Profile Mozambique: Considering JFS Group’s long trajectory in the Mozambican agricultural sector, how has the company adapted its agricultural practices to face the current challenges in the cotton market in Mozambique, ensuring sustainability and benefits for the small farmers it collaborates with?
Francisco dos Santos: Founded in 1897, JFS Group is one of the oldest business groups in Mozambique, maintaining continuous operations even during challenging periods such as independence and civil war. Our approach to contract farming, implemented from the beginning, stands out for collaborating with around 40,000 small farmers. We provide interest-free credit for inputs, along with training and technical assistance, also facilitating access to international certifications.
This model ensures that farmers receive approximately 60% of the export value of the fiber FOB, according to the minimum prices set by the Government of Mozambique. The cotton market has experienced ups and downs over the years, but we remain committed to regenerative and sustainable agricultural practices, as evidenced by our recent Regenagri certification.
PM: Given that the merger between JFS and M-Pesa aims to integrate mobile financial services into the agricultural sector, facilitating financial inclusion and sustainable development of rural communities, what are the main challenges you anticipate in implementing this partnership, particularly regarding the technological adaptation of farmers and the necessary infrastructure in rural areas?
FS: The partnership between JFS and M-Pesa represents a strategic alliance between two companies from distinct sectors, but with a common element – a strong connection to the population, especially those living in rural areas and working in the informal sector. Both entities serve as bridges connecting thousands of families to the formal market.
JFS, with its long history of collaborating with smallholder farmers, provides them with technical assistance, training, and input credit, building trust-based relationships even with those without formal documentation. On the other hand, M-Pesa, with its strong technological base and regional experience, facilitates financial inclusion through mobile services. This partnership aims to provide solutions that promote the development and well-being of rural communities, aligning with JFS’s long-term commitment to the sustainable development of these communities.
Through this collaboration, farmers will gain access to essential financial services that will allow them to better plan their harvests, save for the future, and invest in the growth of their businesses. Furthermore, the initiative includes the creation of a network of M-Pesa agents and merchants in areas where JFS operates, enabling farmers to use their electronic funds to purchase essential goods and services without the need for long trips to carry out transactions.
PM: What specific strategies is JFS implementing to improve the quality and productivity of Mozambican cotton and influence its competitiveness?
FS: Almost all the cotton we produce, around 99.9%, is exported. This happens because we lost our textile industry. For those who are not familiar, the process starts with the harvesting of cotton bolls in the field. Then, in factories, the fiber is separated from the seed. This fiber is exported to the industry that produces the yarn, known as spinning. After that, there is weaving, which makes the fabric, and finally, confection, which produces the clothing.
Although Mozambique still has activity in the garment sector, we rely on the importation of fabrics since we lost the capacity for spinning and weaving on a large scale. We once had these industries in the country, but they have disappeared over time. This represents a significant opportunity because the added value of the fiber, up to a t-shirt sold for 200 meticals, is about ten times greater. Not to mention the by-products of cotton, such as seeds, which can be used for oil and other purposes.
Therefore, it is a very important value chain. Currently, since we lack a textile industry, cotton is exported to regions where the textile industry is concentrated, mainly in Asia. Countries like Bangladesh, Pakistan, and Vietnam are the main destinations. There are also a few African countries, such as Mauritius, that have developed their textile industries and are relatively close to us. However, due to logistics costs and our geographical location, our logistics are more directed toward Asia.
PM: What are the main challenges the cotton sector is currently facing in Mozambique, considering factors such as international price volatility, climate change, and the need for modernization of local infrastructure?
FS: The cotton industry in Mozambique faces significant challenges, especially due to global policies that subsidize cotton production in other countries. These subsidies result in lower prices in the international market, making it difficult for Mozambican producers to compete fairly. Despite these obstacles, cotton remains a resilient crop and a fundamental part of family farming in the country.
Companies provide input credit, technical assistance, and implement quality certifications, benefiting not only cotton production but also other associated crops such as maize and beans. In addition, government initiatives, such as subsidies of five meticals per kilogram of cotton, have been implemented to stabilize prices and support around 600,000 farmers, fostering a “culture of trust” in the sector. These measures aim to promote the holistic development of rural areas, integrating financial services, access to electricity, and other essential infrastructures.
