Tag: Zimbabwe

Zimbabwean Growers Face ‘Debt Trap’

Poto: Taco Tuinstra
Tobacco farmers in Zimbabwe are facing a vicious debt trap, reports The Zimbabwe Independent, citing the Zimbabwe Tobacco Association (ZTA).
The government payment system ensures tobacco growers receive only part of their income in U.S. dollars with the remaining share being paid in Zimbabwean dollars at an inflated exchange rate.
Because most Zimbabwean growers have borrowed U.S. dollars from their contractors to finance their operations, this means they will have difficulties repaying their loans.
Of the approximately USD600 in export earnings generated annually by farmers only USD150 is flowing into the country, according to the ZTA.
For the longer part of last year, farmers were paid 50 percent of their revenues in forex with another half being paid in Zimbabwean dollars at a fixed rate of one U.S. dollar to 25 Zimbabwean dollars.
We plead with the authorities to review the foreign currency retention level before the start of the selling season.
Rodney Ambrose, CEO, ZTA
On the black market, however, one U.S. dollar fetched up to ZWD165 during the first quarter of 2020.
While the government has recently increased farmers’ foreign currency retention to 60 percent, it is insufficient to solve growers’ problems, according to the ZTA.
“Growers’ viability will not improve with the retention levels announced, and we plead with the authorities to review the foreign currency retention level before the start of the selling season,” said ZTA CEO Rodney Ambrose.
Zimbabwe’s tobacco markets are scheduled to open April 7.
Tobacco farmers’ profits have been declining while debts owed to contractors in U.S. dollars have been mounting. Industry representatives have also called on the government to stop basing the pricing of contract tobacco, which makes up 95 percent of national production, on the minimum of tobacco prices paid on the auction floors.
March 29, 2021
Zimbabwe Debates Price Mechanism

Photo: Taco Tuinstra
Stakeholders are debating whether minimum auction prices should continue to determine the pricing of contract tobacco in Zimbabwe, reports The Zimbabwe Mail.
Zimbabwe has a dual marketing system where tobacco is sold through both auction and contract. Over the years, prices have been determined by the minimum price paid on the auction market.
At the time this policy was put in place, tobacco sold through the auction accounted for nearly half the total output. Over the years, however, the share of auction sales has declined sharply because most farmers are unable to self-finance their operations due to lack of collateral. Last year, the Tobacco Industry and Marketing Board (TIMB) registered about 146,000 growers, of which 95 percent were funded by contractors.
Industry players and analysts said it would be absurd to continue applying the policy as the tobacco farming landscape has completely changed.
“Pricing of contract tobacco—95 percent of national production—cannot continue to be based on the minimum of tobacco prices paid on the auction floors,” said Rodney Ambrose, CEO of the Zimbabwe Tobacco Association (ZTA).
We can’t just throw away this important tool of price discovery.
Paul Zakariya, executive director, Zimbabwe Farmers’ Union

TIMB CEO Andrew Matibiri also believes it is “unfair” for a small crop size of lower quality to determine the minimum grade price of tobacco.
“It is a very valid issue, and the board has agreed that something needs to be done,” said Matibiri, who is scheduled to step down from his position later this year.
However, Zimbabwe Farmers’ Union executive director Paul Zakariya fears that abandoning the dual marketing system would leave farmers exposed to price manipulation by contractors.
“We can’t just throw away this important tool of price discovery,” he told The Sunday Mail Business. “The competition at the auction is quite important.”
There would be some sort of minimum guaranteed price for every grade so that farmers can be protected from price manipulation.
Andrew Matibiri, CEO, TIMB

Matibiri said the TIMB would ensure that farmers are protected from rigged prices.
“There would be some sort of minimum guaranteed price for every grade so that farmers can be protected from price manipulation,” he said.
The tobacco selling season is scheduled to start on April 7, with the trade anticipating lower volumes but higher quality than last year. The ZTA expects output to reach at least 180 million kg, down from 184 million kg in the previous growing season.
“Though yields will be down, the quality of this season’s crop is better than 2020,” the ZTA wrote in its monthly tobacco report for March.
Firm prices are also expected during this marketing season, which opens on April 7. Merchants are expected to bring in above US$500 million to the market.
Tobacco Reporter covered the Zimbabwean tobacco market in depth in 2018.
March 22, 2021
Zimbabwe Crop Value Estimated at $0.5 billion

