LIVINGSTONE MARUFU
The stand-off between the tobacco farmers and the monetary authorities over the forex retention level has left growers in limbo as they are battling viability challenges.
The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya reviewed upwards the retention level to 75% from 60%.
But the farmers have been pushing for 85%.
This week, the Zimbabwe Tobacco Association CEO, Rodney Ambrose said the increase by the central bank was inconsequential, painting a gloomy picture as some farmers are contemplating abandoning the crop.
“The 75% forex retention threshold is totally insufficient. We required a minimum of 85% and with that retention level, we certainly cannot market our tobacco under such a framework,” Ambrose said.
“With such inadequate policies farmers will cease tobacco growing in the next 2-3years as decisions for future farming ventures are made today.”
Ambrose added: “The immediate danger of the weak, inconsistent policy for tobacco farmers’ retention is that it may lead to increased side marketing.”
He said the association will find it difficult to convince farmers to continue growing the crop, adding the retention level has since fallen way behind input costs.
These concerns come as the number of farmers registered this year dropped 20%. Tobacco has also dropped to be fourth best forex earner from being the number one in 2018 due to the viability problems.
“We certainly don’t feel our hard toil in the fields has been appreciated,” Ambrose said.
Tobacco Industry and Marketing Board chief executive officer Meanwell Gudu said there is a need to look for alternative crops.
“TIMB is also working towards promoting alternative production of other crops as we move towards sustainable production of tobacco. The “Low profits and high cost of production” are shortcomings experienced by some tobacco growers,” Gudu said.
He said profits are guaranteed when a farmer follows good agronomic practices, unless in the case of a natural disaster.
“The pay-out levels for the 2022 marketing season have since been increased from 60% to 75% US$. Increased US$ retention will go a long way in cushioning the tobacco grower and help improve their livelihood,” he said.
Currently tobacco supports up to 160 000 households in Zimbabwe, accounts for more than 50% of agricultural exports and contributes 25% to agriculture GDP.
Under the Tobacco Value Chain Transformation Strategy, unveiled recently, the government wants to see a sharp rise in tobacco production levels and export revenue by 2025.
The government promised to fund the industry from local cash. It promised to release US$60m to support the tobacco sector.
Ambrose said the inconsistent policies by the government was hurting the tobacco sector.
“The willingness for farmers to grow tobacco is there and the world demand for Zimbabwe tobacco is positive. It is inadequate policies that are hurting the industry. This will only lead to disinvestment out of the sector,” he said.
“Such inadequate policies will certainly not “boost “ production of tobacco as stated in the MPS. The current forex retention framework is certainly working against the objectives of the Tobacco Value Chain Transformation Strategy.”
Mangudya, on the other hand, said the farmers must be content with the retention level as the central bank has done all it can to improve tobacco production in the country.
“We did our best to improve the sector as we have reviewed the forex retention threshold to 75% from 60% at a time other sectors are clamouring for that review. At the moment, tobacco farmers must be content with the new policy review,” Mangudya said.
In the last tobacco marketing season, there were around 30 buyers and according to experts the number is too high and might affect tobacco marketing.
“We have too many buyers and contractors in the industry and this is not healthy as many tobacco purchasers will have to deal with very few farmers and this leads to serious side marketing thereby affecting production as the contractors will lose tobacco to vultures who would not have contracted the farmer,” a contractor who preferred anonymity said.
The reduced appetite to grow tobacco is also coming at a time when the World Health Organisation’s (WHO) Framework Convention on Tobacco Control (FCTC) is intensifying efforts to reduce tobacco production on health grounds.
“Zimbabwe is a Party to the WHO FCTC, perhaps the authorities are now implementing some of the recommendations to discourage the cultivation of tobacco. You never know, they might have agreed with WHO to disempower the farmer,” Ambrose said.
In the Tobacco Value Chain Transformation Strategy, the authorities outlined that Zimbabwe is getting a paltry 15% of the earnings with the balance going to merchants.
Last year, tobacco growers earned a measly US$150m from the expected US$600m owing to the rising United States denominated debt burden owed to contractors and merchants that are choking the sector.
The contractors and merchants, who extend lines of credit, deduct their dues at the auction floors, resulting in some tobacco farmers taking home negative balances as some debts are carried forward.
Farmers’ output, they claim, has not been creating sufficient returns to repay the loans in full and at least take home something significant.
Most farmers who have been over-relying on borrowing said they can no longer carry the debts, which are spiralling out of control.
Zimbabwe has been depending on tobacco to oil the economy but the debt has caused 75% of the amount mobilised to be repatriated to the merchants’ respective countries as about 95% of tobacco farmers are under contract farming, an arrangement in which they are assisted to get inputs through lines of credit.
The balance will be inconsequential for farmers and the economy.
Ambrose said every season growers find themselves with little profit or in debt with their contractors.
He said contract farming accounts for 95% of the total tobacco output, a situation that has left farmers trapped in debt.
The same way the contract system has destroyed the white gold (cotton) is the same way the system is decimating the golden leaf.
