximately 2 95 tons and Singapore attained its peak in 212 at about tons. The graph also depicts that in 29, 214 and 215, South Africa did not export its cotton to Indonesia, while between 26 and 28, and South Africa did not export its cotton to Singapore. In 28 and again between 213 and 215, South Africa did not export cotton to Thailand due to the declining domestic production of the cotton. The analysis further depicts that in 213 and 214, export volumes of cotton (not carded or combed) from South Africa to Indonesia decreased from 359 to tons and that represents 1% as compared to 213 marketing season. Figure 13 shows export volumes of cotton (not carded or combed) from South Africa to Europe between 26 and

16 Export quantity (tons) Figure 13: Export volumes of cotton (not carded or combed) to Europe European Union Source: Quantec EasyData Period (Years) The figure further shows that the major export market for South African cotton to Europe was European Union between 26 and 215. Export volumes of cotton from South Africa to the European Union were from a low base during the first half of the ten year period (26-21) attaining a maximum of about 23 tons in 26. During the second half of the ten year period ( ), export volumes of cotton from South Africa to the European Union were from a high base attaining a peak in 211 at approximately 531 tons. In 27 and 28 and again 212 and 215, there were no export volumes of cotton from South Africa to the European Union. The analysis also shows that between 212 and 215, export volumes of cotton (not carded or combed) from South Africa to the European Union declined dramatically and that represents 1% decline as compared to 211 marketing season. Figure 14 below indicates value of cotton (not carded or combed) exports by Provinces of South Africa to the world between over the past ten years (26-215). 16

17 Export Vaalue (Rands) Figure 14: Value of cotton exports (not carded or combed) by RSA Provinces Source: Quantec EasyData Western Cape Eastern Cape Northern Cape Free State KwaZulu-Natal North West Gauteng Mpumalanga Limpopo Period (Years) The figure further indicates that the major exporter of South African cotton to the world was Gauteng Province followed by Northern Cape and KwaZulu-Natal Provinces between 26 and 215. The figure also indicates that value of cotton exports from Gauteng province to the world were from a low base during the first half of the ten year period, while export values of cotton from Gauteng province to the world were from a high base during the second half of the same period attaining a peak in 212 at approximately R19 million. Substantial value of cotton exports by Northern Cape Province to the world was recorded in 21 at approximately R31.1 million during the period under examination. Notable export volumes of cotton from KwaZulu-Natal Province to the world were also recorded in 215 at approximately R14.4 million during the period under examination. In percentage terms, the decline in cotton exports from Gauteng province to the world in 215 at approximately R1.21 million represents 92.6% decrease as compared to 214 marketing season. Figure 15 below shows value of cotton (not carded or combed) exports from Western Cape Province to the world between 26 and

18 Export Value ( Rands) Figure 15: Value of cotton (not carded or combed) exports by Western Cape City of Cape Town Cape Winelands Source: Quantec EasyData Period (Years) The figure shows that City of Cape Town Metropolitan Municipality was the main supplier of cotton (not carded or combed) exports from South Africa to the world during 215 marketing season. The figure also shows that exports of cotton (not carded or combed) from the City of Cape Town Metro Municipality to the world started with a notable increase in 26, until a peak was attained in 27 at approximately R3.1 million. The figure also shows that in 29, there were no exports of cotton (not carded or combed from the City of Cape Town Metro Municipality to the world. Between 28 and 214, exports of cotton from the City of Cape Town Metro to the world experienced very low exports of not more than R152. In percentage terms, the increase in cotton (not carded or combed) exports from the City of Cape Town Metropolitan municipality to the world in 215 represents 4.3% decrease as compared to 214 marketing season. Figure 16 below depicts value of cotton (not carded or combed) exports from Gauteng Province to the world between 26 and

