LIVINGSTONE MARUFU
The delays in releasing a US$60m local funding facility for tobacco has riled farmers amid indications policy makers are finding traction in the contract farming system which is blamed for impoverishing golden leaf farmers.
It is understood that the tobacco merchants are grossing between 85 % and 90% of the total tobacco earnings and the government has come up with a tobacco value chain transformation strategy which will ensure the golden leaf retains value.
The funds were supposed to have been released last year and the goalposts were shifted to March.
Industry insiders told Business Times that tobacco merchants are a threat to golden leaf production as they continue feasting on the US$1bn dollar industry at the expense of over 200 000 tobacco growers.
“The fact that some authorities are not disturbed by these frightening figures of externalised tobacco earnings and continuous damaging of the country’s soils, forests and environment for nothing, tell us that some bigwigs are benefiting,” an insider said this week, calling for a “holistic approach from all directions” to rescue the sector.
“As it stands the Tobacco Industry and Marketing Board [TIMB] seem to be ready but the dragging down seems to be coming from the government side where some are not ready to let the cake go and ensure it’s shared fairly,” a source told Business Times this week.
In an emailed response, TIMB chief executive officer Meanwell Gudu told this publication that the board is seeking various means to promote local financing of the golden leaf.
“The Reserve Bank of Zimbabwe is still to disburse the US$60m revolving fund facility. This fund can support 50,000 hectares with the potential of producing 60m kilogrammes of tobacco as we move towards achieving the 2025 goal of producing 300m kilogrammes of tobacco by 2025,” Gudu said.
He said there are plans to keep the auction system running which entails that farmers have access to more local funds.
“Government is offering that support through the Agriculture Finance Corporation [AFC] to capacitate farmers,” Gudu said.
He said there is a two-pronged approach that involves local funding and offshore lending.
“We need the Agriculture Ministry, Finance Ministry, RBZ, TIMB, insurance companies and AFC among other institutions. The TIMB database is very strong and the stop order system good enough to recoup funders’ money so the target is achievable. We will ensure tobacco financing comes from banks instead of contractors,” Gudu said
TIMB is pushing to increase the local financing of tobacco production to 70% of total costs per hectare, through localisation initiatives, from the current 30% by 2025, he said.
Gudu said the board is accelerating value addition and beneficiation from the current 1% to 30% by 2025 and champion Sustainable Tobacco Production by ensuring that 50% of tobacco produced is being cured using renewable energy.
TIMB intends to improve the credibility of the tobacco marketing system by ensuring 100% compliance to regulations by all players.
“As mentioned before, the Board is moving towards ensuring that growers retain value. The process of ensuring that is still ongoing and given enough time localisation initiatives will bear fruit.
“Meanwhile, the 2022/23 tobacco growing season commenced on June 1, so growers have to proceed and start production using conventional funding methods till this has been achieved,” Gudu said.
The sector operates in a dual system that is auction and contract.
The former is where tobacco growers are self-funded; they support their own tobacco production until they can sell on the market.
However, the major challenge is the limitations on access to funding from the banks because of lack of bankable collateral by most farmers.
This has pushed them to opt for contract farming which in a way has seen a decline of tobacco sales on the auction floors.
Tobacco Farmers Union vice president Edward Dune said the delays in releasing the US$60m for local funding growers has affected farmers’ viability as farmers are left with nothing to count for their work and continue to be “enslaved by the external tobacco funding system”.
“This system has continued to impoverish the farmers to extreme levels, if there was local funding the situation would have been reversed,” Dune said.
Tobacco has been one of the leading foreign currency earners for the foreign currency-starved economy but the crop has dropped to fourth due to viability challenges.
It emerged that the contractors and merchants, who have extended lines of credit, are deducting their dues from floors, a situation which has seen 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 meaningful.
As of Monday, 197.2m kilogrammes of tobacco were put under the hammer earning US$600m in the process compared to 203m kg sold during the comparative period last year.
The number of registered tobacco farmers fell 17% to 119 979 this year from 140 771 last year while the new farmers registrations plunged 224% to 529 from 1717.
This shows that the appetite for growing tobacco in Zimbabwe has diminished.
