PROJECT DESCRIPTION
Cotton Spinners is a locally owned limited liability company owned by an indigenous Malawian entrepreneur namely; Mr. Richard Kazembe, Mr. Stewart Malata and Mr. Anderson Kulugomba. The company is yet to be operational but the promoter has done substantial assessment studies to establish the potential of the proposed venture.
On average, Malawi produces cotton on about 200,000 hectares in the lower shire valley and the lake shore areas. The lower Shire valley accounts for about 50% of the production, southern region uplands around 36% and the lake shore areas the remaining 14%. There are currently 11 ginning companies in Malawi with a combined ginning capacity of more than 150,000MT per annum, and only one spinner of cloth in the country.
The objective of the project is to produce yarn for export from lint. At a later stage, we intend to add weaving and knitting to produce finished garments for export.
Sector of Operation
Manufacturing, Textile Industry, Agriculture Value Addition
Business Activity
The project will be buying lint from ginneries in Malawi. We are also exploring possibility of acquiring a ginnery to enter into direct contract farming agreements with farmers especially those under the Ncharo Cotton Project spearheaded by the Greenbelt Project. We will be processing lint into yarn, dyeing, knitting, weaving for exporting to SADC countries, Europe, USA (utilizing AGOA), Middle East.
Competitive Advantage/gap analysis
The project looks to take advantage of the large textile market in USA under the new AGOA Agreement from 2016, entry into the USA at a greater cost advantage than Asian countries. Apart from that, there is a very large proven annual gap in the cotton yarn market in southern Africa of 12000 tonnes (2016). With our future plans of having a yarn dyeing plant, an equally large export market exists into the Indian Ocean Islands, Botswana, and the Gulf States (Bahrain especially)
Some of the challenges that exist include non-existent textile industry in Malawi, Mozambique, Zambia. (Malawi exported 95% of cotton produced as lint) and few existing mills are old resulting in low quality & high cost of production (Mapeto DWS in Malawi, Glendale in Zimbabwe)
However, our competitive advantage which aim at bridging Gap between Opportunity & Challenge highlighted above include competitive buying prices, unique Blends from blended Malawian, Mozambican, Zambian and Tanzanian cotton, high quality yarn, low production cost and high quality due to the state-of-the-art factory with low energy and overhead costs.
Competitive yarn export prices at standard 176% of the value of local low FOB price lint, qualifies for AGOA tariff exemption which will allow us entry into the USA at a greater cost advantage than Asian countries, quick and efficient deliveries as we will be able to export to regional & overseas markets via nearby Nacala rail or road and guaranteed locally generated Solar power add to the growing competitiveness of our project.
LOCATION
The project will be located in Liwonde, Balaka District, close to the Nacala rail line. This location was chosen due to the availability of cotton farms which will provide a readily available supply of raw materials
Cotton Spinners is a locally owned limited liability company owned by an indigenous Malawian entrepreneur namely; Mr. Richard Kazembe, Mr. Stewart Malata and Mr. Anderson Kulugomba. The company is yet to be operational but the promoter has done substantial assessment studies to establish the potential of the proposed venture.
On average, Malawi produces cotton on about 200,000 hectares in the lower shire valley and the lake shore areas. The lower Shire valley accounts for about 50% of the production, southern region uplands around 36% and the lake shore areas the remaining 14%. There are currently 11 ginning companies in Malawi with a combined ginning capacity of more than 150,000MT per annum, and only one spinner of cloth in the country.
The objective of the project is to produce yarn for export from lint. At a later stage, we intend to add weaving and knitting to produce finished garments for export.
Sector of Operation
Manufacturing, Textile Industry, Agriculture Value Addition
Business Activity
The project will be buying lint from ginneries in Malawi. We are also exploring possibility of acquiring a ginnery to enter into direct contract farming agreements with farmers especially those under the Ncharo Cotton Project spearheaded by the Greenbelt Project. We will be processing lint into yarn, dyeing, knitting, weaving for exporting to SADC countries, Europe, USA (utilizing AGOA), Middle East.
