New form of Chinese aid revives Zambia's largest textile company

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Last updated at: (Beijing Time) Thursday, November 27, 2003

New form of Chinese aid revives Zambia's largest textile company

Zambia-China Mulungushi Textile Joint Venture Ltd. (ZCMT) is the largest textile company in Zambia.

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Zambia-China Mulungushi Textile Joint Venture Ltd. (ZCMT) is the largest textile company in Zambia.

The company in Kabwe, about 140 km to the north of Zambian capital Lusaka, employs 2,000 workers and produces 1,800 tons of cotton yarn, 17 million meters of various fabrics and 100,000 pieces of garments every year.

But unlike many textile companies in the world, the ZCMT extends interests farther down the line. Its two ginneries could process 20,000 tons of seed cotton a year. It also has a refinery that produces about 600 tons of cotton seed oil.

The ZCMT even goes into cotton growing. Through 5,000 contracted farmers, it now controls 10,000 hectares of cotton farms.

With annual tax bill of billions of Kwacha, the ZCMT is now thelife line of Kabwe, a once bustling mining town that has run out of its mineral resources. Many businesses in the town depend on the ZCMT for their survival.

It would be hard to imagine that just five years ago, the ZCMT itself is one of the many dead factories in Kabwe, with its machines decaying in dust and workers sent home.

The factory, formerly under the Defense Ministry of Zambia, was built with Chinese aid. It was inaugurated in 1983 after five years of construction financed by a 11.17-million-pound interest-free loan from the Chinese government.

It was initially under Zambian management with assistance of Chinese experts. However, it did not take long for the factory to shutdown after the Chinese experts withdrew in 1994, thanks to deteriorating macro-economic situation and mismanagement.

In July 1995, then Chinese vice-premier Zhu Rongji suggested during his visit to Zambia that the factory be turned into a Zambia-China joint venture to bring it back to life. The proposal was readily accepted by the Zambian government.

It was eventually agreed that China's 11.17 million pound investment in the factory and another allocation of 1.5 million US dollars for overhaul will be turned into a 66-percent stake in the new joint venture, while the Zambian side will take up the remaining 34 percent stake.

It was also agreed that both the chairman of the board of directors and the general manager will be manned by the Chinese, who will also man all the main management positions.

To ensure that the new joint venture will have enough operating fund, the Chinese government further provided it with 200 million yuan in low-interest loan.

In January 1997, about 30 management and technical staff from the Qingdao Textile Corporation in east China's Shandong Province arrived in Zambia and immediately started the overhaul work.

It took the new management only 20 days to restart the factory,after repairing all the equipment, drafting new rules and regulations and recruiting workers.

The new joint venture, known as the ZCMT, was formally inaugurated in May 1997 by visiting Chinese premier Li Peng.

Immediately after the resumption of production, the ZCMT ran into new problems such as poor product quality, low efficiency, insufficient varieties of products and long delivery period, all of which demand the replacement of the outdated equipment.

Over the last six years, the ZCMT has spent about 20 million US dollars on new spinning, weaving, dyeing and printing machines as well as a computer auxiliary design system, hence greatly improve the quality and varieties of its products.

Then cotton supply also became a problem. The monopoly of the raw cotton market by a few big companies made it difficult for theZCMT to source cotton at a reasonable price to the level that it had to import cotton from Tanzania, resulting in much higher costs.

Starting from 1998, the ZCMT began to move into cotton farming.It provides farmers with seeds, fertilizer and pesticide in credit to farmers. In return, the farmers sell their cotton to the ZCMT.

Five years later, the ZCMT has become the third largest cotton purchaser in Zambia. It purchased 9,000 tons of cotton in 2002 and 5,000 tons in 2003. In addition to meet its own needs, the company even exported 2,000 tons of cotton since 2002 to China, where there is a high demand for cotton.

The ZCMT has set up a marketing network not only in Zambia but also in the whole sub-region. It has 18 stores across Zambia and two subsidiary companies in Tanzania and Namibia. The ZCMT products can be found in Zimbabwe, Malawi, Mozambique and many other countries in the sub-region.

Taking advantage of the Africa Growth Opportunity Act (AGOA), the ZCMT is also doing its best to explore the US market.

In 2000, it delivered 11,000 pairs of short pants to the United States, the biggest ever single export of textile products to the US market by a Zambian company.

The ZCMT has made impressive efforts in image building. Since 2000, it has been sponsoring an annual contest of Miss Mulungushi,the winner of which is appointed the company ambassador. The ceremony this year was graced by Zambian First Lady Maureen Mwanawasa.

In September 2003, the ZCMT sent three incumbent and previous Misses Mulungushi to China to take part in the Qingdao International Fashion Week, where they showed clothes made by ZCMTon the catwalks. The event was a hit news both in Qingdao and Zambian newspapers.

ZCMT's success is recognized by both Zambian and the international society. Zambian leaders always mention the ZCMT when they talk of Zambia-China friendship, together with the famous Tanzania-Zambia Railway. The official newspaper Times of Zambia described it as a "story of success."

In May 2002, the ZCMT was awarded the 2002 World Quality Commitment International Star Award in Paris by the International Quality Commitment Convention. It is the only textile company and the only company with Chinese background to win the award.

In 2001, the ZCMT was also awarded the 20th Golden Africa Awardby OFICE, or popularly known as the trade leader club based in Dakar, Senegal. The award is described as "a symbol of fraternity and relationship among all nations which work for a better future without any kind of distinction."

Deputy general manager Song Peihua described a rosy future for the company in his recent interview with Xinhua.

He said the company has reached an agreement with Wyler Team International Corporation, an agent of retail giant Wal-Mart, to jointly financing the expansion of its garment factory so that it will have the capacity to produce 100,000 pairs of pants per monthfor export to the US market.

The ZCMT has also completed feasibility study for the investment of a ginnery in Chipata, capital of Eastern Province. The factory will have a capacity to process 20,000 tons of seed cotton a year and will be jointly financed by the ZCMT, Zambia's largest cotton processing company Niymba and other potential partners from China.

The ZCMT has another ambitious plan, which will aim to set up an industrial park on a piece of land owned by the ZCMT, where investors will benefit from the government's policy to encourage export-oriented industries.

The project also got a boost from President's Mwanawasa's China visit, during which an agreement was signed between the Zambian government and the Qingdao municipal authority to encourage Chinese investors setting up businesses in the planned park.

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