19 Export value (Rands) Source: Quantec EasyData Figure 16: Export value of cotton (not carded or combed) by Gauteng Province Sedibeng West Rand Ekurhuleni City of Johannesburg City of Tshwane Period (Years) The figure further depicts that during the period under examination, City of Johannesburg Metro municipality was the main exporter of cotton (not carded or combed) from Gauteng Province to the world, followed by Ekurhuleni and City of Tshwane Metro municipalities. Sedibeng and West Rand District municipalities had very low / intermittent exports of cotton from 26 to 215. The figure also depicts that cotton (not carded or combed) exports from the City of Johannesburg Metro municipality to the world were from a low base during the first half of the ten year period under examination attaining a maximum of R48 million in 21. The figure further depicts that cotton (not carded or combed) exports from the City of Johannesburg Metro municipality to the world were from a high base during the second half of the ten year period under examination attaining a peak in 213 at approximately R75.5 million. The figure also depicts that there was 9.8% increase in cotton (not carded or combed) exports from the City of Johannesburg Metro municipality to the world in 215 as compared to the 214 marketing season. Figure 17 illustrates value of cotton (not carded or combed) exports from KwaZulu-Natal Province to the world between 26 and

20 Export Value(Rands) Figure 17: Value of cotton exports (not carded or combed) by Kwa Zulu Natal Province UMgungundlovu ilembe ethekwini Source: Quantec EasyData Period (Years) The figure further illustrates that ethekwini Metropolitan municipality was the main supplier of cotton (not carded or combed) from KwaZulu-Natal Province to the world, followed by very minimal exports of cotton (not carded or combed) from UThungulu and UMgungundlovu District municipalities. The figure also illustrates that cotton exports from ethekwini Metro municipality to the world were from a high base during the first half of the ten year period under review attaining a peak in 26 at approximately R7.4 million. Cotton (not carded or combed) exports from ethekwini Metro municipality to the world were from a low base during the second half of the ten year period under review attaining a peak in 215 at approximately R14.4 million. The figure further shows that between 211 and 213, there was a consistent decline in exports of cotton (not carded or combed) to low levels of about R. million. In 214, exports of cotton (not carded or combed) from ethekwini Metropolitan municipality to the world attained a peak at approximately R9.5 million. The figure further illustrates that there was 51.6% increase in cotton (not carded or combed exports from ethekwini Metropolitan municipality to the world in 215 as compared to 214 marketing season. Over the past decade (26-215), Figure 18 depicts value of cotton (not carded or combed) exports from Limpopo Province to the world. 2

21 Export value ( Rands) Figure 18: Value of cotton exports (not carded or combed) by Limpopo Province Mopani Vhembe Capricorn Waterberg Greater Sekhukhune Source: Quantec EasyData Period (Years) The figure further depicts that during the period under review, Greater Sekhukhune District municipality was the main supplier of cotton, not carded or combed exports from Limpopo Province to the world. Vhembe District, Waterberg, Capricorn and Mopani District municipalities had minimal levels of exports of cotton to the world of not more than R6 per year during the period under review. Exports of cotton (not carded or combed) from Greater Sekhukhune District municipality to the world were from a low base during the first half of the ten year period attaining a peak in 27 at approximately R Exports of cotton (not carded or combed) from Greater Sekhukhune District municipality to the world were from a high during the second half of the ten year period attaining a peak in 215 at approximately R32.4 million. In 26 and again between 28 and 29, there were no exports of cotton (not carded or combed) from Greater Sekhukhune District Municipality to the world. Again between 211 and 213, there were no exports of cotton (not carded or combed) from Greater Sekhukhune District Municipality to the world. The figure also depicts that the dramatic increase in cotton exports (not carded or combed) from greater Sekhukhune District municipality to the world in 215 represents 775% increase as compared to 214 marketing season. Figure 19 illustrates value of cotton (not carded or combed) exports from Northern Cape Province to the world between 26 and

22 Export value ( Rands) 3 Figure 19: Value of cotton exports (not carded or combed) by Northern Cape Pixley ka Seme Siyanda Frances Baard Source: Quantec EasyData Period (Years) The figure further illustrates that Pixley ka Seme District Municipality was the main supplier of cotton (not carded or combed) from Northern Cape Province to the world, followed by Frances Baard District Municipality and very low levels of cotton exports from Siyanda District Municipality to the world over the ten year period under review. The figure further illustrates that cotton (not carded or combed) exports from Pixley ka Seme District Municipality to the world were from a low base during the first half of the ten year period attaining a peak in 27 at approximately R The figure also illustrates that cotton exports from Pixley ka Seme District Municipality to the world were from a high base during the second half of the ten year period attaining a peak in 214 at approximately R28. million. Between 28 and 29, and gain between 212 and 213, there were no cotton (not carded or combed) exports from Pixley ka Seme District Municipality to the world. The figure further illustrates that there was 28.6% increase in cotton (not carded or combed) exports from Pixley ka Seme District Municipality to the world in 215 as compared to 214 marketing season. 3.1 Share Analysis Table 1 indicates the share of provincial exports into South African cotton exports in percentages between 26 and 215. The table further indicates that over the past decade, Gauteng Province commanded the greatest share in terms of cotton (not carded or combed) exported by South Africa to the world. Table 1: Share of Provincial cotton exports (not carded or combed) to the total RSA cotton exports (%) Years Province Western Cape

