Reserve Bank of Zimbabwe Governor Dr John Mangudya says the tobacco industry should consider opening auction floors earlier to ease cash shortages.He said this at the official closing ceremony of the 2016 tobacco marketing season in Harare yesterday.
Last season, the floors opened on March 30, three weeks late as the season was delayed owing to the El Nino-induced drought, which resulted in late plantings. Traditionally, the floors opened in February.
Dr Mangudya said during the tobacco off season, foreign currency goes down.
“We have long queues because the tobacco season is closed. We should at least open auction floors early to reduce the dry spell of foreign currency and ease cash shortages,” he said.
Dr Mangudya urged farmers to use plastic money, instead of relying on cash transactions.
The central bank came up with a 5 percent incentive for tobacco growers to promote production of the export crop.
“Farmers will get their money end of November. Tobacco farmers are the biggest beneficiaries of the export incentive. We should look after the goose that lays the golden eggs.
“The 5 percent export incentive will be deposited into the farmers’ accounts and they can use the money to buy inputs,” he said.
Government recently awarded tobacco farmers an export incentive, which rewards the growers for generating foreign currency through exporting goods and services.
The incentive pays the farmer a bonus of up to 5 percent on the foreign currency generated. The incentive is paid in bond notes, which have the same value and the US dollar (1:1).
Dr Mangudya said Government had also brought other initiatives to boost production and exports.
“We should increase productivity, and this is achieved in a good investment climate. We should ensure we use policy measures of ease of doing business and, there is also need to reduce costs of production. Let us produce. We have plenty of good soils and minerals,” he said. Agriculture economist, Mr Midway Bhunu concurred with Dr Mangudya and said tobacco brought in money through exports.
He said the early opening of the floors could boost liquidity but said, it was not always the case as buyers could also make rational decisions on when to export the crop.
“I agree with the RBZ Governor that it improves money in our circulation. It does not necessarily mean hard cash, but people can transact using the money in their accounts,” said Mr Bhunu.
“Farmers should also be encouraged to develop a culture of saving. At the moment, all the people are interested in withdrawing all their money from the banks and few people are saving. Farmers should not always rely on cash.”
Farmers Development Trust director Mr Lovegot Tendengu expressed concern that while the tobacco sector was flourishing, 80 percent of the crop was being financed by contractors, a situation he said existed in the cotton industry before its collapse.
Mr Tendengu said Government should also support tobacco production and not leave farmers at the mercy of contractors.
Agriculture, Mechanisation and Irrigation Development Minister Joseph Made said it was not fair to condemn contractors as they were critical in funding tobacco production. He said there was need to have a strong monitoring mechanism to ensure they give farmers a full package of inputs at affordable prices.
“Value addition is also critical in the tobacco industry, but our crop is of a superior quality that is used for blending. So, for us to add value, we need to import other types of tobacco. There are certain considerations that should be made.”
Stakeholders attending the ceremony also noted that there was need for investment in infrastructure such as irrigation, if farmers were going to improve the quality of their crop, and get high prices on the market.
The 2016 tobacco season saw farmers selling 202 million kilogrammes worth $595 million.