Buyers bring in $1 billion to buy golden leaf

LIVINGSTONE MARUFU/CHENGETAI ZVAUYA

International tobacco buyers have mobilised US$1bn to buy the country’s golden leaf crop this year, a move expected to boost foreign currency inflows in the country, Business Times has learnt.

The tobacco-marketing season officially opened yesterday with 172,000 farmers expected to earn windfalls in foreign currency from the golden leaf.

Beyond farmers, the new tobacco season (which runs from March to September) is expected to ease foreign currency and liquidity challenges in the corridors of government, and by extension the general economy.

Andrew Matibiri, the CEO of the Tobacco Industry and Marketing Board (TIMB), told Business Times that “international buyers have mobilised around US$1bn to purchase the country’s tobacco. Of that amount, we expect the first tranche of US$800m now, with the remaining US$200m to come later in the selling season and will be used to support production.”

Last year, a total of US$900m was mobilised, though US$837m was used to buy the golden leaf, said Matibiri.

Tobacco contributes more than 13% to Zimbabwe’s GDP and is second only to gold in terms of forex generation. Last year while gold fetched US$1.6bn in export earnings, tobacco brought in US$900m.

Though tobacco finished second last year, but for the past three years it has been the country’s single largest forex earner.

Matibiri said the golden leaf commands over 25% of agricultural exports and three million people (a quarter of the population) directly and indirectly depend on tobacco.

During the official opening yesterday, Monica Chinamasa, the chairperson of TIMB, said growers would be paid immediately upon delivery of the crop to the auction floor.

“The RBZ and TIMB have jointly put in place payment measures to ensure that tobacco growers get full value for their crop and paid within the shortest possible time,” Chinamasa said. “Tobacco sale proceeds shall be deposited into the growers RTGS dollar accounts and Nostro FCA accounts. Growers shall be paid 50% after the deduction of loans in US dollars and the proceeds shall be deposited into their Nostro FCA accounts,” Chinamasa added.

The payment into the Nostro FCA accounts will be done by the RBZ within 48 hours of the sale.

She said payments into the RTGS accounts would be converted using the prevailing inter-bank rate, which stands currently at 1: 2.7.

Furthermore, growers shall be entitled to withdraw cash equivalent to RTGS $0.50 per kg of tobacco sold, up to a maximum of RTGS $300 per sale.

Speaking at the same occasion, Vice President Kembo Mohadi said the government wanted the tobacco industry to remain sustainable and viable, and therefore it has removed the administrative bottlenecks around the administration of the Afforestation Levy, which came into effect in 2015.

“The Forestry Commission has been authorised to receive 50% of the proceeds of the tobacco levy for use in afforestation programmes,” the Vice President said. “The funds collected will be used to support the establishment of woodlots for curing tobacco so as to ensure that tobacco production is both environmentally friendly and sustainable.”

This year between 220 to 240 million kilos of tobacco is expected to be delivered to the three auction floors – namely Boka Tobacco Floors, Premier Tobacco Auction Floors, and Tobacco Sales Floor. It will be 10% down on last year’s figure of 252 million kilos. The reduction has been attributed to the poor rains this year and last weekend’s devastation wrought by Cyclone Idai during which a lot of tobacco was damaged and over 200 barns were destroyed by torrential rain.

TIMB has licensed 33 “A” class and 31 contract buyers, up from 29 buyers and 23 contractors last season.

TIMB says electronic marketing will be used this year but in the later stages of the season. Vocal bidding will remain the selling method of choice. All other processes will be done through a e-marketing system in real time.

Yesterday, the highest selling price opened at $4.50 per kg, while the lowest was $0.50 per kg.

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