23 Years Province Western Cape Eastern Cape Northern Cape Free State KwaZulu- Natal North West Gauteng Mpumalanga Limpopo Source: Calculated from Quantec EasyData Table 2: Share of district cotton exports (not carded or combed) to the total Western Cape Province cotton exports (%) Years Districts City of Cape Town Cape Winelands.... Source: Calculated from Quantec EasyData Table 2 above shows the share of district exports into Western Cape Province cotton exports in percentages terms between 265 and 215. The table further shows that between 26 and 215, City of Cape Town commanded the greatest market share in terms of cotton exported by Western Cape Province to the world during the period under review. Table 3: Share of district cotton exports (not carded or combed) to the total Northern Cape Province cotton exports (%) Years Districts Pixley ka Seme Siyanda District Frances Baard Source: Calculated from Quantec EasyData 23

24 Table 3 indicates the share of district exports into Northern Cape Province cotton exports in percentages between 26 and 215. The table further indicates that over the past decade, Pixley ka Seme District Municipality commanded the greatest market share in terms of cotton exported by Northern Cape Province to the world. Table 4: Share of district cotton exports (not carded or combed) to the total KwaZulu-Natal Province cotton exports (%) Years Districts UMgungundlovu District UThungulu District ethekwini Metro Source: Calculated from Quantec EasyData Table 4 above indicates the share of district exports into KwaZulu-Natal Province cotton exports in percentages between 26 and 215. The table further indicates that over the past decade, ethekwini Metropolitan municipality commanded the greatest market share in terms of cotton exported by KwaZulu-Natal Province to the world. Table 5: Share of district cotton exports (not carded or combed) to the total Gauteng Province cotton exports (%) Years Districts Sedibeng District West Rand District Ekurhuleni Metro City of Johannesburg City of Tshwane Source: Calculated from Quantec EasyData Over the past ten years, Table 5 shows the share of district exports into Gauteng Province cotton exports in percentages. The table further shows that between 26 and 215, the City of Johannesburg Metropolitan municipality commanded the greatest market share in terms of cotton exported by Gauteng Province to the world during the period under review. 24

25 Import quantity (tons) Table 6: Share of district cotton exports (not carded or combed) to the total Limpopo Province cotton exports (%) Years Districts Mopani District... Vhembe District Waterberg District Greater 56.3 Sekhukhune. 3.. Source: Calculated from Quantec EasyData Table 6 above indicates the share of district exports into Limpopo Province cotton exports in percentages between 26 and 215. The table further indicates that between 26 and 215, Vhembe District municipality commanded the greatest market share in terms of cotton exported by Limpopo Province to the world during the period under review. 4. COTTON IMPORTS FROM THE WORLD INTO SOUTH AFRICA Figure 19 below illustrates volumes of cotton imports (not carded or combed) from various regions of the world into South Africa between 2 and 215. Figure 2: Import volumes of cotton (not carded or combed) from the world Africa Americas Asia Source: Quantec EasyData Period (Years) 25

