SWARP SPINNING MILLS PLC

MOVING INTO THE 21st CENTURY

Birds eye view of the Factory

Today, Swarp Spinning Mills PLC is one of the largest non-traditional exporters in Zambia and this is in line with one of the country's aspirations: to shift its economy's dependance on the traditional copper exports. The company exported over 6,000 metric tons with a value of US$22.0 million of yarn in 1995 to Europe, the regional trade area and the United States of America. This volume is to increase to 12,000 metric tonsper year by 1997.

The company was established in 1981 as the first privately owned spinning mill and commenced production in October 1984 with an initial capacity of 5,412 ring per spindles under phase A1. Phase A2 was subsequently completed in 1986 and phase A3 in 1989 bringing the total production capacity to 310 metric tons of ring and open end yarns per month and compromising 1,008 open end rotors and 10,824 spindles.

In 1992, the company embarked on a second expansion project planned over three phases, B1, B2 and B3. Phase B1 having 16,352 ring spindles was completed in a record twelve months and was commisioned in 1994 and is producing 270MT per month of 100% Carded and Combed Ring Spun Yarns. Phases B2 and B3 involve the setting up of additional capacities which will include 16,352 Ring Spindles to produce 250MT per month of 100% cotton coarse count Ring Spun Yarns and 35MT per monthof bleached surgical cotton wool. Phase B2 is expected to be commissionedin March 1996 and Phase B3 in July 1996 by which time Swarp Spinning Mills Ltd will have a total production capacity of 1120MT of yarn per month.

It is pertinent to mention that when the company commenced productionit was geared to satisfy the domestic market. The planned plant expansions were therefore made in line with the envisaged growth in the domestic demand for yarn. However, due to the contraction of the local market coupled with the severe shortages of foreign exchange, the company realised that the progressive way forward was through the re-orientation of its expansion programme towards exports. In 1986 the company ventured into the export markets.

Difficult road growth to exports

  • The road to growth in exports for the company has however not been an easy one. Zambia had a centrally planned economy where the price of locally manufactured goods and locally produced inputs were controlled by government. The exchange rate of the Kwacha against all the other major currencies of the world was unfavourable and was not market determined. Under this regime Zambian goods could not compete favourably on the inter national market. Zambian exporters were further disadvantaged as they had to overcome the aspect of their geographical position in relation to seaports on the African coast. Needless to mention that exports from Zambia has to be transported for distances of almost 2,000 kilometers overland where the transport infrastucture is not fully developed.

    The only attraction when the company first ventured into exports was the word "Exporters" which looked pretty on the company's profile. Exporters were subjected to numerous problems; the difficulties of accessing exports earnings and bureaucratic procedures. Swarp's early experience had been of mounting constant battles with various authorities and Government over trivial issues such as export licensing, foreign exchange, retention, customs formalities, sales tax, duty drawbacks and transportation.

    But as every hurdle has to be met and overcome, so the company continued in its resolve to establish export markets and to tackle the thorny issues of 100% retention of export earnings, transportation, sales tax and duty drawbacks through relevant fora and by individual company and trade and industry associations' looby on the relevant Government authorities.

    The most notable early accomplishment in so far as exporters were concerned was when Government allowed exporters of non-traditional good to retain 100% of their export earnings. This policy in the liberalised ecomony enabled exporters to sell their retention at rates determined by the market thereby makiing exports of non-traditional goods a viable option to sales on the domestic market.

    This was the turning point for those companies that had taken the option of going into exports at an appropriate time and as for those that had not made any effort in this direction their fate was to face the harsh realities of a contracting domestic market, lack of foreign exchange and thus declining capacity utilisation in view of machinery breakdowns.

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