Tobacco to bail out Zim

..as TIMB hints at early auctions opening fffffffff

LIVINGSTONE MARUFU

The tobacco marketing season will open early this year as the forex-starved economy seeks a lifeline amid fears of an underperformance of the mining sector weighed down by the Covid-19 pandemic, Business Times can report.

Despite the stabilisation of the exchange rate, courtesy of the Reserve Bank of Zimbabwe foreign currency auction system, the market is still dry and still needs foreign currency.

The forex auction market is allotting an average of US$25m weekly against the market demand of US$80m.

The early opening could help gold which is not performing well due to the Covid-19 pandemic which restricted the procurement of raw materials and heavy rainfall.

Tobacco Industry and Marketing Board chief executive Andrew Matibiri told Business Times that the irrigated crop is now at an advanced stage with the rain-fed still have a long way before maturity.

“We are not sure yet to know when the auction floor will open but there are indications we may open earlier than last year,” Matibiri said.

“…it is still early to say specific dates as reaping of the main rain fed crop is not yet in full swing. Also need to take into serious consideration the safety guidelines to be put in place in view of the rampaging Covid-19 pandemic.”

The floors used to open in February to cushion farmers from cash crisis but due to the El Nino induced droughts and the late start of the season, the opening was moved to March.

RBZ governor John Mangudya said during the tobacco off season, foreign currency demands go up due to limited supplies and the early opening of the floors “will reduce the dry spell of foreign currency and ease cash shortages”.

The proposed early opening of the floors comes after the mining sector warned of a subdued performance wreaked by the Covid-19 pandemic which has affected production as some miners have remained at home.

Last year, tobacco exports fell 9% to US$757m after shipping out 186m kilogrammes to 42 countries from US$832m after exporting the same number of kilogrammes.

As at January 8, 1.6m kilogrammes were sold to over 30 countries earning US$5m against 1.3m kilogrammes sold for US$3.7m during the same period last year.

In 2019, tobacco export receipts tumbled to US$846.7m from US$907.8m in 2018 due to payment methods that enslave the farmer.

Tobacco is the country’s second earner of foreign currency after gold at 19% of the total export receipts.

However, the sector has been hit by an unfavourable payment regime with farmers demanding 100% forex retention.

Annually, international mobilise about US$1bn to buy local tobacco. h

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