Tobacco sector must invest more in value addition

THE tobacco marketing season opened on Wednesday at the three auction floors in Harare with the contracted crop going on sale yesterday. About 1 000 bales were expected to go under the hammer at Boka Tobacco Auction Floors, Tobacco Sales Floor and Premier Tobacco Auction Floor while companies that contracted growers started collecting the crop yesterday.

At $4,60 per kilogramme, the opening price was very competitive and should lay a foundation for higher prices as the marketing season progresses. This expectation is realistic given that the first bales are typically of inferior leaves, which obviously fetch a lower price. Also, the good rains that fell should help farmers produce generally better quality tobacco. Therefore as the upper leaf is picked and processed and as the marketing season goes on, the farmer would be better rewarded.

For our economy, the beginning of the tobacco marketing season is big news. The crop is our biggest single foreign currency earner. It is one of the biggest employers at the farm and downstream. A total of 82 699 farmers were registered to grow tobacco during the 2016/17 season. This means 82 699 jobs for the farmers already before one adds the grower’s workers. There are transporters as well to move the crop from the farm to the market. There are others employed by service providers and processors along the value chain.

Launching the marketing season on Wednesday, Agriculture, Mechanisation and Irrigation Development Minister Dr Joseph Made was happy with the opening price, quality and prospects for the season.

He urged the Reserve Bank of Zimbabwe to prioritise the agriculture sector in its foreign currency allocation.

“The burden on the tobacco farmers as raised by the RBZ Governor Dr (John) Mangudya, is that as we generate foreign currency, we want to be given priority on foreign exchange allocation so that we meet all the requirements. We cannot talk of productivity without talking of soil fertility, so we need herbicides and chemicals,” said Dr Made.

We are delighted by the stable environment that characterised the start of the selling period. In some seasons poor initial prices have sparked protests at the auction floors but $4,60/kg was attractive enough to prevent any grumbling.

Estimates are that 205 million kilogrammes of tobacco would be reaped this year, marginally up on the 2016 harvest of 202 million kg.

In the next five months or so, at least $800 million would be injected into a market that has been crying for liquidity over the past few months. This figure represents a huge sum of money that should help as depositors have struggled to get their money from banks. Many are spending days queueing for cash at banks, some of which have reduced withdrawal limits to as little as $50 per day. Others have actually failed to give any money. With so much liquidity on the way, the situation should change.

The Government, through the central Bank has done well by increasing withdrawal limits for farmers. They will be allowed to withdraw $1 000 when they sell their first crop and $500 in subsequent sales this year. This is a recognition of their work in making money for the economy, heroes for the country, in the words of Dr Mangudya on Wednesday.

“The producers of tobacco are indeed our heroes. You are important in this economy. The foreign currency that you produce is about $800 million a year, that amount is sufficient to oil Zimbabwe throughout the whole year. Zimbabwe spends about $60 million in fuel per month which amounts to $720 million per year. Tobacco industry produces enough fuel for the economy,” he said.

For our heroes to continue contributing to growing the economy such support must be intensified and widened. Growers themselves have to play a part too.

They must invest more in their operations in terms of acquiring technical skills, modern machinery and technology. Instead of impulsively spending their riches, growers need to plough much of it back into the land. They would be able to improve their productivity and crop quality. They would be able to earn more money for themselves and for their country.

In that connection, we are happy that collections into the afforestation fund will beginning this year accrue directly to the Tobacco Industry and Marketing Board. This cuts bureaucracy and enable farmers to access money to engage in afforestation programmes, replenishing forests that they exploit yearly when curing their crop. If a farmer is able to use locally available wood fuel in processing his or her crop, he or she is able to produce more competitively and efficiently instead of having to struggle buying coal from as far afield as Harare.

But for tobacco’s contribution to the economy to improve, stakeholders need to invest more in local value addition and beneficiation. Instead of celebrating the huge harvests and the income that the economy earns exporting the crop in its raw form to China, South Africa, United Arab Emirates, Belgium and other countries, we will earn more if the crop is processed locally.

A kilogramme of raw tobacco is sold for an average $5 but if it is processed into cigarettes its value rises to between $30 and $60 per kg. In other words, a kilogramme of the unprocessed crop gains up to 10 times in value if it is processed into a finished product. There, indeed, is potential for the country to build a multi-billion dollar industry based on tobacco. It will not be easy, or immediate. Much time and investment is required. Difficulties would be met but that is the direction that the tobacco sector must take.