China’s tinge of golden lustre on Zim’s tobacco

The tobacco selling season has begun in Zimbabwe, one of Africa’s leading producers of the golden leaf, and being one of the country’s largest foreign currency earners, along with gold and platinum.

Vice President Constantino Chiwenga officially opened the tobacco-selling season recently and said the Government regarded the tobacco industry as a sector with great potential to grow and increase Zimbabwe’s export earnings.

There are many interesting dynamics and stories around the country’s tobacco sector, including the fact that the bulk of the crop now comes from small-scale farmers resettled by the Government during the land reform programme at the turn of the century.

Just a quarter of a century in, they are producing large quantities driving output to record levels in 2023; ranging from just a few acres of planted area to hundreds of hectares for a single farmer in the most successful cases.

The story of Zimbabwe’s tobacco industry transformation has been a huge success, going by the figures such as the nadir of the mid-2000s when the country barely managed 48 million kilogrammes to the record output of last year.

Zimbabwe is presently producing nearly 10 times that amount, and with it transformative earnings for both families and the country.

At the centre of this success story is how China has contributed to the transformation of the tobacco industry in Zimbabwe following the entry of its merchants and agriculture support that allowed Zimbabwe to regain its position as a top producer of the green leaf globally.

The performance has helped Zimbabwe build resilience against the illegal sanctions imposed on the country by Western countries peeved by the country’s land reform programme to resettle the landless black majority.

Chinese investors injected significant funding into the sector to support production through purchasing of the crop for export, raising prices at the auction floors to unprecedented levels.

The merchants also supported farmers with inputs, which allowed poor but hard-working farmers to get a large slice of the cake previously monopolised by white former commercial farmers.

The land reform programme, is now well established, was Zimbabwe’s epochal moment, and the agriculture sector has been transformed forever.

The story of the Chinese investors’ contribution to the Zimbabwe tobacco industry began 2004, when the Government invited a high-level Chinese delegation from the tobacco-growing province of Yunnan to visit Zimbabwe and explore investment opportunities in the country.

The following year, Chinese State tobacco company, China National Tobacco Company established its subsidiary in Zimbabwe, named Tian Ze Tobacco Company (Tian Ze) following a memorandum of understanding signed between the Governments of Zimbabwe and China, with the sole purpose of helping revive the country’s tobacco output.

As a State-owned enterprise, TZTC has direct access to Chinese loans and concessions, which aided its entry into Zimbabwe and enabled it to operate without concern for initial financial losses.

It started with an investment of US$5 million, and initiated contract farming participating at auction floors to procure tobacco for export to China.

Tian Ze would also sell its tobacco to other transnational tobacco companies, including British American Tobacco.

Tian Ze would also represent CNTC’s interests in other leaf-growing countries in the Southern African region.

Back in Zimbabwe, it introduced the contract farming model under which a smallholder farmer would enter into a contractual agreement with the company which provided seeds, fertiliser, equipment, and training upfront. All these costs would be recouped by the contractor at the end of the season.

Initially, Tian Ze had just 78 farmers in its first season, a number that has ballooned to thousands while the contract farming model has been taken over by various other players in the sector, both Chinese and local companies, cushioning farmers who would not have financial resources to do the business effectively.

The entry of the Chinese helped to cover some of the financing gaps at a time when the country’s land bank, Agribank, was placed under Western sanctions.

Local banks would not support agriculture financially ostensibly due to lack of security of tenure by essentially as a form of sanctions on the sector by themselves, arguably because of opposition to the new political economy of the land.

Meanwhile, Tian Ze has recorded exponential success and positive contributions to the country’s tobacco sector.

By 2015 the company had become the single largest exporter to China, buying approximately 40 percent of Zimbabwe’s tobacco leaf, accounting for 55 percent of the total export value as it only purchases the highest-grade tobacco leaf.

It reached approximately 20 000 farmers in its books.

As of last year, 2023, Tian Ze had consolidated its cooperation with Zimbabwean farmers through interest-free loans, zero markup on inputs, free technical support, training and service.

“The company purchases almost 30 million kg of flue-cured tobacco produced from its contract scheme” Tian Ze senior official Li Wenjie revealed last May. From the US$5 million invested in its initial year, Tian Ze poured US$80 million annual investment into contract farming as of last year.”

Wenjie added: “Over the past few years, China Tobacco has been purchasing about 65 million packed tobacco from Zimbabwe worth over 600 million US dollars annually. Tian Ze alone supplies 18 million kilogrammes, taking up to 25 percent of China’s total purchase and playing a critical role in the Zim-China trade.”

This was corroborated by the Tobacco Industry and Marketing Board whose acting chief executive officer, Mr Emmanuel Matsvaire, said Zimbabwe’s tobacco was sought-after globally, indicating that support from China, and contractors like Tian Ze Tobacco Company, have been crucial in ascertaining quality.

“In the past few years, the demand for Zimbabwe tobacco has remained strong. China is our biggest buyer. Almost half of our tobacco is exported to China.

“As I have gathered, this year, China has placed an order for 70 million kg of packed tobacco from Zimbabwe, which is an increase from 65 million kg last year.

“Without the support from China and Tian Ze, in particular, our tobacco industry would not have revived and grown to where we are today,” said Mr Matsvaire.

TIMB chairman Patrick Devenish, has this year pledged to benchmark the country’s tobacco sector with the global industry.

With Zimbabwe breaking records in tobacco production, a fact that helps the country achieve a positive trade balance with China and assert its position in the globe, the trajectory of economic cooperation between the two countries is growing stronger.

Chinese support for the tobacco industry is the gilt edge that is giving the country’s tobacco a lustre.

-herald