THE IMPACT OF AGRICULTURE ON REBUIDLING OF THE ZIMBABWEAN ECONOMY A CLOSER LOOK AT THE TOBACCO INDUSTRY

Agriculture has always been at the cornerstone of human lives since time immemorial. Our ancestors started as hunters and gatherers but as they became more civilised and the pressure on resources increased farming emerged as the important source of livelihood. Even when God created the earth he instructed people to till the land and look after it and this practice was never going to end. There are many crops that are grown in Zimbabwe some for subsistence, some for commercial and some for both. Tobacco Industry plays a pivotal role in the Zimbabwean economy in both foreign currency earnings, creation of employment and uplifting of rural livelihoods.

In 2015 Agriculture contributed 5.9% of the US$75 trillion GDP at US$4.4 trillion according to The World Factbook Central Intelligence Agency. According to the Global Finance Magazine in 2016 Agriculture contributed 12.2% to the Zimbabwean economy. In 2017 total sales (amounts paid to the farmer) amounted to USD 559 million at an average price of US$2.96 per kg according to the industry regulator TIMB. Amounts earned in terms of exports are even higher than that given the prices merchants get from international customers. These statistics point to a very important sector to the Zimbabwean economy that continues to be the highest foreign currency earner for the country. Policy makers must take cognisance of these important metrics and take necessary action to continue promoting the industry.

Historically, large scale commercial farmers dominated the tobacco industry a trend that shifted after the land reform program in 2000. Small scale black farmers have since improved on their productivity and they are now significant contributors to the national production. Unlike cotton that has suffered depressed prices for some time now and require a lot of government subsidies either in form of free inputs and or prices for farmers to be viable, tobacco offers a great option for empowering poor people and creation of employment. The small-scale farmer growing whatever crop that is available faces a challenge of funding. Our financial system has a framework that is not favourable to poor farmers who inherited farms from their white counterpart owners. Banks prefer to fund at the late stage however when one looks at the statistics agriculture will be having a lot of lending available. There are third parties and intermediaries who are playing a pivotal role of funding farmers through contract farming. These agents however face risk of side marketing and high interest rates from the banks and when they price these into the farmer's cost of borrowings the farmer end up paying very high interest rates. The other factor that is militating against the farmer's progress is bankability of the 99-year lease. The Government has made lots of efforts working with Bankers' Association, but more tangible results are yet to be seen on the ground.

In my experience every year they are quite a huge number of farmers who are left unfunded or who are insufficiently funded in the rural areas. If mechanisms are put in place to nurture and groom more farmers, the country stand to realise greater potential. What we need to understand as a nation is that no one was born with capacity and potential. The average full throttle funding by merchants with capacity is $ 1 000 on average and assuming an average yield on 2 000kg (2014 average) at an average price of $3 that produces $6 000 gross income and net of $5 000 before other costs like labour. This gives an average monthly income of $416 per month on a 1 Hectare farm and $833 for a 2-hectare farmer (better than some people in full time employment). This shows that tobacco has a far better potential than other cash crops like cotton that can produce yields as low as 500 per hectare with average prices of 40 cents which is not that much. Let's push ahead with policies that results in win-win scenarios for both the farmer, merchants and government.

Pricing dynamics and mechanism is an important aspect of agricultural viability and growing of our economy. Most farmers are discouraged when they receive prices that they perceive (note that it is also issue of perception) to be low to their expectations. Pricing is also a factor of yields. Serious investment in farmer education and training is important so that farmers achieve higher yields. When yields are higher income per area grows and this leaves farmers viable after repayment of their debts. The pricing of inputs also need to be aligned to regional prices since inputs is the highest cost component of the farmer.

Weather risk continues to affect farmers in Zimbabwe. Fortunately for this beautiful country, every year we receive enough water to produce bumper harvests year in year out. Those who have been to countries with smaller water reservoirs like Israel will understand great potential that lies with irrigation in agriculture. Government efforts and private investment need to be intensified and, in my view, if sufficient investment is made in this important issue, yields will increase, production guaranteed, and farmers can engage in 3 crop cycles. Tobacco farmers can afford the technology and equipment required. In conclusion, the country need to continue looking for pragmatic solutions to real life problems. We need not to look for spectacular out of this world solutions to get our country out of the doldrums. Getting people productive and getting them off the streets and get them to do farming can uplift an economy that has suffered for too long. Funding from Government, Aid organisations and private firms is still required in the agricultural sector especially tobacco. Let's nurture this goose that lay the golden eggs (foreign currency).

Petros Piki CA(Z), MSc, RPA- is a Duff Award Winning Chartered Accountant who runs a new Consultant Outfit Neverlank Consultancy. He is an expert in issues of tax, audit, accounting, strategy, managerial finance and contract farming. He can be contacted on pet.piki@gmail.com