European banks lend money to boost cotton sector

A consortium of European banks has agreed to pump a further 62 million euros (US$78 million)into Burkina Faso’s booming cotton sector, which provides a cash income for hundreds of thousands of subsistence farmers. Good rains last year helped Burkinabe farmers harvest a record crop of 500,000 tonnes and strong demand by China has pushed up world prices for the fibre to 80 US cents per pound - the highest level since 1997. Burkina Faso's parastatal cotton processing company Sofitex said that with the help of the new loan it aims to raise cotton production by a further 20 percent to 600,000 tonnes in the coming year through the improved application of fertilisers and pesticides. Cotton is Burkina Faso's largest source of foreign exchange and the main cash crop of its poor farmers. Sofitex has increased the price it pays producers from 185 CFA (40 US cents) per kilo to 210 CFA (35 US cents)in the coming 2004/5 planting season as an incentive to raise output. Company officials said cotton farmers were expected to earn 125 billion CFA (US$240 million) in the 2004/5 crop year, provided the rains are good, allowing production targets to be met. The new loan agreement, signed on Thursday, will provide money for Sofitex to buy fertiliser and pesticides for the coming planting season and cash to pay farmers for the current crop. Celestin Tiendrebeogo, the managing director of Sofitex, said the bank loan would benefit everyone involved in the Burkinabe cotton industry. “I am now satisfied because the producers will receive their money, the truck owners will be paid, the packing companies will be paid, the electricity company and so on and so forth," he said. "Everyone in the chain will receive their money”. The chairman of the Burkina National Union of Cotton Producers (UNPCB), Francois Traoré, said the working capital provided by the bank loan was crucial because "it allows us to get our money as soon as our cotton is weighed and carried away.” The UNPCB has seven members on the board of Sofitex, which is based in Burkina Faso's second city Bobo Dioulasso, in the southwest of the landlocked country. The government has agreed to let cotton farmers directly take a 30 percent stake in the company. Traoré urged farmers to use fertilizers more effectively to boost output. The UNPCB has used information campaigns in on local radio stations to explain the importance of fertilizers and pesticides. Cotton currently takes up 15 percent of all cultivated land in Burkina Faso, which has risen to become Africa's second largest cotton producer. But Traore said that the UNPCB planned to raise output further by improving yields rather than by planting more land to cotton at the expense of food crops. "We do not need to increase the planted area to increase production...we just need to nurture our land better so as to raise yields to 1.3 tonnes per hectare," he said. The government hopes 540,000 hectares will be planted to cotton in the coming year. Speaking on behalf of the European banks lending money to Sofitex, Pierre Francon of Anglo-French banking group HSBC-CCF praised the Burkinabe company’s sound financial record. “We started funding Sofitex when the situation was much more difficult, but we are comforted that the company keeps performing well every year”, said Francon. He also praised Burkinabe producers for “keeping up the momentum" by raising output without sacrificing quality. About 2.5 million of Burkina Faso's 12 million population depend on the cash raised from growing cotton. It is sometimes referred to as the "white gold" of the Sahel. Production has increased more than four-fold since the government launched a campaign to boost the cotton sector in 1996 and farmers now earn eight times as much from selling their crop to local buyers than they did 10 years ago. However, President Blaise Compaoré has joined with other leaders of developing countries in strongly criticised China, the United States and the European Union for subsidising their own cotton farmers at the expense of producers in some of the world's poorest countries for whom the cash earned from cotton is a lifeline. West African producers reckon they have been losing US $150 million a year in export earnings since 1997 as a result of US subsidies. Burkina Faso's cotton boom has coincided with a slump in the industry just over the border in Cote d'Ivoire. Cotton producers in the rebel-held north of the partitioned country have been isolated from their main markets in the south by a 16-month-old civil war.