Zimbabwe’s tobacco farmers want the Reserve Bank of Zimbabwe (RBZ) to increase the foreign currency retention levels to 70% from the current 60%, a move which would make the farming business viable and enable them to clear debts, Business Times can report.
Zimbabwe Tobacco Association chief executive officer, Rodney Ambrose, said this week farmers have courted the Tobacco Industry and Marketing Board and other players to engage the central bank for the monetary authority to increase the retention levels and plug forex outflows.
Farmers say the low retention levels have forced them to rely on contractors and merchants.
“[Though we would have wanted] 80%, we would like the forex retention threshold to be at 70% so that tobacco farmers may clear debts and make profits towards the end of the season,” Ambrose said.
“In January, the retention was at 70% but with the new policy announced in the Monetary Policy Statement the central bank put it at 60% which is certainly not viable. We would like it to go back to at least 70%.”
Zimbabwe has as of Friday last week earned more than US$77m from tobacco sales against US$40.2m earned during the same period last year.
The average price stands at US$2.52/kg against US$2.26/kg last year.
Ambrose said this year’s tobacco has of great quality owing to good rainfall and the firm prices.
“We have witnessed some good prices this year, which is an encouragement to the sector. We hope those prices will continue to firm so that farmers are able to clear their debts and prepare for the new season,” he said.
“Buoyed by this good start we dare to dream as we hope to see prices to be firmer in the next two months. By these developments we hope most farmers will be able to clear debts by first and second batches and start to make profits on the third batch and fourth batch.”
Tobacco merchants stand accused of manipulating the tobacco pricing system, leaving farmers to survive on margins.
This has left the farmers with no money for the toil they have done over the year as low prices have kept growers trapped in debt and the need to be funded the following season.
Market analysts say the monetary authority should move with speed to save the golden leaf industry as the sector’s contribution to fiscus continues to dwindle each passing year. Tobacco dropped to fourth last year from third position in 2019 in terms of forex receipts.
Zimbabwe’s tobacco farmers have threatened to dump growing the golden leaf due to viability challenges, a move which threatens one of the country’s top foreign currency earners.
Seed sales reflected a 27% increase at 940kgs sold and this could have potentially planted close to 150,000 hectares.
The number of registered growers has remained static at 146,000 with minimal new entrants.