LIVINGSTONE MARUFU
The Tobacco Industry and Marketing Board (TIMB) says it is focusing on tackling the problems threatening the viability of the tobacco industry which have made the local crop uncompetitive, Business Times can report.
“We are facing viability challenges such as high cost of production, increased US$ component in the cost of production and Anti-Tobacco Production and Marketing Campaign threat but we are engaging the authorities to ensure that the growth of the golden leaf is viable,” TIMB chief executive officer Meanwell Gudu said.
The sector has been battling an anomaly which saw the prices of tobacco at the auction floors way higher than the contract prices, a situation which the regulating board said will be addressed during the 2022 tobacco marketing season.
Farmers have been mourning that they remain trapped in debt due to low forex retention levels of 75% against costs of 80%. With this development the country has been getting a pittance from tobacco growing.
Gudu said tobacco products have been the focus of tightening regulations for decades. Placing higher taxation and increasing health awareness among consumers have reduced smoking rates and volume consumption significantly in the past.
According to TIMB, for every US$1 that comes into the country, US$0.80 goes towards the repayment of loans with only US$0.15 benefiting the country.
And the current tobacco policies are not bailing out the troubled farmer.
Gudu said the financing of tobacco production and marketing is regulated by the Reserve Bank of Zimbabwe through the Exchange Control Tobacco Finance Order of 2001, which requires tobacco merchants to borrow offshore in order to buy green leaf tobacco.
After export, only the value-added component accrues to the country while the rest of the export proceeds are used to service offshore loans accessed during the buying season, he said.
“Localisation of tobacco production and marketing financing has potential to maximise the net export proceeds,” Gudu said.
He said tobacco beneficiation could help the economy to get maximum value from the golden leaf.
“The country is currently only processing +/-2% of the tobacco leaf produced into cigarettes. While the tobacco industry has a potential value of US$15bn from cigarette export, only US$ 0.9bn is currently being released from leaf exports,” he said.
TIMB wants growers to use renewable sources of energy for curing tobacco, emphasizing the growers should not cut down indigenous trees for fuel wood for curing tobacco.
A consultant has been engaged by the industry to carry out a baseline survey of the compliance level and more robust action plans will be developed after this survey.
TIMB will enforce additional minimum standards for sustainable tobacco production for both merchants and tobacco growers. (such as woodlots as in Brazil, adoption of fuel efficient technologies and use of renewable sources of energy).
The board is also calling for agricultural labour practice avoiding child and forced labour and improvement of the socio-economic conditions of the people and communities involved in tobacco production.
On the anomaly of auction prices getting better than the contract, TIMB acting chief operations officer Blessing Dhokotera said: “Prices on auction floors will be determined by the bidding process, the highest bid being the final price on every tobacco bale.
A grade-price matrix derived from the average grade prices from the previous day auction sales will determine the floor price for every grade on the contract sales.”
Tobacco farmers shall be paid 75% of their sales proceeds in foreign currency and the 25% portion shall be paid in local currency, converted at the prevailing auction exchange rate on the day of sale.
The 75% portion shall be paid directly into the growers’ foreign currency accounts and shall be treated as free funds.
Similarly, the 25% local currency portion shall be deposited into the growers’ local bank accounts or e-wallets.
Three auction floors that will operate this season include Tobacco Sales Floor, Boka Tobacco Floors and Premium Leaf.
There will be 33 contractors who have been licensed and 35 ‘A’ Class buyers.
The Contract system still caters for 95% of the total tobacco sales with the balance catering for the auction system.
