Tobacco growers turn heat on RBZ

November 11, 2021

 

LIVINGSTONE MARUFU

 

Tobacco growers are pressing the Reserve Bank of Zimbabwe to reduce the export surrender portion and increase foreign currency retention levels amid indications that the golden leaf farming has become unviable due to hefty loans that growers are trapped in.

The farmers say they will be able to repay loans and get out of the contract trap if the forex retention levels are increased.

Tobacco contract farming now accounts for over 95% of the market share and this has left farmers and the country with nothing to count for on the increased golden leaf output.

Zimbabwe Tobacco Association CEO Rodney Ambrose told Business Times that good government policies can get the farmers out of the situation.

“Our fight for the 80% retention has not changed and we keep pressing until the authorities improve the situation so that there is an improved viability in the sector. It does not help to hear that tobacco export receipts are near US$1bn when the farmers and the country get less than 15% of that amount with the rest returning to tobacco merchants,” Ambrose said.

“We intend to meet as growers associations’ representatives very soon to  put together our position paper to the central bank. Whatever the forex component they will give us we want  the local currency balance  to be at a market related exchange rate.”

The push for a higher retention threshold comes as tobacco farmers have threatened to reduce hectarage this season amid indications that they borrowed less to the tobacco merchants to fully repay loans and the failure of the government to bail out stranded farmers in time.

The delays by the government in making the US$60m facility accessible raising a lot of dust in various fora as some government officials were accused of dining with tobacco merchants who are making life difficult for farmers.

He said the new season has started well, with the irrigated crop already planted.

ZTA chief said at this early stage, with good rains forecasted, a marginal increase of between 5-10% on the 211m kilogrammes marketed this season can be predicted.

Ambrose said farmers continue to face serious viability challenges as 60:40 forex retention remained in place; as a result, reviewed forex retention is expected.

“For those who sold early – midseason there was realisation of some value of sales proceeds. Growers who sold in the last half of the season experienced a rapid loss of value of their sales proceeds as USD components of input costs increased and the retooling rate and official rate variance widened,” Ambrose said.

He said on the US$60m local facility, tobacco growers await further guidance on how growers can access the promised facility with huge concerns over the lateness to announce formalities as thousands of growers have already fully committed themselves to contractors.

Reserve Bank of Zimbabwe governor John Mangudya said the central bank will continue engaging the tobacco growers to ensure viability.

“My door is open  for engagement with the tobacco growers to ensure that tobacco growing is sustainable  for all stakeholders,” Mangudya.

He, however, said tobacco farmers are the most favoured  group as they get 60% of the net export revenue unlike other exporters.

Tobacco is the fourth largest foreign currency earner behind platinum, diaspora remittances and gold.

The golden leaf’s contribution to the country’s exports has gone down as it is understood that the tobacco merchants deduct their dues at the floors, a situation which has seen some tobacco farmers taking home negative balances as some debts are carried forward.

This situation has affected production.

Farmers’ output, they claim, have not been creating sufficient returns to repay the loans in full and at least take home something significant.

About 90% of growers are now 100% US$ borrowed from their contractor, implying no new US$ comes into the country until US$ loans are repaid.

 

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