Tobacco farmers sound alarm
Suspect inflated input prices Disquiet over hessian wraps
In a 2019-2020 season that was largely blighted by drought, tobacco farmers managed another record-breaking feat by delivering 259,5 million kilogrammes of the cash crop, up from a historic 252 million kg recorded last year.
But, there was little cheer as revenues significantly declined.
Despite pocketing US$207 million less — as overall earnings slumped to US$530 million from US$737 million a year ago owing to subdued prices — farmers are equally worried by what they perceive to be manmade challenges caused by a well-knit syndicate of merchants, buyers and packaging material manufacturers that allegedly milk them through extortionately inflating the price of inputs and packaging material.
The expenses are reportedly aggregated and deducted from their season’s proceeds, which significantly chews into their margins so much that some of them are mulling substituting the “golden leaf” for other cash crops.
The bulk of farmers are able to grow tobacco, which is one of the country’s major foreign currency earners, through support from contractors.
In fact, 80 percent of the crop is produced under the contract system.
Inflated inputs
However, since most of the contractors finance production in foreign currency, repayments are equally docked in the same currency, and farmers are not happy.
They feel the valuation for the support extended to them is being inflated.
“There is also an issue of exorbitant prices of inputs charged to farmers while TIMB (Tobacco Industry and Marketing Board) sleeps on duty,” said Marondera farmer, Mr Munyaradzi Hove.
“We are charged US$38 and US$48 for a litre of eccotop and 2kg twine (respectively) . . . while these were being sold at a third of the prices in local currency.
“As if that is not enough, TIMB registers numerous merchants who buy at depressed prices for onward selling to those who process.”
Currently, there are 22 contractors and 34 merchants registered with the regulator.
It is a concern that is shared by many other farmers.
There is also disquiet over the current model where farmers have to stump up money every season to “rent” hessian wraps — used to package tobacco — from Propak, which is a subsidiary of Zimbabwe Stock Exchange-listed industrial giant, TSL.
The company manufactures tobacco paper, wraps and twine, and used to enjoy a monopoly in the local agro-packaging business.
Contractors are, however, supplying their own distinguishable packaging to prevent side marketing.
Mr Hove said: “We are being made to buy Propak’s hessians, which we do not get to own . . . with each farmer buying them time and again . . .
“Previously, there was a refund, but now it is no longer available.”
There seems to be collusion, he added, between TIMB, Propak and tobacco merchants to bilk money from farmers.
The Zimbabwe Tobacco Association, a 91-year-old representative body of smalland large-scale farmers that produce an estimated 30 percent of the country’s fluecured tobacco, said it was looking into the concerns.
Competitive
Industry regulator, TIMB, believes that the more the merchants, the more prices offered to producers are likely to be competitive.
“The number of buyers should in effect translate into more competitive bidding for the tobacco. With most buyers supplying the same markets, it is expected that prices would tend to converge,” TIMB chief executive officer Dr Andrew Matibiri told The Sunday Mail.
“Previously, hessian wraps were ‘hired’ by farmers, but the packaging companies have changed their business models into a retail model,” he said.
It is believed that the wraps remain the property of the packaging manufacturer and are rented out to farmers every marketing season for a fee.
Propak operations manager Mr Collins Muchenje said the company, which has been hiring out wraps for more than 30 years, has been charging both a hiring fee and a deposit until 2015, after which it scrapped the deposit.
“There are some merchants who still charge their farmers deposits,” he said, adding: “This arrangement does not involve Propak.
“Farmers are merchants who hire wraps for a period of approximately nine months within a calendar month. Up until 2015, farmers used to pay a hiring fee together with a deposit, which was refunded once a farmer sold his/her tobacco at the auction floor. . .
“In order to reduce the need to raise more funds and subject farmers to refund process, Propak decided to remove the deposit on hessian wraps,” he said.
Last year, the Zimbabwe Farmers’ Union (ZFU), Zimbabwe Commercial Farmers’ Union (ZCFU), Zimbabwe National Farmers’ Union (ZNFU) and Zimbabwe Progressive Tobacco Farmers’ Union (ZPFU) considered suing some tobacco merchants who were reportedly clandestinely registering farmers in order to force them to sell their tobacco to them.
There are growing fears continued frustrations will force some farmers to abandon the crop.
Latest statistics show that the number of new farmers who have registered to grow the “yellow leaf” has declined by 80 percent to 7 274 compared to 34 845 farmers last year.
More than 25 000 of the 162 028 farmers who grew tobacco last year plan to ditch it this year.
However, the 111 000 farmers who managed to achieve the record-breaking season in 2018 are less than the 136 762 that have registered so far this season.
Farmers have also been put off by unattractive prices.
Average prices for contract tobacco topped US$2,07 this year from US$2,95 a year ago, while auction tobacco stood at US$1,76 from US$2,73 in the same period.
The decision to pay half the proceeds in local currency deposited in a farmers’ bank account and the remainder in foreign currency credited in a nostro account also did not find favour in the sector.
The limited withdrawal limits — capped at $300 per day, and mainly in bond coins — were also considered restrictive.
Conversely, in the 2018 marketing season, farmers were allowed to withdraw as much as $1000 per day.
Experts say tobacco is an expensive crop, which costs about US$12 000 per hectare to produce.