Zimbabwe’s economy is expected to take a knock as tobacco exports tumbled 7% to US$846.7m last year from US$907.8m in 2018 due to prolonged droughts and unfavourable payment policies.
The development comes after the country’s leading foreign currency earner, gold, also slumped 28% to US$946m in 2019 from US$1.33bn in 2018, leaving the country with nowhere to look for forex.
This also comes when the country is facing a myriad of challenges which include forex shortages, electricity outages, fuel challenges and approaching drought.
Analysts say this year’s looming drought will complicate an already crumbling economy as the tobacco selling season is expected to start late due to the late planting of farmers.
Tobacco Industry and Marketing Board chief executive Andrew Matibiri told Business Times that complex pricing systems affected the tobacco exports last year and more should be done during the 2020 tobacco selling season to rectify that.
“2019 tobacco exports closed at 187.8m kg worth US$846.7m, this is a decrease while total exports for 2018 were 182.6 million kg valued at US$907.8 million.
Annual exports to the Far East and European Union rose by 23% and 41%, respectively,” Matibiri said.
This means Zimbabwe’s forex drought season will extend to April as most tobacco in the dry land is still at a tender stage, therefore tobacco merchants will bring money later than they have planned due to drought.
By December 20, 2019, 81 977 hectares of tobacco had been planted compared to 79 708 hectares for the same period last season Tobacco Input Credit Scheme.
Under the Tobacco Input Credit Scheme, tobacco inputs equivalent to 5 617 hectares have so far been distributed.
TIMB bulletin tobacco registrations have fallen 15% to 143 568 in 2020 season from 168 735 the previous year while new growers fell 82% to 7447 from 40 772.
Matibiri said the bulk of the country’s tobacco is still at an infant stage and significant rainfall patterns are needed to change the fortunes of 2020 tobacco season.
“Now that the majority of the crop has received major rainfall patterns, we expect the golden leaf to improve significantly.
We now wish rainfall patterns to continue and improve quality of the crop,” Matibiri said.
He said the tobacco industry is faced with various challenges which include complex payment systems and forex retention levels and discussions are at advanced levels with all stakeholders to iron out issues.
Most farmers are rejecting the central bank’s proposed 20% of offshore loans for the production of the crop and 10% for value addition while the investor gets 70%.
Before that, the forex retention for offshore loans was 100%.
Economic analysts say Zimbabwe might be forced to look for more credit lines as the tobacco season is being delayed by severe climatic changes.
Preliminary indications suggest that the selling season will kick off at the end of March with most tobacco expected to come mid-April.
Zimbabwe Tobacco Association (ZTA) president Rodney Ambrose the monetary authorities should start to prepare organised payment methods to avoid confusion of yesteryear which the tobacco merchants capitalised on, resulting in low tobacco prices.
ZTA said the central bank should take in mind that tobacco merchants and banks have given farmers loans in US dollars and need to be paid in United States dollars.
Tobacco experts say a large number of tobacco merchants failed to pay their obligations due to subdued tobacco prices.
Ambrose said contract farming levels have increased to 90% from 82% due to exorbitant input prices and lack of funding for various self-financing farmers.