A journey of a thousand miles

September 17, 2021

There is some good news for the tobacco farmers.

Cabinet last week approved a Tobacco Value Chain Transformation plan meant to transform the troubled sector into a US$5billion industry by 2025 with local financing of the golden leaf complementing external sources.

Briefing journalists at a post-Cabinet briefing last week, Information minister Monica Mutsvangwa said the strategic objectives of the plan include localising the funding of tobacco to complement external funders and raise tobacco production and productivity to 300m kg by 2025 from the current 262m kg.

The proposed local funding of tobacco comes as farmers have been exposed to the predatory tobacco merchants who are accused of manipulating the prices at the floors and are said to be taking around 85% of the tobacco farmers’ earnings and as a result, the country is not benefiting much from its tobacco.

In another avenue to fund the golden leaf, the Tobacco Industry and Marketing Board last week signed a memorandum of understanding with the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange to cooperate in areas such as fundraising for tobacco farmers, fundraising for local tobacco merchants, the compilation and distribution of tobacco production and marketing data and the establishment of a tobacco derivatives market.

The full implementation of the MoU is expected to result in increased productivity and smoother cash flows for small scale farmers and improved capacity for local tobacco merchants, the parties said.

While these initiatives come at a time merchants have already distributed inputs to farmers, they are welcome as they are building blocks for the local tobacco financing.

Tobacco farmers had been abandoned as they struggled to get funding. Banks are reluctant to fund small-scale farmers due to the absence of collateral with the financial institutions shunning the 99-year leases.

In the past, banks would fund tobacco but they adopted a cautious approach after the fast track land reform programme which displaced former commercial white farmers to pave way for thousands of previously disadvantaged locals.

The absence of local funding has left farmers at the mercy of the predatory tobacco merchants who are accused of manipulating the prices at the floors and are said to be taking around 85% of the tobacco farmers’ earnings.

Tobacco is the fourth largest foreign currency earner behind platinum, diaspora remittances, and gold.

However, the sector has been allowed to flounder. Other than the local funding of the golden leaf, authorities have to come up with a workable retention threshold for the sector.

At 60%, the sector feels it is lower. Tobacco farmers argue that the rate at which the 40% is liquidated at using the foreign currency auction rate is lower than the retooling rate which is a mirror image of the parallel market.

The problems bedevilling the sector could be solved with a stakeholders’ dialogue. That dialogue part seems to be missing if the mixed signal is anything to go by. The local tobacco funding could bring back the smiles on the faces of the tobacco farmers. It won’t be overnight for the golden days to return for tobacco as a journey of a thousand miles begins with a step.

 

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