Govt Has Left Tobacco Farmers Exposed

Zimbabwe’s tobacco farmers have lurched into a crisis following the government’s failure to launch the long-awaited Tobacco Value Chain Transformation Plan, which was expected to spell out how the administration would fund the troubled sector from local resources.

Business Times can report that the Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement, has been working closely with the Tobacco Industry Marketing Board (TIMB). They had promised to launch the strategy before mid-August.

But, the government has now deferred the plan indefinitely.

The delay means the tobacco farmers have been left exposed to the predatory tobacco merchants, who are said to be impoverishing the farmers by luring them into debt trap.

Merchants deduct their dues at the floors to recover loans availed to farmers for inputs under a contract growing scheme, leaving farmers with tiny fractions of what their tobacco would have fetched.

Farmers are also charged punitive interest rates for loans availed by the merchants.

The delays in launching the funding plan comes as tobacco merchants have maintained a tight grip on the sector and are said to have already started distributing inputs and availing funds to farmers for the 2021/2022 tobacco season.

Experts said the sector, which was once a lucrative industry for local farmers, requires local funding equivalent to US$200m.

But, the government appears to be reneging on its promise to provide local funding for the sector, leaving farmers exposed.

The situation has been worsened by the reluctance of local banks to advance loans as the government has failed to issue transferable ownership to black farmers settled on former white-owned land.

The reluctance by banks to lend has seen tobacco merchants coming up with contract growing schemes.

But, farmers are saying the tobacco merchants are impoverishing them as they charge high interest rates on loans.

Analysts suspect that the delay in launching the strategy shows that some authorities might be benefiting from the contractors’ prejudice.

“The failure by the government to launch the Tobacco Value Chain Transformation Plan within its stipulated time is a cause for concern as the mid-August date was a bit late and the further delay could throw the strategy astray,” an expert, who preferred anonymity, told Business Times this week.

“The delays by the authorities could suggest that there may be some individuals benefiting from external funding.”

All efforts to get a comment from the Minister of Lands, Agriculture, Fisheries, Water and Rural Resettlement, Anxious Masuka and permanent secretary John Basera were futile.

TIMB chief executive officer Meanwell Gudu said the strategy was a long term plan which would bring a long lasting solution to the tobacco sector and earn foreign currency for the country.

But, Gudu said he would not pre-empt the plans of the Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement, until the strategy has been officially adopted.

“Currently, there is a lot of work that is being done to transform the tobacco industry value chain. Part of the objectives of the tobacco value chain transformation plans is to prioritise strategic interventions in the localisation of tobacco funding. This is to ensure retention of the foreign currency that accrues to the country through tobacco exports,” Gudu told Business Times.

It is estimated that from more than US$600m the country has been getting from tobacco sales, the tobacco merchants deduct their dues at the floors.

It is estimated that more than US$500m has been deducted as payments of loans, a situation which has seen tobacco farmers taking home less than US$90m.

Some farmers have been taking home negative balances as some debts are carried forward.

Farmers’ output, they claim, have not been creating sufficient returns to repay the loans in full and at least take home something significant.

This implies that the pressures on tobacco farmers are significant.

The dire situation has threatened farmers’ viability, a situation that has left most tobacco farmers living on the margins.

Currently, the tobacco contractors control 95% of the total tobacco sales in the country and with the delays in local funding their dominance is likely to continue for some years.

This is giving the government a headache amid revelations that the contractors and merchants were inflating input prices, among other concerns.

“Therefore in as much as the government is tempted to act, the withdrawal of tobacco merchants will have serious ripple effects on tobacco farming in the country. Hence the hands of the government are tied at the moment,” a senior Reserve Bank of Zimbabwe (RBZ) official, who requested anonymity, told Business Times this week.

Efforts to get a comment from RBZ Governor John Mangudya were futile. His mobile phone continuously went unanswered.

Tobacco is the fourth largest foreign currency earner behind platinum, diaspora remittances, and gold.

Farmers claim that the debt levels are now unsustainable with some having ballooned to critical levels.

Some farmers have been piling up debts in the past few years.

About 90% of growers are now 100% US$ borrowed from their contractor, implying no new US$ comes into the country until US$ loans are repaid.

The average price for the auctioned tobacco stands at US$2.80 per kilogramme against the contracted price of ZWL$2.79 per kg.

According to the TIMB tobacco marketing regulations, the lowest contract average price should be at the same level as the auction price but most of the time higher.

But for the majority of the season the auction prices have dominated the proceedings and the regulator and the agriculture ministry have turned a blind eye to the anomaly.

In a survey by this publication, the auction system was rejecting farmers’ bales at an alarming rate leaving farmers with no option but to sell their golden leaf to the contractors at a discount.

According to TIMB, the auction rejection rate stood at 13.65% versus 2.40% on contract. BusinessTimes