VZCZCXRO2877
OO RUEHBC RUEHBZ RUEHDE RUEHDH RUEHDU RUEHGI RUEHJO RUEHKUK RUEHMA
RUEHMR RUEHPA RUEHRN RUEHROV RUEHTRO
DE RUEHNJ #0437/01 2821443
ZNR UUUUU ZZH
O 091443Z OCT 09 ZDK
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7292
INFO RUCNFUR/DARFUR COLLECTIVE PRIORITY
RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/HQ USAFRICOM STUTTGART GE PRIORITY

UNCLAS SECTION 01 OF 02 NDJAMENA 000437 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/C, S/USSES 
NSC FOR GAVIN 
LONDON FOR POL - LORD 
PARIS FOR POL - BAIN AND KANEDA 
ADDIS ABABA ALSO FOR AU 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PREF ECON ETRD CD
SUBJECT: COTTON:  CHAD'S SECOND EXPORT SECTOR IN TROUBLE 
 
NDJAMENA 00000437  001.2 OF 002 
 
 
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SUMMARY 
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¶1.  (U) CotonTchad, the GOC's largest parastatal and second 
largest exporter (after the oil sector), is in danger of 
bankruptcy.  Complicated arrangements with growers require 
complex financial deals, which are challenging for a company 
that is poorly managed and plagued by corruption.  In recent 
years, CotonTchad has been caught in a vicious cycle caused 
by reduced production which in turn causes reduced income and 
ability to finance out-year production.  CotonTchad's decline 
puts in jeopardy the livelihoods of many individuals who work 
for the company, contracts with it, or depend on a worker 
associated with the firm for sustenance.  END SUMMARY. 
 
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COTTON:  A MAJOR EMPLOYER 
------------------------- 
 
¶2.  (SBU) CotonTchad, headquartered in Chad's southern city 
of Moundou, is the country's largest parastatal and the 
second largest exporter, by revenue, after the oil sector. 
The firm is the sole cotton processing company in the nation, 
owned 75 percent by the GOC, 18 percent by the French textile 
company Dagris, and 7 percent by the local banking sector. 
The company produces cotton fiber for export and presses 
cottonseed oil for domestic consumption; it is not involved 
in any textile production. 
 
¶3.  (SBU) Poor management, rising prices for inputs, and 
challenges in the supply chain have all led CotonTchad down a 
precarious financial path.  The failure of the firm would 
have major effects given the company's significant role in 
the national economy.  CotonTchad is the third largest 
government employer, topped only by the public administration 
sector and the Chadian National Army.  The cotton company 
employs over 3,000 permanent and temporary workers, in 
addition to the thousands of growers and cooperatives with 
whom it contracts.  Company officials estimate that close to 
one million Chadians (counting families of workers) depend on 
the company's income; this is eight percent of the nation's 
population.  IMF officials estimate that CotonTchad's 
revenues make up 20 to 25 percent of Chad's GDP.  The 
National Institute for Economic and Demographic Statistics 
(INSEED) places the total value of Chad's cotton-fiber 
exports at 56.4 million USD for the three-year 2006-2009 
period. 
 
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A POORLY MANAGED PARASTATAL 
--------------------------- 
 
¶4.  (SBU) Some of the company financial troubles stem from 
its complicated arrangements with contracted village 
cooperatives.  CotonTchad must secure two loans to finance 
its production each year.  One loan enables the company to 
purchase fertilizer, which it then gives to producers on 
credit.  A second loan provides cash with which the company 
purchases raw cottonseed at harvest time.  A committee 
comprised of company officials and cotton producers sets 
CotonTchad's annual purchase prices for the harvested cotton. 
 
¶5. (SBU) The firm's complex strategy of financing, fertilizer 
acquisition and distribution to farmers requires careful 
planning.  Arrangements do not always align with Chad's 
short, rainy season-dependent growing period.  A delay at any 
step in the process means that farmers cannot take full 
advantage of the use of fertilizer, which in turn jeopardizes 
production.  Declining yields have created a vicious cycle: 
the company's production of cotton fiber for export has gone 
down, thus reducing revenue and the ability to finance 
out-year production at current levels. 
 
¶6.  (SBU) According to the African Bank for Development, 2009 
was CotonTchad's worst year.  The company's 2009 production 
was 30,000 tons, which earned 35.4 million USD, compared to 
historical averages over 100,000 tons and average earnings 
over 146 million USD.  Although the GOC established a program 
to reform the cotton sector in 1999, there has been little to 
show for the effort.  A functioning organization complete 
with Coordinator, which is known as the Cotton Sector Reform 
 
NDJAMENA 00000437  002.2 OF 002 
 
 
Project, aims to privatize the company, enhance growers' 
efficiency, and promote strong production.  Still, CotonTchad 
has requested a government bailout of 120 million USD for 
restructuring, which runs counter to a GOC goal under its IMF 
Staff-Monitored Program to reduce government support to the 
cotton company.  CotonTchad is also facing public assertions 
that its leadership is corrupt.  Two directors were arrested 
in September for improper sales of cotton fiber, and the 
company's head has been suspended by the Ministry of Morality 
for misappropriation of funds. 
 
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COMMENT 
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¶7.  (SBU) CotonTchad's accelerating decline puts in jeopardy 
the welfare of large numbers of Chadians who depend on the 
company for income.  There does not seem to be any serious 
government effort to address the company's poor management 
situation or precarious financial structure, despite the 
President's recent claims that more effort and development 
must be focused on the cotton and agricultural sector. 
Further, the Cotton Sector Reform Project has yet to begin 
the necessary economic and financial audit necessary for any 
privatization effort.  END COMMENT. 
 
¶8.  (U)  Minimize considered. 
BREMNER