LIVINGSTONE MARUFU
ZIMBABWE has been forced to wait a little longer on the annual US$1bn which is mobilised by international buyers to buy local tobacco after the coronavirus pandemic brought world business to a halt.
The virus, also known as Covid-19, began in China’s Hubei province in December and has disrupted the global supply chain as it has triggered lockdowns and reduced travels.
Over the years, Zimbabwe could have been in the middle of utilising the fund but due to closure of many borders and lockdowns, the tobacco selling season will be announced in later dates.
Traditionally, Zimbabwe opens tobacco auction floors in March, a move which helps the country to ease liquidity crunch and foreign currency challenges.
Tobacco is Zimbabwe’s second largest foreign currency earner after gold. Government, particularly the Agriculture Ministry and Tobacco Industry and Marketing Board among a host of stakeholders, agreed to officially open the tobacco floors on April 22 but the spread of the pandemic could make Zimbabwe wait longer for the funding.
With coronavirus cases hitting past a million , and over 53 000 fatalities, Zimbabwe will be kept waiting. China and South Africa are two of the biggest recepients of the country’s tobacco but are heavily affected by the deadly pandemic.
Zimbabwe mainly depend on gold and tobacco on exports but with tobacco international buyers battling the pandemic in their respective countries, the country may lose out more.
TIMB chairman Patrick Devenish told Business Times that the board together with other players will continue to monitor the virus and see if they can still open the floors.
“We made a decision sometime last month that we will open on April 22 but with the virus still at its peak we might be forced to delay a bit.
But we will consult the authorities and see the way forward,” Devenish said.
Zimbabwe, which is reeling with serious economic challenges, is likely going to take a serious dip as one of its key economic drivers will be affected by the pandemic.
Analysts say even if the US$1bn comes into the market, very few tobacco growers would risk to go to the floors at a time the pandemic is still at its peak.
The selling season still having some pending issues with Reserve Bank of Zimbabwe offering 50% forex on sales proceeds and farmers demanding 100% of their total sales, a matter which could also affect the season.
Farmers want forex as they are wary of depreciating local currency. The development comes at a time when the local currency has plummeted to 1:25 on the interbank rate and 1:39, on the the parallel market, making it difficult for farmers to continue operating when they have large volumes of local currency.
Last year, tobacco growers were given a 30-day window to utilise the United States dollars locked up in their nostro accounts or risk converting those funds into Zimbabwean dollars.
This year, farmers’ nostro fund will remain as it is until a tobacco farmer decides to liquidate it. Last year, tobacco exports tumbled 7% to US$846.7m from US$907.8m in 2018 due to unfavourable tobacco selling regimes.
Last year, RBZ proposed 20% of offshore loans for the production of the crop and 10% for value addition while the investor gets 70%.
Buoyed by last year’s success of over 258 million kilogrammes of the tobacco output, latest statistics say 81, 977 hectares of tobacco had been planted compared to 79, 708 hectares for the same period last season.
According to TIMB bulletin, tobacco registrations have fallen 15% to 143 568 in 2020 season from 168 735 the previous year while new growers fell 82% to 7447 from 40 772.
