Reserve Bank of Zimbabwe (RBZ) and tobacco farmers are in talks on the foreign currency retention ahead of the selling season in March.
Tobacco farmers want to retain 100% sales payment in forex while RBZ maintained the 50% forex payment threshold.
In a crunch meeting held on Thursday last week, RBZ and tobacco farmers agreed on over 90% of the issues except on the forex retention levels wanted by the tobacco farmers.
However, the negotiations for the forex retention threshold are still on.
Zimbabwe Tobacco Association president, Rodney Ambrose told Business Times that there was a lot of progress in their negotiations with the RBZ.
“We had a very positive meeting with the RBZ governor John Mangudya but the forex retention threshold is one issue that we haven’t concluded as yet.
However, the RBZ has promised to work on it (foreign currency retention) in order to ensure growers get value for their tobacco,” Ambrose said.
“There is one issue that the RBZ is going to work on and there is another issue on the growers’ side that needs tidying up.
We will be working with TIMB [Tobacco Industry and Marketing Board] to come with a draft of the 2020 tobacco payment process for tobacco growers.”
Tobacco growers want the improvement of the system where they will receive money from the merchants without any central bank involvement.
The payment of the US$2m owed to the farmers from last season proceeds is underway with RBZ moving fast before the opening of a new season.
Merchants have begun the drawing down of forex from their offshore lenders to buy the country’s golden leaf.
Mangudya said there is room for negotiations and his door remains open for discussions with the tobacco farmers.
However, he said the demand for forex was high as the economy requires the foreign currency to import raw materials.
Tobacco experts say the 2020 tobacco selling season will be determined by forex retention solution otherwise, the stalemate will continue.
A fortnight ago, tobacco farmers demanded payment of their golden leaf deliveries for the upcoming selling season in US dollars as confidence in the local currency continues to wane.
The development comes at a time when the local currency has plummeted to 1: 17 on the interbank rate and 1:28.3 on 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 the tobacco farmer decides to liquidate it.
Last year, tobacco exports tumbled 7% to US$846.7m from US$907.8m due to unfavourable tobacco selling regimes.
Tobacco is the second highest forex earner after gold. Last year, RBZ proposed 20% of offshore loans for the production of the crop and 10% for value addition while the investor gets 70%.
RBZ is hoping that the tobacco selling season, which traditionally kicks off in March, will help ease the crippling foreign currency crisis bedevilling the economy.
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 the TIMB bulletin, tobacco registrations have fallen 15% to 143 568 in the 2020 season from 168 735 the previous year while new growers fell 82% to 7447 from 40 772.