Zim loses US$35m

LIVINGSTONE MARUFU

Zimbabwe could have lost around US$35m to side-marketing amid indications that tobacco farmers deliberately diverted the golden leaf to get something out of their toil.

Since 2019, farmers have been pushing for the review of foreign currency retention to around 85% to increase tobacco growing viability as mounting debts and high cost of production threaten the viability of the golden leaf.

The monetary authorities had recently maintained a forex retention threshold at 75% for tobacco with a review coming during the first quarter of 2023.

Farmers say the cost of production rose to 80% from 70% last year, the production costs are eating into growers’ margins thereby forcing them to resort to side-marketing as most farmers are failing to pay their workers who have made the delivery to the auction possible.

According to statistics obtained from the Lands ministry, farmers are said to be getting U$0.15 per every US$1 with the tobacco merchants getting US$0.85 per US$1 which means tobacco growing is an expense to growers.

A source close to the developments told Business Times that the government knows the root causes of side-marketing but it does not bother.

“According to statistics at hand, Zimbabwe lost close to US$35m to side marketing of tobacco as farmers willingly diverted the golden leaf to floors which they are not contracted to.

“The reasons are that they have piling debts which they are failing to clear due to subdued prices hence the farmers sell the tobacco to the middlemen who come to their plots. By that the Tobacco Industry and Marketing Board [TIMB] won’t be able to trace the tobacco,” the source said.

Even contractors have no answer to farmers as they visit and see graded tobacco only to come back and see a grower with no leaf.

TIMB spokesperson Chelesani Tsarwe told Business Times that side marketing was an unnecessary evil to the industry which affects the sustainability, orderly marketing, viability and productivity of the tobacco industry and hence should be regularly monitored.

“We cannot accurately ascertain how much money was lost through side marketing since it is an illegal activity, and no one keeps a record of how much tobacco is sold illegally.

“There is no clear-cut root cause to side marketing, but the following are the forms that side marketing may be undertaken; delivering for sale tobacco grown by another person but marked by the deliverer’s grower number and buying tobacco without a license.

“Delivering for sale tobacco grown by the deliverer but marked by another person’s grower number, bartering tobacco, selling auction tobacco other than through auction and licensed contractor buying tobacco from farmers contracted to other companies are some of the side-marketing activities that need attention,” Tsarwe said.

“At this point, we can confirm or deny the claims that forex retention threshold and huge debts as these are subject to debate,” she said.

Side-marketing has threatened the tobacco juggernaut which hauled 212.7m kilogrammes during the 2022 tobacco marketing season from a projected 190m kg in a tough year amid fears the act could hamper multi-billion-dollar industry viability.

The development comes at a time when TIMB deregistered 37000 errant growers who registered to grow the golden leaf but failed to deliver it to the auction floors.

The deregistration of growers was subsequently triggered by the operationalisation of the new compliance administration framework that TIMB has put in place for orderliness and addressing challenges affecting the sector.

The side marketing of the golden leaf comes as tobacco export receipts rose 7% to US $803.26m from US$748.13m due to firm prices.

Area planted went up 28% to 53 571 hectares from 38 312 hectares planted last year due to the early start to the summer cropping season.

The growers’ registrations went 26% up to 144 434 during the 2022/2023 summer cropping season from 114 721   registered in the same period last year.