Repayment scheme sets TIMB, contractors on collision course
The Tobacco Industry and Marketing Board (TIMB) has directed merchants to first, deduct money owed by farmers who benefited under the regulator’s inputs scheme two years ago in a development likely to set the TIMB and contractors on a collision course.
The scheme, known as the Tobacco Inputs Credit Scheme (TICS), is administered by the TIMB and is meant to support farmers who fail to access inputs from private contractors.
The TIMB selected four companies to roll out the scheme, but three of them failed to recover the debts citing side marketing and abuse of inputs by some farmers. Of the four companies, Ethical Leaf Tobacco managed to repay the debt in full.
“TICS legacy debts will take precedence over current merchant’s debts,” TIMB acting chief executive Emmanuel Matsvaire, wrote to all tobacco merchants on Tuesday.
The arrangement immediately comes into effect as the country begins the 2023 marketing season.
“Merchants are strongly advised not to manipulate the stop order file or risk being suspended.”
What the directive means is merchants who funded farmers who defaulted on TICS loans will deduct the money owed to the TIMB before recovering their own investments through the stop order arrangement.
To put this into perspective; companies that were not part of the TIMB scheme, but contracted defaulters who were funded under the TICS will have a portion of their investment go towards settling the legacy debts which, otherwise they are not liable for.
Industry players warned of the potential risk of failure by contractors to recover their money.
“The TIMB has a database of the farmers who defaulted but some of these farmers were funded by private contractors,” said an official with a contracting company.
“So what the directive basically means is that the TIMB is redirecting the burden to merchants who supported these farmers and that will affect the recovery of their loans.”
Some industry players suggested the directive was not compatible with the Stop Order Act, which explicitly prohibits the proceeds of crops funded under contracted schemes to be directed towards the payment of any other debt.
It says: “Save as otherwise provided in any enactment or this Act…no proceeds of any crop or part thereof delivered by or on behalf of a farmer or his legal representative for marketing shall be applied towards the settlement of any debt, including set-off, or in accordance with any agreement, express or implied, or any arrangement or instructions of any kind whatsoever, or paid to the farmer or any other person, until all prescribed costs, addressee’s fees, registered stop-orders, and special stop-orders payable in respect of such crop or part thereof have been paid in full.”
The 2023 marketing season opened on Wednesday with deliveries expected to increase to 230 million kg from 212 million last year. The farmers’ register boasts 148 527 growers who planted 117 928 hectares during the 2022/23 tobacco production season as compared to 110 155 hectares of tobacco by 122 841 growers.
The TIMB registered 3 283 new growers and this “proves that as an industry we
must be doing something right and that is increasing the appetite to grow tobacco,” TIMB chairman Patrick Devenish said during the official opening at the TSF.
To offtake the tobacco, the TIMB licensed two auction floors—the Tobacco Sales Floor and Premier Tobacco Auction Floor. The TIMB also licensed 25 “A” Class buyers and 32 contracting companies. Contracted sales will be conducted in Harare and five decentralized centres in Karoi, Mvurwi, Bindura, Marondera and Rusape.-ebusinessweekly
