Auction system under threat

Zimbabwe’s tobacco auction system is facing serious threats, according to a story in The Zimbabwe Independent.

The country currently operates both auction and contract sales and last year the Tobacco Industry and Marketing Board (TIMB), said it would maintain the current dual marketing system despite an uproar over wide price disparities between contract sales and auction sales, which tended to be lower.

Official figures show that contract farming accounted for nearly 80 percent of the cash crop sold last year.

Some tobacco companies were quoted as saying that the opening of two contract floors in Mvurwi and Karoi could increase side-marketing and pose viability problems for the current system.

“The opening of the floors faced some resistance from some merchants and auction floors alike who felt that this arrangement would affect the viability of the sector,” said one stakeholder who requested anonymity.

“The granting of a contract floor license to Mashonaland Tobacco Company could spur side-marketing which is not healthy for the industry especially in a season where yields are expected to be low,” another executive said.

The TIMB’s chief executive Andrew Matibiri blamed a liquidity crunch for affecting the operations of small scale farmers. Banks were reluctant to lend money to most farmers who currently did not have bankable collateral.

“We still believe that the future of the auction floor is still there despite the liquidity challenges in this economy,” Matibiri said.