Competitive Advantage/gap analysis
The project looks to take advantage of the large textile market in USA under the new AGOA Agreement from 2016, entry into the USA at a greater cost advantage than Asian countries. Apart from that, there is a very large proven annual gap in the cotton yarn market in southern Africa of 12000 tonnes (2016). With our future plans of having a yarn dyeing plant, an equally large export market exists into the Indian Ocean Islands, Botswana, and the Gulf States (Bahrain especially)
Some of the challenges that exist include non-existent textile industry in Malawi, Mozambique, Zambia. (Malawi exported 95% of cotton produced as lint) and few existing mills are old resulting in low quality & high cost of production (Mapeto DWS in Malawi, Glendale in Zimbabwe)
However, our competitive advantage which aim at bridging Gap between Opportunity & Challenge highlighted above include competitive buying prices, unique Blends from blended Malawian, Mozambican, Zambian and Tanzanian cotton, high quality yarn, low production cost and high quality due to the state-of-the-art factory with low energy and overhead costs.
Competitive yarn export prices at standard 176% of the value of local low FOB price lint, qualifies for AGOA tariff exemption which will allow us entry into the USA at a greater cost advantage than Asian countries, quick and efficient deliveries as we will be able to export to regional & overseas markets via nearby Nacala rail or road and guaranteed locally generated Solar power add to the growing competitiveness of our project.
LOCATION
The project will be located in Liwonde, Balaka District, close to the Nacala rail line. This location was chosen due to the availability of cotton farms which will provide a readily available supply of raw materials
BENEFITS OF THE PROJECT/ALIGNMENT OF PROJECT TO GOVT GOALS
The factory will provide basis for growth of textile industry, potentially in hundreds of USD millions for Malawi and Region. Below are the estimated export sales for 5 years:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| 16,586,449 | 26,221,958 | 30,901,108 | 36,879,262 | 36,879,262 |
At present, the main focus is on lucrative export market. However, we foresee in future other textile players exploiting local market with garments using our textiles.
The standard Yarn exports value is at standard 176% of the value of lint. This value is more than doubled when yarn is dyed, and increases exponentially when weaving and knitting is added. Thus, expected minimum value addition is 76% on value of lint exports and likely more than treble with the dyeing, knitting and weaving included.
FINANCIAL REQUIREMENTS
Capital Expenditure Requirement - US$27 million
Working Capital Requirement - US$3 million
Proposed Financing Structure - Debt 75%, Equity 25%
Capital Expenditure Requirement - US$27 million
Working Capital Requirement - US$3 million
Proposed Financing Structure - Debt 75%, Equity 25%
PROPOSED INVESTMENT MODEL (ACTIONS REQUIRED/ IMPLEMENTATION ARRANGEMENTS/ CONTRACT TYPE)
Joint venture partnership
Required Equity Investment of US$6m,
Current Shareholders to Invest US$2 million for a total Investment of US$8million
Financing – Long-term debt (10 years) of US$22 million
PROJECT FEASIBILITY
Technical Feasibility
Done, business plan vetted by experts available
Feasibility Study
Not complete
Environmental Impact Assessment
Not yet done
Technical Designs
Machinery designs and quote available. Final Factory designs not yet done but estimates already done
Licenses
Done, company registered
Market Feasibility Study
Done (off-takers agreement available)
Financial Feasibility
Internal Rate of Return - 11% (Based on 10-year cashflows and 10.45% discount rate), Net Present Value - $19,130,900 (Based on 10-year cashflows and 10.45% discount rate) and Payback Period - 10 years
CONTACTS
Contact Person: Richard Kazembe, Managing Director. Mobile: +265 888843482. Email: This email address is being protected from spambots. You need JavaScript enabled to view it.