Photo: Taco Tuinstra
Tobacco merchants are preparing to pay around US$500 million for Zimbabwe’s tobacco crop this year—significantly more than the US$440 million they shelled out last year, according to an article in The Herald, citing local industry officials.
Auction floors are scheduled to open April 7 for the self-financed growers while the contract sales begin the following day.
“We are well prepared for the marketing season,” said Tobacco Industry and Marketing Board Chairman Pat Devenish. “We are expecting a crop of 200 million kg and at an average price of US$2.50 per kg. We expect an estimate of around US$500 million.”
This season, tobacco growers will get 60 percent of their earnings in foreign currency while the remaining 40 percent will be paid in local currency using the auction rate.
One potential problem is looming in areas where cash-rich middlemen are trying to buy harvests at low prices for ready cash, which will present any contract farmer with legal problems when they come to deliver.
To discourage such fly-by-night players, merchants must submit copies of legally binding contracts by Sept. 30 of every year and proof of inputs distributed either paid up invoices or payment plans with suppliers.
Devenish said most merchants had met the requirements.
Assembly member Ngoni Masenda warned farmers against selling to fly-by-night merchants as they stand to lose in the long run.
March 17, 2021
Zimbabwean Selling Season to Start in April

Photo: Taco Tuinstra
Zimbabwe’s tobacco marketing season kicks off April 7, reports Daily News, citing the Tobacco Industry Marketing Board (TIMB). The auction floors will officially open on that day, but contract tobacco sales will begin April 8.
Normally, the tobacco marketing season opens in February, but the coronavirus crisis could have affected the dates for this year.
Three auction floors, Boka Tobacco Floors, Premier Tobacco Auction Floors and Tobacco Sales Floor, have been licensed for 2021. The three firms would all operate from Harare only, and there will be no decentralization of auction sales. As was the case last year, some of the contracting companies would operate out-of-Harare sales points.
Tobacco growers are anticipating a bumper harvest after good rains and adequate supplies of inputs. The potential national tobacco output is currently being assessed by Agritex and TIMB with the results set to be released by the parent Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement.
According to the TIMB, 180.8 million kg valued at $452.3 million were delivered to the country’s contract and auction floors last year. Last year’s average price was $2.50 per kg.
Zimbabwe exports its tobacco mostly to China and the European Union.
Following a policy change by the Reserve Bank of Zimbabwe, tobacco farmers are set to receive 60 percent of payment in foreign currency and the remainder in local currency. Last year, farmers were paid 50 percent of their proceeds in U.S. dollars with the other 50 percent being in Zimbabwe dollars.
The tobacco Farmers Union of Zimbabwe has warned that the retention levels still fall short of growers’ production cost.
March 15, 2021
Growers Welcome Increased Forex Cap

Photo: Taco Tuinstra
The Tobacco Farmers Union of Zimbabwe (TOFUZ) has praised the government for increasing the nation’s foreign currency retention cap from 50 percent to 60 percent ahead of the 2021 tobacco selling season, reports All Africa.
Growers are now able to purchase and/or supplement their foreign exchange requirements from the auction system. The union had called for a 70 percent retention cap but noted that 60 percent was still a positive level for tobacco leaf growers.
“Though we would have wanted 70 percent forex retention for farmers, we applaud the RBZ [Reserve Bank of Zimbabwe] and the Ministry of Agriculture for the policy review, which is set to benefit farmers,” a TOFUZ spokesperson said.
This will certainly see an increase in tobacco production.
TOFUZ
“This will certainly see an increase in tobacco production as farmers will increase hectare capacity. Our concern as a union is to see totally empowered tobacco farmers who can independently make decisions without conditions as the case with contract farming. Given that tobacco is the country’s largest single foreign currency earner after gold and it contributes much to our economic growth as a nation, tobacco farming should be promoted through supportive input loan facilities.”
March 12, 2021
Zimbabwe Marketing Board Seeks New CEO

The TIMB headquarters in Harare (Photo: Taco Tuinstra)
Andrew Matibiri will step down as CEO of Zimbabwe’s Tobacco Industry and Marketing Board (TIMB) after his term ends in April, according to Newsday.
Andrew Matibiri
Matibiri has led the industry regulator for 15 years. Government regulations restrict a parastatal CEO’s term to 10 years, but the rule was not yet in effect when Matibiri took the helm.
The TIMB board has contracted Industrial Psychology Consultants (IPC) to search for the new CEO.
“Industrial Psychology Consultants (Pvt.) Ltd. has been contracted by the Tobacco Industry and Marketing Board to assist with the recruitment and selection of a suitable candidate for the position of chief executive officer,” IPC said in a vacancy advert published in late 2020.
“The CEO is accountable for leading the business through the initiation and implementation of strategies to unlock its full potential through the effective utilization of the material, financial and human resources, and supervision of all operational units.”
According to TIMB data, 180.8 million kg valued at $452.3 million was delivered to the country’s contract and auction floors during the 2020 season. During the same period last year, 240 million kg valued $479 million went under the hammer.
February 19, 2021
Union Urges Equal Treatment of Growers

