THE future of tobacco farming in Zimbabwe is bleak due to
viability challenges, and farmers are calling for an emergency meeting with the
regulatory body and government to solve the issues affecting them.
Tobacco, which is Zimbabwe’s second-biggest foreign
currency earner after mining, is currently under siege as producers are not
given value for their golden leaf.
Farmers who invested foreign currency to produce the best
crop are their counting losses after the Reserve Bank of Zimbabwe (RBZ) told
them that they were only allowed to retain 50% forex.
Farmers needed to retain 100% of their proceeds in order to
be able to improve productivity, but the central bank spurned them.
To make matters worse, the Tobacco Industry Marketing Board
(TIMB) recently hiked floor-clearing charges, weighing and auction fees,
further eating into the earnings of farmers already hard-pressed by depressed
prices this season.
The weighing and auction fees were raised from ZWL$25 to
ZWL$48 per bale and floor-clearing charges were raised to ZWL$4 per bale.
Apart from weighing and auction fees, other deductions
incurred by farmers include tobacco levy (0,75%), TIMB stop order levies (0,8%)
and the Ministry of Agriculture levy (USD$0,875c per kg ).
In its June 13 report, the Zimbabwe Tobacco Association
(ZTA) said the 2018/19 marketing season had been the most challenging ever for
many farmers and early indications were that tobacco production and USD
earnings from tobacco would decline this season, unless there was urgent
intervention to save the industry that directly employs close to half a million
people with two million dependants downstream.
“Many farmers have been unable to clear their USD debts and
will exit the once attractive industry. Tobacco will, more worryingly, also
become a lesser of an important key foreign currency earner, social and
employment contributor to the economy,” the report reads in part.
ZTA said high selling charges both on auction and contract
floors were a major concern to all farmers as it impacted on viability.
Selling charges vary from US$7,50 to US$9 per bale, settled
at the prevailing day’s rate of exchange.
“Just recently, auction floor charges were raised by over
60%, yet farmers’ real returns are on a decline. Farmers already incur other
high marketing charges and levies,” the report reads.
On 50% forex retention, ZTA said as the entitlement was
based on a farmer first clearing his US$ loans, and in a season with depressed
US$ prices against high US$ seasonal borrowings, very few farmers have been in
a position to benefit from the retention to date.
“Farmers also need to have generated sufficient RTGS$
income from their sales to buy back their entitlement, which again has further
reduced the number of farmers benefiting. The process of crediting farmers’
tobacco FCAs with their entitlements is slow,” it said.
“Many farmers are therefore trying to retool, using RTGS$
revenues generated at official exchange rates, at inputs being priced at close
to parallel rates, which is an almost impossible task to accomplish.”
“There are minimal surpluses being generated and coupled
with the high inflation environment, farmers will have little income once
completing their tobacco sales to sustain themselves,” ZTA said.
Farmers’ unions who spoke to Standardbusiness said the
situation was dire and production could plunge going forward if no mitigating
measurers were put in place.
“The current viability challenges surely point to a bleak
future for tobacco, but we should not allow that to happen. If we don’t do
anything to address those viability and cost of compliance issues, we are going
to see a decline in tobacco production. We cannot afford to do that because
tobacco is our huge foreign currency earner in this country,” Federation of
Farmers’ Union chairman Wonder Chabikwa said.
Chabikwa said there was need for TIMB and farmers to sit
down and come up with ways to make tobacco farming viable and profitable.
“The challenges that are being faced, we need to sit down
and iron them out. The costs of complying with the regulations are too high. It
is true, farmers are complaining about issues of viability,” he said.
“So as an industry, ourselves the farmers and the regulator
TIMB, we need to sit down and ensure we make the environment conducive to
continue with production of tobacco in this country. So we can’t afford to
reduce production because of issues over which we can sit down and address.”
The environment must be conducive for the farmer to
continue producing. You know we raised production to a record of over 250
million kilogrammes because it was viable and profitable. Now the farmers are
complaining,” Chabikwa said.
Last year, tobacco farmers delivered 252 million kg, an
all-time record, raking in $892 million.
Zimbabwe Commercial Farmers’ Union director Jeremiah Tevera
said farmers were counting their loses and some could scale down their
production or pull out from tobacco farming altogether.
“Tobacco farmers are losing out. Quite a number would be
making a decision whether to go for it next season or not. All production has
been compromised by this environment,” he said.
With all the changes happening, Tevera said no rewarding
compensation was going to the farmer.
He said farmers should assess the situation first before
venturing into tobacco farming next season to avoid incurring costs like they
have done this season.
ZTA said prices on the auction floors had remained fairly
static throughout the season at US$1,65/kg, although a price ceiling of
US$4,99/kg has been maintained on the floor there has been very little tobacco
that has attained this pricing as compared to previous years.
In recent days, ZTA said there had been an improvement in
prices, though daily volumes were declining. On contract floors, after a
significant weakening of prices to well under US$2 per kg, there has been a
welcome improvement, with daily averages above US$2 per kg, as higher quality
leaf grades of commercial tobacco come onto the market and firmer prices are
being paid for some lower leaf styles.
However, with close to 70% of the national crop sold, this
recent improvement in prices has come too late.
As at June 12 2019, ZTA said 171,2 million kilogrammes at
an average price of $1,87/kg had been sold after 57 days of trade, a decrease
of 11,1 % in volume and a significant 36% decrease in seasonal average price.
Seasonal auction price was down 41%, while seasonal
contract price was down 36% when compared to 2018. Auction volumes remained on
a decline, accounting for just 13% of the total volume sold to date.
Daily volumes during the month increased significantly with
close to 80 million kg sold in the month of May 2019. Daily deliveries in the
month of June have dropped on certain days as a large number of small-scale
farmers start completing their sales.
It is estimated that by the end of June, close to 190
million kg should have been sold and with farmers estimated to complete sales
in mid-August, the national crop size could reach plus or minus 230 million kg.
Tobacco export earnings have been growing over the years
from $772,6 million in 2014, rising to $855 million in 2015.
In 2017, tobacco accounted for a quarter of Zimbabwe’s $3,8
billion export earnings. It is also one of the largest employers in the country,
where formal employment is scarce, but workers in the sector are classified as
working poor.
TIMB is projecting tobacco output of over 260 million kg
from 252 million kg obtained last year. Standard
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