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It is an important step for the Ethiopian textiles industry, as the European market demands organic cotton
AYCOOM Agricultural Development Plc has secured 10,000ha of land in the South Omo Zone of the Southern Region. It will now start the first certified organic cotton cultivation in the country at a cost of 815 million Br.
This company, formed by a 55pc share from Ayka Addis Textile & Investment Group and a 45pc share from Omo Valley Agricultural Development Plc, will largely supply Ayka’s demand for organic cotton. Omo Valley is a company owned by the Amibara Business Group, which has already been supplying cotton to Ayka for the past six years from its 13,000ha of land in different parts of the country.
AYCOOM signed a land lease agreement on Tuesday, March 25, 2014, with the Gnangato and Hamer woreda administrations. Construction work on the workers camps had, however, already begun, according to Amare Teklemariam, CEO of Ayka. The agreement will have AYCOOM pay 158 Br a hectare a year for 25 years.
The total cost of the project may depend on the technology to be deployed on the farm, but the feasibility study puts it at 815 million Br, according to the CEO.
The need for organic and quality cotton has pushed the textile company, which sells most of its products in Europe, to engage in such a venture, says the CEO. Currently, there is no certified organic cotton farm in Ethiopia, according to the Ethiopian Textile Industry Development Institute (ETIDI).
The other reason for this move is the increasing foreign exchange that the Company is spending on organic cotton imported from abroad. The Company spent 72.5 million Br for the import of organic cotton in 2013 alone.
“This will also enable the Company to be an end-to-end producer, integrating its production processes,” says Amare.
The Company will also get its cotton from the Cotton Made in Africa Project, through farmers in Metema – 900km from Addis Abeba, in the North Gondar Zone of the Amhara Region. Ayka signed an agreement with the Metema Cotton Producers’ Union and member associations on Friday, March 7, 2014, for the supply of 50,000qts of cotton in the 2014/15 harvest season.
Garment made from organic cotton has a greater demand in the global market and could fetch better prices, saysYared Mesfin, cotton and textile marketing director at the ETIDI.
“There was not enough market for organic cotton in the country and the process of certification is cumbersome and costly for small-holder farmers,” said Assefa Aga, general manager of the Ethiopian Cotton Producers, Ginners & Exporters Association (ECPGEA), explaining the reason for the absence of organic cotton farms in the country.
Organic cotton farms cannot use manmade fertiliser and pesticides above a certain threshold level.
AMIBARA has been engaged in agriculture for the last 15 years; it comprises of 11 different companies as subsidiaries, with around 700 million Br capital and 3,000 permanent and 10,000 temporary workers. Its subsidiaries include – Gelista Agricultural Development, Middle Awash Agricultural Development Enterprise, Amibara General Aviation Service, Addis Modjo Edible Oil Complex and Amibara Agrochemicals.
The business group has been supplying cotton to Ayka since the textile Company first became operational in 2008. This has led to the partnership, according to Amare.
“We have been using their cotton for the last six years and we are happy with their performance,”Amare said.”They run some of the biggest cotton farms in the country.”
The business group believes that its expertise in cotton production will enable it to effectively run the farm, says Yusuf Omer (Sheikh), directing manager of the business group.
Amibara is hoping to access loans from the Development Bank of Ethiopia (DBE) and the Commercial Bank of Ethiopia (CBE).
There seems to be a trend with big textile companies in the country investing in cotton cultivation, with the list including Adama Textile, Elyse Textile and Almeda Textile. Such companies are trying to minimise the risks in cotton market volatility, says Yared.
“In the short run, this kind of process integration can solve the raw material problem in the market,” he said.
Yet this development will not pose a threat to already existing cotton farms, according to Assefa.
“There will not be a problem for existing cotton producers, as there is shortage of cotton in the market,”he said. “Even though major textile companies are beginning cotton production to secure their input.”
In the last harvesting season, 2012/13, 55,000ha of land were covered with cotton and 35,000tns of produce was collected, according to the ECPGEA. Total cotton production stood at 79,710tns in the 2011/12 harvest season. Ethiopia expects to import around 20, 000tns of cotton in the current fiscal year, in order to cover the growing demand from the textile industry, according to the ETIDI.
The Institute is trying to rectify problems in the industry by increasing productivity and working on modernising marketing practices, according to Yared.
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