Is Zim benefiting from tobacco?

Zimbabwe will this year record its all-time high tobacco yield, but concerns abound if the farmers and the country at large are really benefiting from the much-touted improvement in tobacco production from the 2022/23 cropping season.

As of mid-July 2023, the country had recorded 290 million kilogrammes in tobacco deliveries, the highest volume of the crop ever to be delivered to floors in Zimbabwe.

According to statistics, Zimbabwe is presently value-adding and beneficiating just one percent of the total tobacco output while the rest is exported semi-processed.

The global tobacco market size was estimated at US$868 billion in 2022 and is projected to grow to over US$1 trillion by 2025, but experts say Zimbabwe earns only 0,017 percent of the global tobacco market value yet it produces seven percent of the crop.

Seven percent of the global tobacco market value can easily translate to a potential US$61, 46 billion per year but Zimbabwe is getting far much less.

Local tobacco companies beneficiate approximately between one and two percent of the locally produced tobacco thus the country is realising meagre US$1- US$1, 2 billion of tobacco annually as indicated by current tobacco export statistics, losing quite a lot of value in the process.

Most of the local factories only do the basic processions of the tobacco, which are to grow, cure, pack the tobacco after separating stems and unwanted materials, and finally distribute the tobacco all of which are low tech and simple, with low profit.

According to statistics approximately five percent of tobacco exports are in the form of processed tobacco (cutrag), 75 percent as semi-processed (lamina), and 20 percent as processing by-products (stems, fines).

Currently, Zimbabwe has three cigarettes producers that are using locally grown leaf already including Mosi-oa-Tunya, based in Victoria Falls.

Value addition and beneficiation are necessary if Zimbabwe is to realise more from tobacco, thus needs to invest in new technology, improve on local financing and establish state-of-art-manufacturing plants.

It is assumed that out of 250 million kilogrammes of tobacco produced in the country, only 2, 5 million kilogrammes are value added into cigarettes.

In this regard, Zimbabwe needs to craft measures to capture more value from the world’s US$868 billion tobacco industry, through more value addition of the crop by the local industry.

The value addition debate for the sector’s growth has been raging for quite some time now and should be taken more seriously if the country is to realise more from the crop.

This will make tobacco a cash crop that contributes immensely to fiscal generation and Gross Domestic Product (GDP).

Tobacco is a key foreign currency earner for Zimbabwe, demonstrating its importance to the country’s economy, a narrative that could be changed for the better if the crop is value-added and exported as a finished product.

However, despite the contribution of tobacco to the national GDP, it has somehow failed to transform the livelihoods of small-scale farmers who are major contributors and growers as they remain enslaved to debt from contractors.

Through the Tobacco Value Chain Transformation Strategy, Government has shown intentions to capture some of the value that the country should be getting from the crop while producing more because the market for Zimbabwean tobacco remains huge.

According to the local think tank, Zimbabwe Coalition on Debt and Development (ZIMCODD), albeit the improvement of tobacco production in the country, reliance on tobacco growers to contract farming has culminated farmers into debt and poverty.

Farmers are growingly relying on contract farming and in 2018, about 80 percent of small-scale tobacco farmers had contracts with private companies.

“Tobacco contract farming has created an opportunity for tobacco companies to create a dependency syndrome system that debt-traps farmers and underpays them. This dependency syndrome system was in the form of contract farming.

“There is substantial power asymmetry between farmers and buyers of tobacco,” said ZimCodd.
Apparently, much of the contract farming funds by companies originate from beyond the country, especially Asia.

According to one scholar, Zhaoyang Wang, Zimbabwe should try to move towards making higher quality products but that can only be realised if the country improves its funding structure.

“To boost the economy, the local government recommended local farmers to farm tobacco, however, they need loans to buy the fertilisers and seeds required to farm the tobacco and then they will pay it off when the harvest season arrives.

“The biggest problem with Zimbabwe is its finance structure as its unbalanced finance structure has caused severe poverty and hunger problem.

“The only way to solve this problem is to alter the structure. However, this could not be done easily, and it will be a long-term task for Zimbabwe,” said Wang.

He said blind expansion and loans with inappropriate interest rates will never be of help but to make a better scene now. If we think in the long term, decades, these current policies will only slow down Zimbabwe’s pace of development

Most of Zimbabwean tobacco exports are primary products that do not have much profit and require lots of labour.-ebusinessweekly