Mixed fortunes for tobacco sector in 2019

Elita Chikwati Senior Agriculture Reporter
This year will be remembered as one of mixed fortunes for stakeholders in the tobacco industry.

On the positive side output surpassed the 2018 deliveries of 253 million kg to hit a record 259 million kg despite various challenges that affected production and marketing of the crop.

In 2000, a record of 231 million kg had been delivered to the auction floors, and after the land reform programme, output declined before increasing in the last two years, to shatter the previous record and demonstrate that black farmers were up to the task.

In 2019, tobacco contributed significantly to Gross Domestic Product (GDP) through exports to different destinations; Africa, America, Europe, European Union, Far East, Middle East and Oceania.

The bulk of the crop went to the Far East.

Tobacco, which used to be grown by the elite, has been democratised and thousands of people, mainly indigenous blacks, are now growing the crop.

The numbers are growing each year, and in 2019, US$529 million was generated from the exports of the 259 million kg.

Several success stories have been recorded in the tobacco industry, with some farmers testifying great improvements in their livelihoods while companies have ventured into value addition.

Some companies have also started processing the crop and exporting cigarettes, a move meant to maximise profits.

This year, farmers in Burma Valley continued to produce cigar wrapper tobacco and exporting it.

Plans are underway for the wrapping of the cigar locally starting next year.

Such is the success story of tobacco, a crop that has become so popular with most smallholder farmers after the land reform.

Challenges

The 2019 tobacco crop was grown under unfavourable weather conditions characterised by late rains and prolonged dry spells especially when the crop was almost ready for reaping.

Low prices

Deliveries to the floors were low during the first days of the season as most farmers adopted a wait-and-see attitude, while others withdrew their bales in protest of the low prices on offer.

The first day of the marketing season was hampered by farmers who withdrew 98 percent of the crop from the floors in protest over low prices offered by buyers.

The Tobacco Industry and Marketing Board(TIMB) statistics show that growers sold 3 886 kilogrammes of tobacco worth US$7 100 on the first day compared to 165 105 kilogrammes worth US$366 003 same period in 2018.

The statistics also show that rejected bales on the first day of 2019 marketing season had increased by 1 433 percent from the 5,70 percent in 2018 to 87,38 percent in 2019.

The highest price offered on the first day in 2019, was $4,50 per kilogramme, which is less than the $4, 99 per kilogramme offered during the same period in 2018.

Payment system

In 2019 farmers were paid 50 percent of their money in RTGS accounts with the remaining 50 percent being deposited into their Foreign Currency Accounts.

A number of farmers at first complained that they did not have FCA bank accounts, while others said not enough communication had been done by the relevant authorities to educate them on the new payment system.

Others were not aware of the period that was taken for the money to be transferred from the RTGS account to the FCA resulting in some spending their money while others were complaining that the money was not being deposited into the FCA when they would have used the money in the RTGS account.

Cash constraints

The farmers complained over the limited cash payments. They were getting 50 cents per kilogramme cash for the RTGS transactions and 10 cents per kilogramme for the United States dollar transactions.

The money was not enough for most farmers who preferred to be given their cash so they will be able to pay their workers back home. The farmers also complained that 50 percent foreign currency earnings were not enough and should have been increased to around 80 percent.

Farmers also complained over the use of plastic money as they were being charged extortionate interest rates which eroded their earnings.

Regulatory issues

The 2019 marketing season which started on March 20, coincided with new developments in the economy and many farmers did not have the adequate information and could not understand issues leading to many withholding their crop.

Two percent tax

Tobacco farmers were at first not exempted from the two percent tax and this further eroded their earnings.

Finance and Economic Development Minister Professor Mthuli Ncube had to intervene and scrapped the Intermediated Money Transfer tax (two percent tax) from all transactions involving the tobacco through Statutory Instrument 80 of 2019, which amended the Finance (Rate and Incidence of Intermediated Money Transfer Tax) Regulations.

This resulted in a boost in sales.

Stakeholders concerns and interventions

Due to the continuous problems at the auction floors and high rates of rejections, stakeholders in the tobacco industry; farmers, RBZ officials, tobacco merchants and buyers, TIMB and the Tobacco Research Board (TRB), converged for a Tobacco Indaba where they called for a holistic approach to challenges that were being faced by farmers to come up with solutions that will enable the whole value chain to benefit from the business.

The stakeholders established that farmers were lacking important knowledge which resulted in them experiencing challenges from production to marketing of tobacco.

2019/20 tobacco season preparations

The 2019/20 season is underway although there has been a decline in the farmer registrations when compared to the previous season.

As at December 19, TIMB statistics show a decline of 16 percent in farmer registrations for the 2019/20 season.

By December 19, 141 169 farmers had registered to grow tobacco compared to 167 100 farmers during the same period last year.

The decline has been attributed to bad experiences by farmers during the 2019 season.

The challenges have seen some farmers looking to other high-value crops that are less risky when compared to tobacco, with other farmers keeping their options open.

Farmers are considering other options like horticulture crops.

Others farmers said the improvement in the payment system by the Grain Marketing Board had also attracted them to grow more maize instead of tobacco.

TIMB said the decline in figures was transitory as more farmers were expected to register as they plant their crops in the fields.

Crop condition

There are concerns over the current dry conditions which are affecting the current tobacco crop. Irrigation is being affected by load shedding while those who want to switch to generators are experiencing challenges procuring fuel due to shortages.

Future

Despite the challenges faced during the 2019 season, some tobacco growers have continued to show resilience and shown interest to produce the crop.

Source :

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