LIVINGSTONE MARUFU
Tobacco sub-contractors have failed to recover more than 60% of loans extended to local farmers due to side marketing, signalling the depth of the crisis in the billion-dollar industry.
Multiple sub-contractors said they were now at crossroads and had their assets seized by the main contractors to recover the loans.
“We are in this situation as most farmers have side marketed most of the tobacco we have contracted them and the heat is now turned on us as our off takers need their money back,” a sub-contractor told Business Times.
“We are at a crossroads right now. We don’t know where to start as we have failed to recover more than 60% of the money given by main contractors and lent out to farmers. We are having some of our properties being attached by our main contractors and it’s a risk activity to try and hide some of our properties as our families won’t have a place to stay.”
From a total of 33 contractors, only six are exporting companies with 27 companies being subcontracted by these big companies at a premium.
The problem that the surrogate contractors are facing is that they do not have direct access to offshore funding and local funding as they have little to show to get funding hence they depend on big contractors for funding but at a price.
Some of the big tobacco exporting companies are Chinese company Tianze Tobacco Company, Zimbabwe Leaf Tobacco, Mashonaland Tobacco and Voedsel Tobacco International. The big companies are pushing small companies to pay as soon as possible or they would be cut off.
With the tobacco season closing, prospects of repaying loans are very dim.
“The regulator should find tough methods to track down farmers who side-market as the current laws and implementation methods are inadequate to stop farmers from selling to where they are not contracted,” a contractor said.
The contracted farmers, who are living on margins due to huge debts, are side marketing to get something out of their toil thereby complicating chances of repaying loans.
Surrogate contractors are also crying foul that the tobacco merchants take on board accomplished farmers with irrigation leaving them with average farmers that practice rain-fed agriculture.
This year’s average prices were US$3.06 per kg against US$2.79/kg but this has not helped farmers to repay loans.
“We have witnessed one of the best prices in years but with side marketing this has not helped us to recover our money,” a contractor told Business Times this week.
“If tobacco merchants’ chill warning is anything to go by, over 15 contractors are going to close with 10 000 people going to lose their jobs in the process.”
Dry land tobacco farmers who usually plant late November, this summer cropping season planted in January, giving an indication that the crop was heavily affected with the dry spell and climate change effects.
The Tobacco Industry Marketing Board (TIMB) vowed to fight side- marketing this year but surrogate contractors said the farmers are so cunning that they will sell their bales without a trace of foul play.
“We are investigating the matter and we will give the information once we are done,” TIMB said.
