Livingstone Marufu
Tobacco farmers have continued to hold on to their crop amid reports that they have only delivered less than 10% of the golden leaf in the first five days of trading this year, citing poor prices and complicated payment methods as major causes.
This comes after tobacco merchants, growers, and monetary authorities formed a marriage of convenience to open the auction floors, but due to mistrust farmers and merchants have remained defiant.
By Day 5 (Tuesday), farmers had delivered 305,637 kg while grossing $488,497, against 3.5 million kg last year worth $9.1m.
Even worse, this year’s average price stands at $1.60/kg against last year’s $2.60/kg. With fundamentals not addressed, farmers and merchants believe deliveries will not improve any time soon.
However, the CEO of the Tobacco Industry and Marketing Board (TIMB), Andrew Matibiri, told Business Times that the tobacco selling season was still in its infant stages and he expected the situation to turn around next week.
“We accept that tobacco volumes are currently down by a very huge percentage, but we don’t think it is because of prices and payment systems. Instead it is due to the late starting of the 2018-2019 summer cropping season which has so far affected deliveries,” Matibiri said.
“As you know, most farmers don’t have irrigation facilities so tobacco farmers planted late in mid-December when the rains started.”
Matibiri added: “Of the 31 contractors, only one in the name of Northern Tobacco has opened so far, with others waiting for April 1 to start operations.”
TIMB expects the deliveries to start picking up next week, saying most farmers would need money for the upcoming holidays (Easter and Independence) and the opening of schools.
But the farmers are not having all of this. They want another meeting with the Reserve Bank of Zimbabwe governor, John Mangudya.
Chipo Murefu, a Karoi famer who was at Boka Tobacco Floors on Tuesday, said the authorities had a misplaced belief that most farmers were still curing their golden leaf when in actual fact they had completed grading.
“I don’t know other areas besides Mashonaland West, but in our province most farmers have completed grading and baling, and are waiting for prices to increase and for the monetary authorities to be very clear on payment terms,” said Murefu.
“I don’t want to lie to anyone that I will bring my other tobacco bales to the auction floors if the prices remain the same. It’s better to sell my tobacco to a middleman who is offering US$2.50 per kg rather than less than RTGS$2/kg offered at the auction floors.
“If big gold companies are being paid 50% forex retention levels directly, how can they say they will first pay us in local currency, then later give us the 50% forex payment after sale to prevent inconveniences,” Murefu asked.
The RBZ governor said farmers would be paid 50% of their net sale in forex and the other 50% in RTGS dollars at the forex rate of the day.
Mangudya said his stance remained the same on giving farmers their 50% forex threshold, and that his door remained open for discussions with farmers and merchants.
Persistence Gwanyanya, an economist and Bullion Leaf founder, said most contractors had not opened yet due to very low tobacco deliveries and unfinished discussions with the RBZ.
He said; “most contractors are yet to start operations this selling season due to seriously low deliveries coming to the tobacco floors. I may not be aware of other reasons why tobacco is not being delivered in significant numbers, but the reason why most contractors have not started operations is that they are waiting for feedback from the RBZ on the 70% forex retention and 30% local payment. We want to retain the 70% in forex as we bought inputs in forex, and the 30% in RTGS which will be used to pay wages and other necessities,”
Over the past decade, tobacco has been the single largest forex earner used to address the country’s liquidity challenges due to a lump sum paid by international buyers who mobilise an average of US$900m per season.
TIMB remains optimistic that the tobacco output will reach a range of between 220 million and 240 million kg despite a very low start to the season.
