Side marketing threatens tobacco output

LIVINGSTONE MARUFU

The Tobacco Industry and Marketing Board (TIMB) has raised concerns over side marketing amid fears contractors may hold funding for the golden leaf, one of Zimbabwe’s foreign currency earners.

Tobacco is mainly financed by contractors and a few individuals with the capacity to plough money into the billion dollar industry.

Contractors account for more than 70% of the tobacco delivered at the floors. Tobacco Industry and Marketing (TIMB) chairman Patrick Devenish told Business Times that the season has been good so far in terms of price and quality in the better grades.

“Despite good quality tobacco this year, there have been more incidences of side marketing than in previous years which is a cause for concern going forward,” Devenish said.

“The crop was drought stressed than expected which is a huge disappointment.”

At the auction floors, the highest price was US$4.99/kg against US$0.10 which was the lowest price.

Some farmers had difficulties in travelling as some security forces turned them away despite farmers being granted essential services status.

Side marketers capitalised on that gap to start buying golden leaf for an average price of US$1.20/ kg.

Most farmers accepted the deal to avoid high transport costs and travelling hustles.

Devenish is projecting an output of between 190m kg and 200m kg. He attributed the decline to successive droughts that had a major impact on crop size.

In 2019, RBZ proposed 20% of offshore loans for the production of the crop and 10% for value addition while the investor gets 70%.

The season kicked off at a time when the tobacco farmers have rejected the 50% forex retention offered by Reserve Bank of Zimbabwe as they want 100% of the sales proceeds.

This could have some negative repercussions to the country’s tobacco industry and economy as farmers feel the local payment system could wipe their earnings due to galloping inflation.

“Last year’s payment system prejudiced growers especially smallholder farmers and this influenced planting decisions,” Devenish said.

Economic analysts said the increase of tobacco export earnings could help foreign currency -starved Zimbabwe to oil the dry economy.

Tobacco is the country’s second earner of foreign currency after gold at 19% of the total export receipts and improves liquidity in the economy and its functionality is critical to the country.

Zimbabwe Commercial Farmers Union president Wonder Chabikwa said there is need to review the foreign currency retention threshold to help the farmers to increase productivity on the farms.

Last year, tobacco exports tumbled 7% to US$846.7m from US$907.8m due to unfavourable tobacco selling regimes.

The TIMB has enlisted all relevant authorities, which include the Zimbabwe Republic Police and local government authorities, to enforce the complete closure and removal of all flea markets and all vendors around the perimeter of the auction floor and contract sales during the 2020 tobacco marketing season.

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.

As at July 8, 2020, 164 885 tobacco growers had registered for the 2019/20 season whilst 185 592 tobacco growers had registered during the same period last season.

Small scale farmers accounted for 79% of the total growers registered in the 2019/20 season.

Tobacco growers have bought 362 998 grammes of tobacco seed, equivalent to 60 499 hectares, in preparation for the 2020/21 season. 269 345 grammes, equivalent to 44 891 hectares were purchased during the same period last year.

During the 70 days of tobacco trading as of Friday last week, tobacco farmers have so far grossed US$410,4m after selling 165.6 million kg against US$397.4m after selling 207m kg during the same period last year.

This year’s high earnings were a result of good average prices of US$2.48/ kg against US$1.92/kg.