Tobacco injects millions into Zim economy

TOBACCO is important in Zimbabwe’s economy. Farmers are this year expected to deliver more than 200 million kilogrammes (kg) of the golden leaf following a good 2020/2021 harvest. Tobacco sales had injected US$325 million into the economy on the 35th day of this marketing season, Tobacco Industry and Marketing Board (TIMB) data showed in June.

The sector had generated US$210,6 million during the same time last year, a period when markets were thrown off balance after government enforced hard lockdowns to fight a deadly COVID-19 pandemic that was at the time in its infancy.

TIMB data showed that the US$325 million came after farmers shipped 120,6 million kg of tobacco during the period, compared to 90,73 million kg during the comparable period in 2020.

This year’s tobacco marketing season only kicked off after strenuous planning by the industry as the country is in the midst of the third wave of COVID-19.

Farmers, observing strict World Health Organisation guidelines, have been shipping more golden leaf bales to markets compared to last year.

TIMB figures also showed a remarkable improvement in prices during the review period, with average prices for both contracted and auction floor sales rising 16% to US$2,69 per kg.

The average price was US$2,32 per kg during the same period in 2020.

However, the average price for tobacco delivered to the auction floors, at US$2,76 per kg, was higher than that of the golden leaf grown under contract, which averaged US$2,69, according to TIMB data.

Farmers’ unions were worried that with 96% of tobacco coming out of farms under contract, big foreign contracting firms were likely to suppress prices.

The contract tobacco farming model has courted controversy since it made inroads onto the market in the past few years, as local funding collapsed, with thousands of capital-starved new entrants saying they were being manipulated by big foreign corporations.

TIMB chief executive Meanwell Gudu has said the regulator is looking into the problems affecting farmers.

TIMB said contract floors had received the bigger chunk of 112,5 million kg compared to 8,13 million kg handled by the auction floors.

Farmers’ unions have been pushing for local funding of tobacco to address the anomalies.

In that same month, Cabinet said a tobacco value chain transformation strategy to localise funding and increase value-addition was nearing completion.

“Measures are being put in place to facilitate value-addition of tobacco before exporting so as to maximise on the proceeds from tobacco,” the Cabinet minutes read.

“The tobacco value chain transformation strategy is nearing completion. The main focus of the strategy is as follows: growers production to increase to 300 million kg, combating de-forestation, localising financing of production, increasing value-addition and beneficiation and growing alternative crops.”

Zimbabwe Commercial Farmers Union president Shadreck Makombe said farmers were concerned about developments on the contract side of tobacco.

“Contractors are still colluding and of late, some who failed to do what they wanted to do are ruthless and unscrupulous,” he said.

“The average price for contract floors is definitely below that of auction floors. But some are offering better prices but because of certain cheats and crooks at contract floors, you find that prices are reduced further.

“With that in mind it is not a pleasing scenario because they are duping people of their money.”

Tobacco Association of Zimbabwe president George Seremwe raised concern over contract floor prices saying after deductions, farmers were left with nothing.

“Though payment of United States dollars has improved, the retention at the end is not viable,” he said, referring to a central bank retention strategy that compels farmers to get 60% of their earnings in foreign currency.

“Farmers are remaining with nothing or not much after the contractors’ deductions. There are too many middlemen among buyers. That is compromising the prices,” Seremwe added.

Of concern also are reports that there are surrogates in the tobacco industry who are destroying the industry and illegally taking unlicensed tobacco worth R10 million to South Africa and other countries at the expense of the country’s farmers.

This follows the recovery of unlicensed tobacco from Zimbabwe last week in an East London warehouse in South Africa, confirming fears of smuggling and underhand dealings.

South African officials, including the police working with customs officials, confirmed the recovery of unprocessed tobacco worth R10 million at a warehouse in the town’s Thorn Park area, suspected to have been smuggled through the Beitbridge Border Post.