The role of a multi-national in developing markets
A Cargill case study

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Page 5: Investments

Cargill 3 Image 4In 1996, Cargill acquired two cotton ginning operations from the government-owned Cotton Company of Zimbabwe. The cotton gins are located in Chegutu and Tafuna, respectively 108 miles south and 50 miles north of the capital of Harare in central Zimbabwe. The cotton gins were CargillÕs first processing plant investments in the country and in financial terms, the most significant in Africa.

The move followed International Monetary Fund pressure on Zimbabwe to break away from its state monopolies and privatise industries in order to encourage the development of markets and a new spirit of enterprise. For Cargill, this presented an opportunity both to help Zimbabwe develop new effective markets and also to ensure a high quality supply link through its own direct investment in facilities in Zimbabwe. The gins’ main suppliers are smallholder cotton farmers, the most rapidly growing sector in the national cotton business. The privatisation process enables smallholders to increase their production of this reliable cash crop. Cargill pays farmers on the spot when they deliver their crops, as it does in Malawi and Tanzania. This has marked a significant change for farmers’ incomes, from the previous situation where the government marketing boards often took as much as eight weeks to process payment. The two gins employ a combined workforce of about 40 permanent and 130 casual and seasonal staff. With the funds gained through selling two of its gins to Cargill, the government’s Cotton Board is building another gin, further expanding the industry. A look into the future, then, suggests farmers will grow even more cotton to supply the competing gins, increasing both their own income and the income the country will earn from exports - income which can be used to further its overall growth and development.

Cargill 3 Image 5On the global market, Zimbabwe is a sought-after producer of premium (high quality), consistent quality cotton, averaging 250,000 tons per year. The privatisation of the Zimbabwean cotton industry is a welcome one for cotton consumers world-wide. The Cargill gins are located in two of the country’s main cotton growing areas and together process approximately 75,000 tons of cotton lint annually. This is some 30% of the total Zimbabwean output. The gins play a significant role in the national supply chain. They also play a valuable role in the national economy. In the first year of the gins’ operation, Cargill paid farmers approximately $40 million. Much of this was then injected into the economy by being spent locally on food, clothing, education, home and business improvements, etc.

Cargill | The role of a multi-national in developing markets
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