Banks deliver on tobacco forex promise


Local banks have delivered on their promise to extend 60% foreign currency portion to tobacco farmers as required by the law, a move which is expected to boost farmers confidence, it has emerged.

Farmers had been critical of the local lenders who had previously ignored a directive from the central bank, which compelled them to dispatch the full threshold.

Consequently, the farmers’ forex ended up being converted to local currency at the prevailing exchange rate.

But, several tobacco farmers who spoke to Business Times confirmed that the lenders were giving the tobacco farmers their 60% foreign currency component as per the Reserve Bank of Zimbabwe (RBZ) instruction. The move was a welcome development.

“I bank with the FBC Bank and have managed to take my entire 60% foreign currency portion. Now, I am able to invest the forex.

“This has boosted me so much as I can now budget for the upcoming season. Last season, I did not get any forex as the bank could not provide my money in time as I got it as the local currency after liquidation,” a Karoi farmer, Runesu Solani said last week.

He added: “This year, the prices are way better than last year and we are happy that we can even start some considerable investments in irrigation infrastructure, draught power, cars, land and residential stands in towns.” 

Solani is targeting to deliver 30 bales this year from 28 bales last season and the Karoi based farmer believes this year’s golden leaf has more weight than last year’s.

Another farmer, Michael Magwenzi, whose farm is located in Chivhu, said he withdrew all his money from the bank.

“I am a contract farmer but I have received all my money in both nostro and the local bank account after all required deductions. In terms of the nostro I have taken all the money but I have some challenges with local currency which I need to sort out here,” Magwenzi said.

 He said he has brought 10 bales and expects to deliver 30 more bales between now and the end of May.

Chinhoyi-based tobacco farmer Peter Nyamweda said though there is need to review forex retention levels, the banks executed their duties well.

“Let us give credit where it’s due, this year banks have been giving forex unsparingly. However, if the central bank could raise forex retention before the end of the season, this could be dubbed a perfect tobacco season,” Nyamweda said

As of Thursday last week, the country’s tobacco had earned US$33.3m after 13.4m kilogrammes (kgs) of tobacco had been delivered to the auction floors.

In the same period last year, tobacco generated US$14.6m after 6.4m kgs were delivered to the auction floors.

This year has seen the average price increasing 9% to US$2.49 per kilogramme from US$2.28/kg.

Although the farmers are getting 60% of their proceeds in forex, they are demanding 80%. 

This, farmers said, would enable them to clear their debts.

Market analysts say monetary authorities should move with speed to save the golden leaf industry as the sector’s contribution to fiscus continues to dwindle each passing year.

Tobacco, which used to be one of the leading foreign currency earners, has dropped to fourth position this year.

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