Cotton Export

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COTTON EXPORT REPORT
cotton spinning mill
in 11 sub-Saharan African countries

Feasibility study for a cotton spinning mill in 11 sub-Saharan African countries

A study undertaken by Gherzi on behalf of UNIDO

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna, 2011

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. This publication has not been formally edited.

Foreword
Cotton plays a significant role in the economy of sub-Saharan Africa. However, merely 15 per cent of the cotton grown in the subregion is processed locally; the bulk of it is exported as a raw material. The United Nations Industrial Development Organization (UNIDO) has undertaken a variety of initiatives in support of the African cotton industry. At a highlevel session on cotton organized by the World Trade Organization in Geneva on 15 and 16 March 2007, UNIDO presented a paper entitled “Support for the cotton industry and industrialization issues”. The present study has been carried out with the aim of building productive capacities in the cotton/textile/garment value chain in 11 cotton-producing sub-Saharan African countries. The objective of UNIDO is an increase of the volume of cotton processed within the subregion to at least 25 per cent in the near future. The spinning of cotton yarn represents the first stage of the industrial transformation of raw cotton into an intermediate textile product (yarn), and results in significant added value. The promotion of this activity is in line with the global trend towards “task-based” production, which is predicated on specialization in some stages of a value chain rather than in final products, as highlighted in the Industrial Development Report 2009. World trade in cotton yarn is estimated at 7 billion United States dollars; as such, the market represents an interesting niche for cotton-producing African countries. From a development perspective, promoting the spinning industry would help to integrate the African cotton economy into the world trade in manufactured products. The present study includes a technological-economic feasibility analysis for setting up a cotton yarn spinning mill based on the factor costs prevailing in the 11 sub-Saharan African countries that were selected. A comparative analysis of economic returns has revealed that because energy is scarce and expensive, only iii

a few African countries can meet the investment criteria. A strategic research finding was that Government support in the form of policies and incentives is essential for attracting foreign direct investment to the capital-intensive spinning industry, especially in Africa. The present study is intended to be used as a template based on a set of given premises and parameters. However, any decisions taken by a particular company should take into account several factors, including cotton and yarn prices, exchange rates, interest rates, type of technology and equipment, product mix, location, market access and Government support measures. In addition, the study provides an opportunity for policymakers in African countries to learn from the experiences gained by cotton and textile-producing Asian countries in strengthening the value chain.

Kandeh K. Yumkella Director-General, UNIDO

iv

CONteNtS
Page

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. The social and economic impact of the cotton sector in Africa . . IV. The rationale for spinning . . . . . . . . ....
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