Photo: Taco Tuinstra
The Tobacco Farmers Union (TFU) has urged the government of Zimbabwe to make contracting companies treat small-scale farmers as equal partners in the production process, reports Newsday.
The union said farmers’ interest in growing tobacco had decreased because contractors were claiming the lion’s share of earnings realized from the sale of the crop.
Zimbabwe is one of the world’s biggest tobacco exporters, having produced 190 million kg last year, earning farmers about $748 million.
But official statistics indicate that farmers paid back $400 million to contracting companies, leaving them with only $350 million.
“Tobacco contract farming in Zimbabwe does not benefit the ordinary farmer,” the TFU said in a statement ahead of the start of this year’s marketing season.
The season is expected to kick off next month if regulators are convinced that World Health Organization protocols on controlling Covid-19 are adhered to, according to Tobacco Industry Marketing Board CEO Andrew Matibiri.
February 18, 2021
Zimbabwe Earns $763 Million From Tobacco

Photo: Taco Tuinstra
Tobacco exports earned Zimbabwe $763 million in 2020, reports The Street Journal.
More value-added tobacco in the form of cut rag and cut stems were exported in 2020 compared to 2019, the Tobacco Industry and Marketing Board (TIMB) said.
Exports of byproducts increased from 36 million kg in 2019 to 43 million kg in 2020.
Despite Covid-19, Zimbabwe exported 187 million kg of tobacco, equal to the previous year’s volumes, according to the TIMB. “Global tobacco movements in the year 2020 have not been impacted significantly regardless of the global pandemic,” the TIMB said in a statement. “More value-added tobacco in the form of cut rag and cut stems have been exported this year [2020] compared to 2019. The Far-East was the top destination for Zimbabwean tobacco as 33 percent of total exports were destined for China.”
The average tobacco export price in 2020 was $4.06 per kg compared to $4.51 per kg in the same period in 2019.
Tobacco generates 30 percent of Zimbabwe’s foreign currency, bringing in more than $600 million annually.
January 7, 2021
Zimbabwe: Cannabis Could Outstrip Tobacco as Cash Crop

Photo: NickyPe from Pixabay
Zimbabwe’s earnings from cannabis exports could outstrip those of tobacco by almost three times, according to local officials, reports Bloomberg.
Last year, the southern African nation legalized cultivation of cannabis for medicinal use. Since announcing rules for growing cannabis in September, the government has issued 44 licenses
Treasury spokesman Clive Mphambela expects sales to reach $1.25 billion in 2021. By comparison, Zimbabwe earned $444 million from the 2020 marketing season that closed in August, according to the Tobacco Industry and Marketing Board.
John Robertson
John Robertson, an independent economist based in Harare, said the projections were ambitious. “It’s a massive overestimate and ignores that cannabis is grown in many markets outside of Zimbabwe,” he told Bloomberg.
“It’s sold in grams, not in kilograms or tons, so there will be disappointment,” Robertson said. “The only enthusiasm will be from producers, but massive supply globally will depress prices.”
South Africa, Malawi, Zambia and Lesotho have also legalized medicinal cannabis.
In his budget statement on Nov. 26, Finance Minister Mthuli Ncube said cannabis production for medicinal purposes has “immense potential” to generate export receipts and tax revenues. A so-called cannabis levy will be introduced next year, in line with export values, Ncube said. Taxes of as much as 20 percent will be applied on oils, bulk extracts and dried cannabis flowers.
Growers, most of whom are locals with international partners, can produce $40 million to $46 million worth of cannabis a month, underpinning Treasury’s “very conservative” estimates, Mphambela said.
December 4, 2020
Leaf Traders Report Losses in Zimbabwe

Photo: Taco Tuinstra
Several tobacco merchants have seen losses estimated at $20 million by some industry players due to lower than expected output and side marketing, reports The Herald, citing the Tobacco Industry and Marketing Board (TIMB).

Due to drought, there was a 29 percent drop in crop production to 179 million kg from 252 million kg last year. This year’s crop projection was 233 million kg.

Andrew Matibiri, TIMB CEO, said that side marketing is “rampant;” about 80 percent of tobacco farmers in the country are financed under contract schemes. “Side marketing takes place when parties to the contract violate the agreement, either when a farmer chooses to sell to other merchants or when a company buys from farmers it has not contracted,” according to the Herald. This practice almost caused the cotton industry to collapse.

Many tobacco farmers cannot borrow from banks to finance their operations, so they go into contract arrangements where merchants finance the farmers and then recover their money from the crop proceeds. Due to travel restrictions to stop the spread of the coronavirus, side marketing was more prevalent, and some merchants took advantage of that by buying directly from farmers.
September 21, 2020