LIVINGSTONE MARUFU
Zimbabwe’s tobacco farmers have so far earned a paltry US$29.171m from a total of US$416.74m earned after contractors and merchants deducted what was owed them.
This was disclosed by the Zimbabwe Tobacco Association CEO, Rodney Ambrose.
“Though demand is high, sadly growers’ viability remains unaddressed. Growth is not forecasted and returns will continue to diminish,” Ambrose said.
“We can see that from the total amount of US$416.74m, tobacco merchants grossed US$387.57m with tobacco growers earning a paltry US$29.17m which is just 7% of the total earnings.”
Added Ambrose: “The daily volumes are dropping as farmers slow down deliveries in protest against unviable prices and this is against strong world demand where international buyers are scrambling for the golden leaf.But the firm prices are not making sense for farmers as they are not helping them to pay off rising debt due to the high cost of production that has risen to around 85% from 70% last year.”
Tobacco has been one of the leading foreign currency earners for the foreign currency-starved economy.
It emerged this week that the contractors and merchants, who have extended lines of credit, are deducting their dues from the auction, a situation which has seen some tobacco farmers taking home negative balances as some debts are carried forward.
Farmers’ output, they claim, has not been creating sufficient returns to repay the loans in full and at least take home something meaningful.
Most farmers who have been over relying on borrowing said they can no longer carry the debts, which are spiraling out of control.
This implies that the pressures on tobacco farmers are significant.
The dire situation has threatened farmers’ viability, a situation that has left most tobacco farmers living on the margins.
Farmers claim that the debt levels are now unsustainable with some having ballooned to critical levels.
Merchants mobilised about US$650m into Zimbabwe and the figures look fine. But, in reality, about 93% of the amount will be deducted and flown back to merchants’ respective countries as 95% of tobacco farmers are under contract farming, an arrangement where they are assisted to get inputs through lines of credit.
The balance, farmers told Business Times, will be inconsequential.
Ambrose said every season growers find themselves with little profit or in debt.
“This debt is in US$ and carried forward to the next season, with more US$ loans and debt added due to lower retention levels. About 90% of growers are now 100% US$ borrowed from their contractor, implying no new US$ comes into the country until US$ loans are repaid,” Ambrose said.
“Roll out of diversification cropping programmes for tobacco growers remain paramount so that their general livelihoods are protected, as tobacco viability diminishes each season.”
Tobacco has since been knocked off the top spot of being the highest forex earner.
And the golden leaf continues to slide downwards.
Currently tobacco is the fourth highest forex earner in the country, as the industry has been hit by unfriendly policies.
Ambrose said tobacco growing currently is not an attractive venture.
He said contract farming accounts for 95% of the total tobacco output, a situation that has left farmers trapped in debt.
The government said it has realised that the viability challenges can be addressed if there is local funding.
Last year, the authorities launched US$60m local funding to go towards the support of sustainable tobacco production but the fund is yet to be disbursed, a move that has prompted some critics to suggest that some top officials could be part of the syndicate that is swindling tobacco farmers.
“We just hear that the US$60m has been finalised but it hasn’t been disbursed to farmers as yet, raising huge questions on authorities’ quest to deal with viability challenges,” Ambrose said.
Tobacco Industry and Marketing Board (TIMB) CEO, Meanwell Gudu said headwinds in the economy are taking a toll on farmers’ viability.
“Our prices are second highest after the USA. Viability issues are not affected by prices but macro-economic fundamentals,” he said.
The number of registered tobacco farmers fell 17% to 119 979 this year from 140 771 last year while the new farmers registrations plunged 224% to 529 from 1717.
This shows that the appetite for growing tobacco in Zimbabwe has diminished. TIMB expects Zimbabwe production to drop to 180m kg from above 200m kg last year.
