The Reserve Bank of Zimbabwe (RBZ) has relaxed fundraising conditions for cotton merchants by removing the requirement for prior approval before sourcing production and buyback funding from local capital markets.
The central bank says the move is intended to unlock financing for the cotton sector and encourage financial institutions to develop lending products tailored to merchants involved in cotton production and marketing.
Authorities believe easier access to capital will help revive an industry that once ranked among Zimbabwe’s leading foreign currency earners.
Policy shift aimed at boosting investment
The policy change follows a similar approach adopted for the tobacco sector, where financing restrictions were eased to reduce reliance on offshore loans.
By allowing merchants to access domestic capital markets without prior RBZ approval, policymakers hope to increase private sector participation in cotton production.
The sector currently supports more than 400 000 farming families, particularly in regions such as Gokwe, Muzarabani and Chiredzi.
Cotton sector challenges
Zimbabwe’s cotton industry has faced significant challenges over the past decade, including declining investment and climate-related shocks.
Production dropped sharply in 2024 to around 13 000 tonnes after severe drought conditions linked to the El Niño weather pattern.
Limited private investment has also affected the sector, partly due to long-standing concerns around side marketing.
Side marketing occurs when farmers sell their produce to buyers other than the contractors who provided production support, discouraging companies from investing in contract farming arrangements.
Government support programmes
Most cotton farmers in Zimbabwe are small-scale rural producers.
About 85 percent of cotton growers receive assistance through the Presidential Cotton Free Inputs Scheme.
Under the programme, farmers receive free seed, fertiliser and chemicals to support production.
The scheme was introduced in 2014 after cotton output dropped to about 28 000 tonnes following the devastating drought of 1992 and a prolonged decline in the sector.
Authorities say reforms aimed at improving financing and strengthening private sector participation are critical to restoring cotton production and improving rural livelihoods.
