AgribusinessCentral African Republic (CAR)Zimbabwe

Zim tobacco farmers cry foul of current forex retention threshold

By Almot Maqolo

Zimbabwe has so far earned US$172.04 million in one month from 74.85 million kilograms of tobacco sold so far since the selling season opened, despite farmers feel short changed by the current foreign currency threshold which requires them to get 50% of their proceeds in local currency at a fixed rate of Z$25 to USD1.00.

Tobacco is the southern African nation’s second largest foreign currency earner after gold. This year, tobacco was grown under difficult weather characterised by delayed rains and prolonged drought.

This year the tobacco selling season is being conducted with minimized human traffic at auction floors to reduce the spread of the novel coronavirus which is ravaging the world.<br>Latest data from Tobacco Industry and Marketing Board (TIMB) shows that sales rose 72.98% from US$99.46 million earned from 55.73 million kgs of the golden leaf sold in the comparable period last year.

Average price at both auction and contract floors stood at 2.30 USD per kg, which is 28.79% higher than in the 2019 marketing season. So far the golden leaf has fetched the highest price of 6.60 USD per kg, while the lowest has been 0.10 US cents per kg.<br>Rejected bales declined to 34 168 from 44 951 recorded in the same period last year.

Tobacco production has been on the increase in the past few years, with farmers selling a record 259 million kg last year, up from 253 million kg in 2018. Last year, it generated US$747 million in exports mainly to China and Europe, according to the Reserve Bank of Zimbabwe data.

Traditionally, the opening of tobacco auction floors leads to improved foreign exchange inflows in the country, with buyers scrambling to purchase the crop. Meanwhile, Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) said a number of issues require immediate attention if tobacco farming is to continue generating forex for the country and continue to serve as a source of livelihood for the majority of the smallholder tobacco farmers.

One of the issues raised is the need to review forex retention threshold from the current 50%. As at 12 March 2020, only 7 554 new growers had registered to grow tobacco in the 2019/2020 season, representing an 82% decline from those recorded in 2018/19 season.

“The RBZ retention system that stipulates that tobacco farmers get 50% of their proceeds in local currency might have contributed. This component is received at a fixed rate of Z$25 to USD1.00, which is only half of the rate prevailing on the unofficial market and farmers feel short changed,” ZEPARU stated in its Q1 2020 report.

“Further, farmers experience delays in the processing of payments after selling their crop. More so, there are restrictions around tobacco transportation truck capacity that increase their cost of ferrying the crop to the market. In the face of increasing costs of inputs and inability of farmers to reinvest on the farm, this may result in serious reduction in tobacco output in the forthcoming season.”

Thrust on irrigation development, ensuring reliable power supply and timely availability of inputs can alleviate some of the challenges tobacco farmers are facing, the quasi-government body added.

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