Qingdao cotton company picks a winning model for African farms

Ruichang Tech operates in several African countries and has an annual output of at least 100,000 tons of unginned cotton - before the fiber is separated from the seeds and waste material - and 1,200 tons of cotton yarn. [Photo/VCG]

An agribusiness company in eastern China that has made significant inroads in the African market says its growing presence on the continent is boosting economic development and farmers' incomes.

Qingdao Ruichang Tech-Industrial Co was one of the first Chinese enterprises to grow cotton in Africa, entering the market in 2003.

Back then, the market was dominated by global conglomerates like Cargill, Plexus and Olam, said Liu Yanbo, deputy general manager of the company, based in Qingdao, Shandong province.

To establish a foothold amid fierce competition, Ruichang Tech adopted an order-based model by signing contracts with local growers.

The model, then popular in China, allows farmers to plant and grow crops in line with market demand, preventing unnecessary production.

Liu said the model was a good fit for African nations, as they have abundant land and labor but are short of funds and technologies.

The company hires local employees who are responsible for signing contracts with farmers. In growing seasons, they sell seeds, fertilizers and pesticides on credit to growers, and then buy the cotton after harvest time.

This way, farmers can grow cotton and earn a living without investment, Liu said.

As an example, she cited a father of 10 living in Zambian shanty who signed up with Ruichang Tech in 2014. Before, he had struggled to afford seeds and fertilizer, but with the company's help he was harvesting 3 metric tons of cotton, earning almost $500 in that year.

More than 200,000 families have benefited from the order-based model, Liu said.

China is the world's largest cotton importer, bringing in over 1.1 million tons last year.

Ruichang Tech operates in several African countries and has an annual output of at least 100,000 tons of unginned cotton - before the fiber is separated from the seeds and waste material - and 1,200 tons of cotton yarn.

Every ton is shipped to China as raw material for the textile industry.

"We've also extended our operation to downstream industries such as yarn, weaving and clothing, to make bigger strides forward," Liu said.

In 2009, the company joined hands with the China-Africa Development Fund and Qingdao Hifu Textile Co to establish a joint venture, China-Africa Cotton Development.

Liu said Ruichang Tech brings its close relationship with local cotton growers and experience in international trade, while Hifu Textile specializes in equipment and management, and the China-Africa Development Fund provides financing.

The venture started in southeastern Africa. The first project was in Malawi, where it not only created job opportunities and tax revenue but also introduced new development models and management experiences to improve local economies, she said.

It is now one of five major enterprises involved in cotton growing and processing in Mozambique, the second-largest cotton company in Zimbabwe, and has expanded its business to Mali.