26 Import quantity (tons) The figure further illustrates that the major import market for cotton (not carded or combed) from the world into South Africa was Africa, with very minimal volumes of cotton imports from Americas and Asia between 26 and 215. South Africa s import volumes of cotton (not carded or combed) from Africa into South Africa were from a high base during the first half of the ten year period (26-21) under review attaining a peak in 26 at approximately tons. The figure further illustrates that South Africa s imports of cotton from Africa were from a low base during the second half of the ten year period ( ) under review. The analysis further illustrates that in 215, import volumes of cotton (not carded or combed) from Africa into South Africa declined by tons and that represents 35.2% as compared to the 214 marketing season. Figure 21 below shows volumes of cotton imports (not carded or combed) from Africa into South Africa over the past decade (26-215). Figure 21: Import volumes of cotton (not carded or combed) to Africa Eastern Africa Rest SADC (excluding SACU) SACU (Excluding RSA) Source: Quantec EasyData Period (Years) The figure further shows that the biggest supplier of cotton (not carded or combed) import volumes from Africa into South Africa was SADC Region excluding SACU, with very minimal volumes from Eastern Africa and SACU excluding South Africa between 26 and 215. The major source of cotton lint in particular is from SADC countries with cotton import volumes increasing every year. During the period under examination, import volumes of cotton (not carded or combed) from SADC into South Africa were from a high base during the first half of the ten year period under review attaining a peak in 26 at approximately tons. The figure also shows that between 26 and 214, cotton import volumes from SADC into South Africa generally experienced a consistent decline to lower levels of about tons in 215. The SADC Free Trade agreement as well as closeness between South Africa and other SADC countries is the main reason behind such a huge flow of cotton imports from the region to South Africa and otherwise. Other SADC countries such as Zimbabwe, Zambia and Malawi have a comparative advantage in cotton production, and this allows them to produce more cotton at a lower cost and intensifies their potential to export to less producing countries like South Africa. The analysis further 26

27 Import quantity (tons) shows that in 215, import volumes of cotton (not carded or combed) from SADC into South Africa declined by tons and that represents 4.8% as compared to 214 marketing season. Figure 22 depicts volumes of cotton imports (not carded or combed) from SADC region into South Africa between 26 and 215. Source: Quantec EasyData Figure 22: Import volumes of cotton (not carded or combed) to SADC Malawi Mozambique United Republic of Tanzania Zambia Zimbabwe Period (Years) The figure further depicts that import volumes of cotton (not carded or combed) from SADC into South Africa originated mainly from Zambia, followed by Zimbabwe and Malawi between 26 and 215. The figure also depicts that import volumes of cotton (not carded or combed) from Zambia into South Africa were from a low base during the first half of the ten year period (26-21) attaining a peak in 26 at approximately tons, while the stronger Rand to the US$ in relation to the weaker SADC currencies contributed to the fact that cotton from SADC can be discounted in the SA market, thereby making the local crop less attractive to take up. Producers in Zambia and Zimbabwe are paid considerably lower prices than SA producers and thus ginners in these countries can be aggressively competitive when selling into the SA market. Many SADC governments are also providing some or other form of support to their cotton growing sectors and this is opposite with South African producers. The figure further depicts that South Africa did not import volumes cotton (not carded or combed) from United Republic of Tanzania between 21 and 214 of the period under scrutiny. The figure also depicts that in 215, import volumes of cotton (not carded or combed) from Zambia into South Africa declined by approximately 9 29 tons and that represents 54.8% as compared to 214 marketing season. Figure 23 below shows import volumes of cotton imports (not carded or combed) from the Americas into South Africa over the past decade (26-215). 27

28 Import quantity (tons) South America NAFTA Source: Quantec EasyData Figure 23: Import volumes of cotton (not carded or combed) to Americas Period (Years) The graph further shows that most of cotton import volumes (not carded or combed) from South Americas into South Africa were mainly originated in South America, followed by NAFTA during the period under examination. The graph also shows that import volumes of cotton (not carded or combed) from South America into South Africa were. tons during the first half of the ten year period (26-21) under scrutiny. During the second half of the ten year period ( ) under review, import volumes of cotton from South America into South Africa were from a high base attaining a peak in 211 and 212 at about 1 42 and tons respectively. The graph also shows that import volumes of cotton (not carded or combed) from NAFTA into South Africa attained a peak in 211 at approximately 1 29 tons. The analysis also shows that between 213 and 215, import volumes of cotton (not carded or combed) from South America into South Africa declined by tons respectively and that represents 1% decline as compared to 212 marketing season. Figure 24 below indicates volumes of cotton imports (not carded or combed) from Asia into South Africa between 26 and

