TIMB fixing cracks, providing example
The tobacco contract system has been one of the earliest major success stories in Zimbabwe agriculture after land reform, playing a crucial role in the transition from a crop grown by less than 2 000 estate owners funded by banks to tens of thousands of smaller-scale farmers funded through contracts.
The system has been an example to others where those who need the crops contract farmers to grow them. Millers would contract farmers to grow maize, traditional grain and wheat.
Cooking oil companies would contract farmers to grow soya, sunflower and perhaps cotton. Horticulture exporters would contract for vegetables.
The system combines self interest of all parties. Tobacco merchants know exactly what varieties and what qualities of leaf are saleable in global markets and roughly the sort of prices that can be expected.
So they get the farmers to grow the right varieties and most offer support to ensure that the quality they want is what is grown and cured.
Farmers get their inputs on credit, and then pay back when they deliver and sell the crop.
The system works on a great deal of trust, that merchants will not cheat the farmers by overpricing inputs and underpricing leaf, and that farmers will sell to the company that they are contracted with and will not sneak their crop off to someone else.
What made the system work well for almost two decades was a tough and fair regulator, a referee, in the form of the Tobacco Industry Marketing Board, an organisation that represents all interests and whose primary job is to ensure that the whole industry functions smoothly and fairly.
So everyone in the industry is registered, from the smallest farmer to the largest merchant. Seed sales are limited to approved varieties.
Anyone cheating, again from smallest farmer to largest merchant, can be deregistered, that is banned from growing or dealing in tobacco, which is a fairly strong incentive for everyone to stay on board.
Thanks to the limitless ingenuity of human beings, there will always be someone who reckons they can make a quick buck outside the letter and the spirit of the system rules.
The TIMB reacted by tightening some of the rules to separate out the sheep from the goats.
For the present season, all contractors had to give additional information, such as what they paid for inputs and how they valued these when they turned them over to their farmers.
Copies of all contracts were wanted, for examination and the files. And it was made clear to farmers, where side marketing had started to nibble at deliveries in a good season, that this was a no-go area.
The result has been interesting. Of the 37 licensed contractors 26 appear to have had no problem in giving the TIMB the needed information.
A decent and respectable company would have all this on tap and it would require minimal extra work to press the print button on the computer and send the copies down to the board. So we know that the majority of the contractors were respectable companies.
Another nine are taking their time, and even by the end of last week, the final deadline, had still not told the TIMB everything the board wanted to know.
The whereabouts of the other two and what they are doing was not made clear, but clearly they are unlikely to remain in business.
It is interesting that the TIMB was not necessarily fixing margins and the like, or trying to run other people’s businesses with a heavy-hand.
In fact the TIMB is outside the business, neither growing tobacco, nor funding production, nor buying tobacco, nor exporting tobacco.
It is the referee, and a very good one, rather than a player. And when it appears that there could be breaches in the rules, or at least in the spirit of the rules, the first response was to seek more information. It is common knowledge that the competent and honest are quite happy to work in daylight.
The other problem that arose in tobacco, how to work out the prices, was in part a result of the success of contract farming.
Only a minute percentage of the crop was being sold on auction, yet the auctions set the prices and if there is not enough of all varieties and qualities sold on auction it becomes extraordinarily difficult to figure out the proper price to pay the farmers on contract.
The solution to that was for Government to provide a modest revolving fund to allow more farmers, the larger A2 variety, to self-finance and then sell at auction. Again a sensible fix to sort out a problem no one really expected to rear its head.
This role of the TIMB is what might well have to be duplicated in other farming sectors.
To a degree, the Grain Marketing Board does some of the work for grain and oil seeds, but it is the major buyer, and major conduit of inputs, regardless of whether the contracts are commercial contracts for larger farmers or the direct Government assistance to the smallest farmers to ensure at a minimum they grow enough for their families and preferably start growing extra for sale and move onto the lower steps of the commercial ladder.
Being the major player and the referee is not really an ideal solution. Agritex does some of the other functions with the TIMB using Agritex as well to certify that the farmers exist and have land.
In time, the obvious arrangement would be seeing all farmers being on the commercial ladder, and this will require a complex system of contract, loans and other ways of funding the production and a clear, transparent and acceptable way of setting prices and ensuring delivery.
And that needs a referee, with a pack of red and yellow cards, an agreed set of rules and a loud whistle.
Much of the present Government effort are the vital transition programmes, to convert poor subsistence farmers into middle income commercial farmers, making full and productive use of their relatively small farms, but let us remember that many European farms are small and the farmers own tractors, pick-ups and other equipment.
As our farmers move towards that, contracts will become big deals, and they need to be the right ones.
Tobacco has shown the way, and has shown that problems can be sorted out as they arise and that the system is flexible enough to defeat even the biggest cheat.
Something like the TIMB is needed in these other sectors. Why we are building them up now is a good time to start the debate on what form it should take, what sort of people need to serve on a board, and how everyone can fit into a system that makes honesty, transparency and fairness the default choices.-The Herald
