A golden-leaf effect on the eight consumer names  


Batanai Matsika

Tobacco is Zimbabwe’s second biggest export-earning commodity after gold and the 2019 selling season has just kicked off.  Of course, agriculture remains a strategic sector in terms of contribution to exports and provision of livelihood for many Zimbabweans (jobs), particularly in the rural areas and production of the bulk of the country’s food requirements. It also has links with the manufacturing factor in terms of inputs.  Numbers from the auction floors indicate that the highest selling price so far is US$4.50/kg. In 2018, flue-cured tobacco deliveries reached a record high of 252 million kg compared to the previous record of 231 million kilogrammes in 2000 (see graphs below).

While tobacco grower registrations have increased from 118,450 in 2018 to 171,269, the expectation is that output will be slightly lower than the 252 million given the poor rains. However, in drought seasons the quality of the crop tends to improve and this may translate to better pricing or an increase in total tobacco receipts.






Several measures have been put in place to ensure that growers get value from the golden leaf. More recently, the RBZ has agreed with growers for retention of 50% of net tobacco proceeds. This means that farmers will be paid half of the tobacco sales in foreign currency, while the other half would be in RTGS dollars. Another development is that all transactions taking place at the tobacco floors will be exempted from the 2.0% electronic transfer tax in a bid to safeguard farmers’ earnings.

The net-effect will be more money or disposable income in the farmers’ pockets.  Consumer-facing companies on the Zimbabwe Stock Exchange (ZSE) should benefit from an uptick in volumes emanating from this golden-leaf effect. We have identified the 8 consumer names as Delta, BAT Zimbabwe, Econet, Innscor, Simbisa Brands, OK Zimbabwe, Meikles (TM Pick n Pay) and Dairibord.  We are long term bulls on consumer-oriented stocks on the ZSE given the defensive nature of food, alcohol, cigarettes and air time/data.

Author – Batanai Matsika

Head of Research – Morgan & Co

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