29 Import quantity (tons) Figure 24: Import volumes of cotton (not carded or combed) from Asia Eastern Asia South-central Asia South-eastern Asia Source: Quantec EasyData Period (Years) It is evident that the major supplier of cotton (not carded or combed) from Asia into South Africa was mainly South-central Asia, followed by very low or intermittent cotton import volumes from Eastern Asia. The figure also indicates that in 26, 28 and between 212 and 213, there were no import volumes of cotton (not carded or combed) from South-central Asia into South Africa. Import volumes of cotton (not carded or combed) from South-central Asia into South Africa started to increase substantially in 211 and at the same time attained a peak at approximately tons. Import volumes of cotton (not carded or combed) from Eastern Asia into South Africa also attained a peak also in 211 at approximately 292 tons. After a 1% decline in imports of cotton (not carded or combed) from South-central Asia into South Africa between 212 and 213, cotton import volumes saw a substantial increase during 214 to maximum levels of approximately 29 tons. The analysis further indicates that in 215, import volumes of cotton (not carded or combed) from South-central Asia into South Africa decreased by approximately 179 tons and that represents 14.5% increase as compared to 214 marketing season. Figure 25 shows import volumes of cotton (not carded or combed) from South-central Asia into South Africa between 26 and

30 Import quantity (tons Import quantity (tons) Figure 25: Import volumes of cotton (not carded or combed) from South-central Asia India Source: Quantec EasyData Period (Years) The graph further shows that the major supplier of cotton (not carded or combed) from South-central Asia into South Africa was mainly India, with no competition from other counter parts. The graph also shows that in 26, 28 and between 212 and 213, there were no import volumes of cotton (not carded or combed) from India into South Africa. Import volumes of cotton (not carded or combed) from India into South Africa started to increase substantially in 211 and at the same time attained a peak at approximately tons. The industry saw a 1% decline in imports of cotton from South-central Asia into South Africa between 212 and 213, until a substantial increase was observed during 214 to maximum levels of approximately 29 tons. The analysis further shows that in 215, import volumes of cotton (not carded or combed) from India into South Africa decreased to 179 tons and that represents 4.5% decrease as compared to 214 marketing season. Figure 26 illustrates volumes of cotton imports (not carded or combed) from Europe into South Africa over the past decade (26-215). Figure 26: Import volumes of cotton (not carded or combed) from Europe Western Europe Rest Source: Quantec EasyData Period (Years) 3

31 The figure further illustrates that the major supplier of cotton (not carded or combed) from Europe into South Africa during the period under review was Western Europe with no competition from any other European region. The figure also illustrates that imports of cotton from the Western Europe into South Africa started to increase in 27 and at the same time attained a peak at approximately 64 tons. The figure further illustrates that in 26 and again between 28 and 214, there were no import volumes of cotton from the Western Europe into South Africa. The figure also illustrates that in 215, import volumes of cotton (not carded or combed) from Western Europe Rest into South Africa did not grow at 24 tons and that represents 1% increase as compared to 27 marketing season. 31

32 5. MARKET INTELLIGENCE Table 6: List of importing markets for cotton exported by South Africa in 215 Trade Indicators Importers Exported value 215 (USD thousand) Share in South Africa's exports (%) Exported quantity 215 (tons) Unit value (USD/unit) Exported growth in value between (%, p.a.) Exported growth in quantity between (%, p.a.) Exported growth in value between (%, p.a.) Tariff (estimated) faced by South Africa (%) World Lesotho Indonesia Japan Botswana Zambia Namibia Swaziland Congo, Democratic Republic of the 1 5 Malawi 1 1 Zimbabwe 1 13 Bangladesh Source: Trade Map 32

33 Table 6 shows the list of importing markets for cotton (not carded or combed) exported by South Africa to the world in 215. The table further shows that during the period under scrutiny, South Africa exported a total of tons of cotton to the world, and this means that South Africa is a net importer of cotton as the country imported at approximately tons. The table further shows that during the period under scrutiny, Lesotho, followed by Indonesia and Japan were the biggest import markets for cotton (not carded or combed) from by South Africa in 215. The table also shows that although Lesotho was the leading import market for South African cotton, the exported growth in quantity decreased by 32% per annum, as compared to that of Swaziland and Singapore that declined negatively by 26% and Botswana had the highest exported growth in quantity sitting at approximately 18% per annum between 211 and 215. The table further shows that although Lesotho was the leading import market of South African cotton, its exported growth in value was at 6% while Zambia increased their exported growth in value at 9% and 78% per annum respectively. The table also shows that Lesotho had the highest market share in South Africa s exports of cotton (not carded or combed) in 215 at 9%, followed by Indonesia at 9.1% and Japan at 7.5%. One other key point to notice was that South Africa s exported growth in value to Botswana decreased at 21% per annum respectively, while the average world figures declined at 33% between 214 and

