$30 mil­lion ex­port in­cen­tive for tobacco farm­ers

Chronicle (Zimbabwe) - - Business - Harare Bureau

TOBACCO farm­ers who sold their crop dur­ing the just ended mar­ket­ing sea­son will re­ceive a cu­mu­la­tive $30 mil­lion as ex­port in­cen­tives by the end of this month, the Re­serve Bank of Zim­babwe has said.

This comes after a to­tal of 73 343 grow­ers de­liv­ered 202 mil­lion kilo­grammes of tobacco dur­ing the 2015/16 mar­ket­ing sea­son, earn­ing just short of $600 mil­lion from tobacco sales.

Tobacco is one of the big­gest ex­port earn­ers along with gold and plat­inum.

Re­serve Bank gover­nor Dr John Man­gudya said the cen­tral bank was re­ward­ing ex­porters, in­clud­ing tobacco grow­ers, with an in­cen­tive for their ef­forts in gen­er­at­ing the much needed for­eign ex­change.

As such, like other ex­porters, tobacco farm­ers who de­liv­ered their crop start­ing from March 30 this year, are en­ti­tled to a 5 per­cent ex­port bonus.

He said the in­cen­tive, to be funded through bond notes, a medium of ex­change and le­gal ten­der in Zim­babwe, would be paid into the bank ac­counts of all el­i­gi­ble farm­ers by end of this month.

The cen­tral bank chief said the bonds, which will come into cir­cu­la­tion at the end of Novem­ber, were a fi­nan­cial in­stru­ment to fund the ex­port in­cen­tive and can only be printed to a max­i­mum $200 mil­lion.

The African Ex­port and Im­port Bank pro­vided the fa­cil­ity to back the fi­nan­cial in­stru­ment meant to in­cen­tivise the growth of ex­port earn­ings.

Dr Man­gudya made the re­marks on Fri­day last week at the 2016 tobacco mar­ket­ing sea­son clos­ing cer­e­mony or­gan­ised by the Tobacco In­dus­try and Mar­ket­ing Board.

“As for tobacco farm­ers, the to­tal in­cen­tive is $29,8 mil­lion, you are the big­gest ben­e­fi­ciary. By end of Novem­ber (2016) that amount will go into the ac­counts of pro­duc­ers,” Dr Man­gudya said.

“We need to have this in­cen­tive so that you can con­tinue to pro­duce.”

He said the in­cen­tive will cut down cost of pro­duc­tion for farm­ers. Dr Man­gudya said the so­lu­tion to Zim­babwe’s cash cri­sis lay in in­creas­ing pro­duc­tion and ex­ports to gen­er­ate hard cur­rency.

The cen­tral bank chief un­der­scored the need to ex­pand pro­duc­tion in ma­jor sources of for­eign ex­change into Zim­babwe, es­pe­cially tobacco and gold, which ac­count for over half of the earn­ings.

In this re­gard, Dr Man­gudya pointed out that the liq­uid­ity cri­sis in the econ­omy tends to get worse dur­ing the tobacco off sea­son, as such; he im­plored TIMB to open the mar­ket­ing sea­son ear­lier next year.

“When we bor­row cash to close the liq­uid­ity gap, we will be as­sum­ing that the tobacco sell­ing sea­son will start ear­lier,” he said.

Im­port­ing cash, he said, how­ever, comes at a high cost to the coun­try. Zim­babwe uses a bas­ket of for­eign cur­ren­cies, dom­i­nated by the US dol­lar, after scrap­ping its own cur­rency in 2009 due to in­fla­tion, which peaked at 231 mil­lion at the last of­fi­cial up­date in 2008.

Dr Man­gudya noted that there is grow­ing pres­sure on nos­tro ac­counts, ex­ter­nal bank ac­counts used to make for­eign pay­ments, due to the coun­try’s huge ap­petite for im­ports against fall­ing ex­port earn­ings.

Cap­i­tal flight, in­clud­ing smug­gling, and Zimbabweans’ fix­a­tion with hold­ing phys­i­cal cash in­stead of al­ter­na­tive pay­ment sys­tems such as elec­tronic trans­fer, mo­bile money and point of sale ma­chines, was part of the rea­son the pre­vail­ing ban­knote shortage was wors­en­ing.

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