Zim farmers demand localisation of tobacco financing
FARMERS have implored the Government to initiate ways of improving local funding for the country’s lucrative tobacco sector to ensure they derive maximum benefits from their crop as it emerged the current financing model has seen all the proceeds being consumed offshore.
Currently, tobacco is financed mainly through off-shore funding, with 95 percent of the farmers under contracts and only 5 percent being self-financed.
As it stands, Zimbabwe retains around 12,5 percent of the value of its tobacco, with the remainder paying back loans and interest from off-shore financiers.
The crop though remains one of the largest foreign currency earners for the country behind gold and platinum and recently the central bank revealed tobacco proceeds were enough to procure enough fuel for the country for a year.
For this season the national tobacco target is 148 500 hectares. The country achieved its largest tobacco crop last season when 296 million kilogrammes of the leaf was produced surpassing the previous high of 259 million kilogrammes in 2019.
Speaking at the Tobacco Conference hosted by Business Weekly in Harare last Friday, farmers said they were not realising meaningful benefits from the contracted crop, adding that Government intervention was critical to ensure that farmers enjoyed the fruits of their hard work.
The highly subscribed event was attended by stakeholders in the tobacco industry and was financed by a number of organisations including the headline sponsor, Stanbic Bank, the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development and Tobacco Industries and Marketing Board among others.
Zimpapers chief finance officer, Farai Matanhire, gave the opening remarks on behalf of chief executive officer, Pikirayi Deketeke.
Zimbabwe Tobacco Growers Association chairman, George Seremwe, said production costs had gone up, and local banks could not finance farmers.
There was a need for the Government to find ways that would support farmers in tobacco growing.
Local funding was currently more expensive for most merchants than off-shore, and merchants were thus reluctant to take the local funding route.
“We are not happy with the current model of contract farming because these merchants are not for the benefit of most of us, so we would like to change that. We are not happy with the current contract system because we are not getting any benefits from anything as farmers. Actually, we are getting poorer.
“We have to raise local funding. As farmers, we are going to look at ways of how we are going to raise capital. We can raise funding to be able to support ourselves.
Foreign funding is costly and it has restrictions on it and it is not benefiting us at all. Let us rectify this because our Government is the one which controls the financial institutions.”
He said the reason why they wanted to have local funding is to have control over the products.
Tobacco Farmers Union Trust vice president, Edward Dune, said farmers needed an enabling environment to maximise production adding that lack of collateral was hindering them from borrowing.
He also said 100 percent foreign currency retention is critical since all costs that are in tobacco production required foreign currency.
“We have over 30 percent of farmers who are doing side marketing because these offshore beneficiaries entice them. We are very aware of these surrogate players in the industry but as farmers, we are very much in support of local funding. As farmers, we need good agronomic practices to put in place so that we get maximum benefits out of it,” he said.
Zimbabwe Farmers Union secretary general, Paul Zakariya, said offshore financing was not a favourable model as farmers were left in debt trap.
“This financing model needs to be revisited. All things being equal there is nothing wrong with accessing offshore finance. The bulk of the export proceeds are used to pay offshore loans thereby supporting foreign economies. The greater part of the revenue generated stays offshore,” he said.
Dr Kingstone Mujeyi, an agricultural business development expert at the University of Zimbabwe, said it was important to come up with a localisation strategy to ensure that resources were harnessed locally so that Zimbabweans could retain the value generated from resources.
“As a country, we are only retaining about 12,5 percent of the value added so we should take a holistic approach to the value chain in terms of benefits. We are interested in the value-added in the tobacco value chain and as a country, we are retaining 12,5 percent that has to be shared across all the actors of the value chain,’’ he said.
Tobacco Industry and Marketing Board chairman, Patrick Devenish, said there was a need to focus on sustainable sourcing of tobacco, reduce Zimbabwe’s carbon footprint, and support initiatives that promoted the well-being of tobacco farmers and their communities
“By adopting sustainable practices and communicating our efforts to our stakeholders, we can build trust and maintain a positive reputation in an ever-changing business landscape,” he said.
Lands, Agriculture, Fisheries, Water and Rural Development Permanent Secretary, Professor Obert Jiri, said the Government had to ensure that farmers got the value of their crop and that meant Zimbabwe had to embark on value addition and beneficiation of tobacco.
“The economy wants to see value and farmers want to get value of their crop. We need to transform the leaf into a product that we want to export. Farmers should grow tobacco and process it. We must change the narrative. We do not want to export all our foreign currency because we need to create value. We need to work together with relevant stakeholders,” he said.-ebusinessweekly