34 Figure 27: Growth in demand for cotton (not carded or combed) exported by South Africa in 215 Source: Trade Map 34

35 Figure 27 depicts the growth in demand for cotton (not carded or combed) exported from South Africa to the world in 215. The figure further depicts that Mauritius was the biggest import market for cotton (not carded or combed) exported by South Africa during the period under scrutiny. The figure further depicts that the annual growth of South Africa s cotton (not carded or combed) exports to Lesotho was increasing at 6% but economy / country was in a declining market, as compared to the annual growth of South Africa s cotton exports to Zambia which is in a dynamic market at approximately 9% respectively. This means that in Indonesia and in Namibia, the growth in demand for cotton (not carded or combed) exports from South Africa was low during the period between 211 and 215. The annual growth of South Africa s cotton exports to Zambia increased to approximately 9% in a dynamic market. The bubble graph also depicts that it was not a good economic decision for South Africa to export cotton to both Lesotho and Botswana as both markets are declining in terms of South Africa s cotton exports during the period between 211 and

36 Figure 28: Prospects for market diversification for cotton exported by South Africa in 215 Source: Trade Map 36

37 Figure 28 indicates the prospects for market diversification for cotton (not carded or combed) exported by South Africa to the world in 215. The figure further indicates that Indonesia was the biggest market for South African cotton (not carded or combed) during the period under review, with a share of partner countries in South Africa s exports at 9.6%. The figure also indicates that if South Africa had to diversify its markets for cotton (not carded or combed), small but attractive markets exists in Lesotho. The figure further indicates that Lesotho had a highest market share in South Africa s cotton exports at approximately 8.37% between 211 and 215, as compared to Indonesia and Japan at approximately 9.1% and 7.5% market share respectively. Table 7: List of supplying markets for cotton imported by South Africa in 215 Trade Indicators Exporters Imported value 215 (USD thousand) Share in South Africa's imports (%) Imported quantity 215 (tons) Unit value (USD/unit) Imported growth in value between (%, p.a.) Imported growth in quantity between (%, p.a.) Imported growth in value between (%, p.a.) Tariff (estimated) applied by South Africa (%) World Zambia Malawi Zimbabwe Côte d'ivoire India Lesotho Singapore Burkina Faso Switzerland China Australia 6.6 Source: Trade Map Table 7 shows the list of supplying markets for cotton (not carded or combed) imported by South Africa from the world in 215. The table further shows that during the period under review, Zambia followed by Malawi and Zimbabwe were the biggest supplying markets for cotton imported by 37

38 South Africa over the same period. The table further shows that during the period under examination, South Africa imported a total of tons of cotton from the world, and this means that South Africa is a net importer of cotton as the country managed to export cotton at approximately tons. One of the reasons for this result is that all the countries are from the SADC region which means the distance to the market is short and the tariff agreements are suitable for trade as South Africa is also part of SADC. It is also interesting to note that South Africa s imported growth both in value and quantity to Zambia decreased at 13% and at 3% respectively, as compared to negative 26% and 13% respectively of what was imported from the world during the same period under scrutiny. Also important to note was that South Africa s imported growth in value and quantity to Malawi also increased at 2% and 21% as compared to negative 26% and 13%% from the world between 211 and 215. Zambia s share in South Africa s imports accounts for 49.3%, while Zimbabwe accounts for 19.6% and Malawi accounted for 2% during the same period under scrutiny. 38

39 Figure 29: Competitiveness of supplying markets to South Africa for imported cotton in 215 Source: Trade Map 39

40 Figure 29 illustrates the competitiveness of supplying markets to South Africa for imported cotton (not carded or combed) by South Africa in 215. The figure further illustrates that the biggest supplying markets for cotton (not carded or combed) imported by South Africa was Zimbabwe during the period under review, with an annual growth of South Africa s imports from the above partner countries at negative 2% respectively between 211 and 215. The figure also illustrates that during the period under examination, the most competitive supplier for cotton imported by South Africa was Malawi with an annual growth of South Africa s imports from the partner countries of about 2% and Zambia with an annual growth of South Africa s imports from the partner countries of about 5% between 211 and

41 Figure 3: Prospects for diversification of suppliers for cotton imported by South Africa in 215 Source: Trade Map 41