Tobacco’s big money headlines cloud farmers’ struggles: ZTA
ZIMBABWE boasts big earnings from tobacco each year, but these figures hide the true picture — growers are sinking in debt, the industry is not attracting new farmers and the country is not earning as much as it should.
Last year, Zimbabwe earned around US$460 million from 183 million kg of tobacco sold, according to the Tobacco Industry Marketing Board. But growers say this money is not all landing in the pockets of farmers.
Based on seed sales and area planted, the Zimbabwe Tobacco Association (ZTA) estimates this year’s crop to be at par with last year’s, between 180-185 million kg.
However, the ZTA warns that sales figures alone do not show the true state of the tobacco industry, one of the country’s biggest forex earners.
Ahead of the start of the new marketing season, the Reserve Bank of Zimbabwe has said a farmer will receive 60% of their tobacco sales proceeds in US dollars, while the rest will be paid out in Zimbabwe dollars at the official exchange rate.
Around 95% of all tobacco production is on credit secured from contractors. This is not working for growers, according to the ZTA, which represents farmers.
“The payment modalities announced by the central bank will not improve growers’ viability this season. The stagnant growth this season reflects this. Every season growers find themselves with little profit or in debt with their contractor,” ZTA said in a note ahead of the new selling season.
The debt means that in real terms Zimbabwe is not getting the bulk of the tobacco money.
“This debt is in US$ and carried forward to the next season, with more US$ loans and debt added. 90% of growers are now 100% US$ borrowed from their contractor, implying no new US$ comes into the country until US$ loans are repaid.”
“So while on paper tobacco sales may earn US$500-US$600 million per season, real inflows are about a quarter of this.
“Rollout of diversification cropping programmes for tobacco growers remain paramount so that their general livelihoods are protected, as tobacco viability diminishes each season.
“Tobacco growing currently is not an attractive crop to venture/expand into and such growth will remain subdued.”
ZTA said the pricing of contract tobacco, which is 95% of all output, could not be determined by prices at the auction floors, which account for just 5% of production.
“This is outdated legislation that needs to be speedily changed by the authorities,” the association said.
On the estimated size of this year’s crop, ZTA said seed grew by 27% to 940kg. There has been no real growth in the number of registered growers, which remains at 146 000. Based on seed sales and the number of growers, the planted area is estimated at 130 000 hectares.
—newZWire
ZIMBABWE boasts big earnings from tobacco each year, but these figures hide the true picture — growers are sinking in debt, the industry is not attracting new farmers and the country is not earning as much as it should.
Last year, Zimbabwe earned around US$460 million from 183 million kg of tobacco sold, according to the Tobacco Industry Marketing Board. But growers say this money is not all landing in the pockets of farmers.
Based on seed sales and area planted, the Zimbabwe Tobacco Association (ZTA) estimates this year’s crop to be at par with last year’s, between 180-185 million kg.
However, the ZTA warns that sales figures alone do not show the true state of the tobacco industry, one of the country’s biggest forex earners.
Ahead of the start of the new marketing season, the Reserve Bank of Zimbabwe has said a farmer will receive 60% of their tobacco sales proceeds in US dollars, while the rest will be paid out in Zimbabwe dollars at the official exchange rate.
Around 95% of all tobacco production is on credit secured from contractors. This is not working for growers, according to the ZTA, which represents farmers.
“The payment modalities announced by the central bank will not improve growers’ viability this season. The stagnant growth this season reflects this. Every season growers find themselves with little profit or in debt with their contractor,” ZTA said in a note ahead of the new selling season.
The debt means that in real terms Zimbabwe is not getting the bulk of the tobacco money.
“This debt is in US$ and carried forward to the next season, with more US$ loans and debt added. 90% of growers are now 100% US$ borrowed from their contractor, implying no new US$ comes into the country until US$ loans are repaid.”
“So while on paper tobacco sales may earn US$500-US$600 million per season, real inflows are about a quarter of this.
“Rollout of diversification cropping programmes for tobacco growers remain paramount so that their general livelihoods are protected, as tobacco viability diminishes each season.
“Tobacco growing currently is not an attractive crop to venture/expand into and such growth will remain subdued.”
ZTA said the pricing of contract tobacco, which is 95% of all output, could not be determined by prices at the auction floors, which account for just 5% of production.
“This is outdated legislation that needs to be speedily changed by the authorities,” the association said.
On the estimated size of this year’s crop, ZTA said seed grew by 27% to 940kg. There has been no real growth in the number of registered growers, which remains at 146 000. Based on seed sales and the number of growers, the planted area is estimated at 130 000 hectares. -newZWire
