LIVINGSTONE MARUFU
Tobacco farmers have been left exposed to merchants after the government abandoned its earlier plan to set up a US$60m revolving fund to support the industry.
Merchants stand accused of impoverishing the growers by charging punitive interest rates on loans availed to the farmers.
Business Times has it on good authority that senior Treasury officials told farmers representatives in a recent crisis meeting that the government will not be able to extend the US$60m tobacco local funding.
“Government told us that the US$60m local funding facility, is no longer possible. Instead, we were told to go to banks which have a told there is US$10m which will be guaranteed by government not the US$60m,” an impeccable source said.
“We were not given the reasons for that development and we continue guessing what could have caused that move.”
The source added: “Ever since we discussed the issue, the US$10m is yet to be availed, boggling one’s mind if the local funding is ever going to be available.”
Repeated efforts to get a comment from Finance and Economic Development Minister Mthuli Ncube and Lands, Agriculture, Fisheries, Water and Rural Development Minister, Anxious Masuka were futile.
Reserve Bank of Zimbabwe(RBZ) governor, John Mangudya, said it was never the central bank’s programme but the government’s.
“It’s a government programme, not ours but what I know is that tobacco is a commercial crop just like other cash crops in horticulture and is mainly funded from commercial banks.
“Tobacco growers will access their loans through the banks as they have been doing all along,” Mangudya said.
Analysts told Business Times that the move by the government will leave farmers in a quagmire.
“It’s disappointing that the government has dumped the US$60m local funding which it proposed should be in place to reduce the influence of merchants in the country’s tobacco growing.”
“As it stands, from the US$680m earned estimates say US$578m went to the tobacco merchants with US$102m going to the country’s coffers,” she said.
The tobacco merchants provide the farmers with inputs since most farmers cannot raise the capital required to undertake a tobacco farming business.
The prices of the inputs are sometimes inflated as the merchants take advantage of the desperate tobacco farmers.
Under such contract agreements, the tobacco merchants deduct their dues-the principal amount plus interests- at the auction floors, a situation which has seen some tobacco farmers taking home negative balances as some debts are carried forward.
This situation has affected production. This year the tobacco farmers’ registrations fell 17% to 119 979 from 140 771 last year while the new farmers’ registrations plunged 224% to 529 from 1717.
This shows that the appetite for growing tobacco in Zimbabwe has diminished.
Experts said the failure of the authorities to set up the tobacco local funding facility will further eat into farmers’ margins.
“Some thoughts into 2022, viability remains unaddressed. Though US$ prices were up last season, the export retention of 75:25 and the stagnant exchange rate eroded all gains.
Farmers’ debts increased, and so did side marketing,” she said.
It is believed that the US$ costs of inputs have increased at least 15%, not only locally but internationally.
This means growers’ cost of production has gone up accordingly with the percentage of input costs in US$ having risen significantly and growers require no less than an 80:20 export retention this season.
“If the fiscal and monetary policies affecting tobacco growers are not urgently addressed, tobacco production will continue on a rapid decline and none of the objectives of the Tobacco Value Transformation Strategy will be achieved,” a source said.
Tobacco, which used to be the leading foreign currency earner, has gone down resulting in the golden leaf losing ground to gold, platinum and diaspora remittances.
The majority of the desperate farmers are living on the margins.
Many complain they are in serious debt.
The current funding system is not benefiting the tobacco farmers but middlemen such as tobacco merchants, leaving most of the farmers in dire straits.
Official data obtained from the Lands, Agriculture, Fisheries, Water and Rural Development ministry shows over 96% of the tobacco farmers in Zimbabwe are under tobacco merchants’ contracts.
The tobacco merchants provide the farmers with inputs since most farmers cannot raise the capital required to undertake a tobacco farming business.
Farmers’ output, they claim, has not been creating sufficient returns to repay the loans in full and at least take home something significant.
This implies that the pressures on tobacco farmers are significant and the situation has left most tobacco farmers living on the margins.
Farmers claim that the debt levels were now unsustainable with some having ballooned to critical levels with some debts having been building up in the past few years.
About 90% of growers are now 100% US$ borrowed from their contractors, implying no new US$ comes into the country until US$ loans are repaid.
