The smallholder
tobacco farmers are set to benefit from a US$2 billion loan facility over 10
years under the Productivity Booster Kit Programme, a major step towards
strengthening local financing and the tobacco value chain.
Currently,
tobacco is financed mainly through offshore funding, with 95 percent of the
farmers under contracts and only 5 percent being self-financed.
Zimbabwe
retains around 12,5 percent of the value of its tobacco, with the remainder
paying back loans and interest from offshore financiers.
Tobacco remains
one of the largest foreign currency earners for the country, behind gold and
platinum.
As at the end
of July 2025, farmers had sold over 350 million kg of tobacco, earning about
US$1.167 billion, with the final export value greater after the initial
processing by Zimbabwean merchants, but the earnings could even be more if the
middlemen are cut loose.
In his address
on Monday during the Productivity Booster Kit Programme launch in Mazowe,
Mashonaland Central Province, President Mnangagwa said the scheme will also
include tobacco farmers as they are part of the agriculture sector.
“My Government
plans to allocate US$1.98 billion over 10 years as a loan for the Productivity
Booster Kit Programme,” the President said. “Additionally, five banks have
committed to providing additional working capital.
“The
Productivity Booster Kits will also be made available to smallholder tobacco
farmers, to localise the procurement of farming equipment and other aspects of
the tobacco value chain.”
Lands,
Agriculture, Fisheries, Water and Rural Development Permanent Secretary
Professor Obert Jiri said the move is a big step towards localised tobacco
funding in Zimbabwe.
“About 80
percent of our tobacco is produced by smallholder farmers and by extending
booster kits to these farmers, we are able to produce more and better tobacco,”
he said.
“They now have
the ability to procure farming equipment, which also includes irrigation.
Technically, this means we have localised funding for tobacco farming, which
has been mainly funded offshore. Tobacco production has always been financed
offshore. We are now moving towards the local financing of tobacco production.
So it is a big step towards localised tobacco farming.”
Professor Jiri
said the country must also move towards the value addition of the crop to
ensure maximum benefits.
“The first
stage is localising tobacco financing in the country, while the second stage is
that of value addition. Farmers are only getting paid for the raw tobacco,
which is around US$4,99 a kg. However, once it’s value added from the raw
tobacco to cigarettes, it gains more value. So our farmers are getting very
little from the raw tobacco, they are selling.
“Since there is
an increase in tobacco production, we must now focus on localised financing and
value addition of the tobacco so that the country gets value out of tobacco
production.”
Although
vibrant, the country’s tobacco sector is predominantly driven by six major
foreign-owned tobacco contracting firms, often companies affiliated to global
tobacco giants.
These firms
secure loans facilitated by their overseas parent companies to procure inputs
for their contract farming programmes.
About 90
percent of tobacco is financed by contractors.
However, a
concerning pattern has emerged where farmers see inputs reportedly sold to them
at inflated prices.
Farmers, who
receive the inputs as part of their production loans, then become indebted for
values exceeding the actual market cost.
Investigations
have revealed that large tobacco contractors begin profiting significantly at
this stage, effectively recovering value they may not have genuinely invested
in the first place.
This has become
a key basis for critics to argue the practice also raises concerns about
potential transfer pricing.
The contract
system becomes even more intricate. To meet the large volume demands of their
global parent companies, some foreign-owned contractors often engage local
Zimbabwean firms, known as “surrogate companies”.
The surrogates
are supplied with inputs or funds by the major contractors to support the
farmers, who are technically contracted by these local firms.
In essence, the
tobacco produced ultimately belongs to the foreign-owned companies. Local
“surrogate” firms receive commissions for their role, which critics argue
should “rightfully” go to the farmer.
The “additional
loss” for farmers comes on top of the already reduced value they experience
from paying for the inflated prices of inputs, highlighting a significant
challenge for the profitability and sustainability of tobacco farming for many
smallholder producers in Zimbabwe.Herald
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