Tobacco farmers wipe out cash from banks

Source: Tobacco farmers wipe out cash from banks – The Zimbabwe Independent June 24, 2016

Had it not been for the massive withdrawals, the move by RBZ could have shored up deposits in the banking sector and increased money supply in the market.

THE RESERVE Bank of Zimbabwe (RBZ)’s decision to channel all tobacco payments through banks as part of a financial inclusion strategy has backfired amid indications producers of the golden leaf are wiping out financial institutions with large withdrawals.

By Fidelity Mhlanga

A snap survey by businessdigest this week revealed that as cash shortages continue unabated, tobacco farmers are having to wait for almost two weeks at banks at the auction floors in a desperate attempt to withdraw all their money.

At the beginning of the tobacco marketing season, banks agreed to waive some of the Know-Your-Customer (KYC) requirements for tobacco farmers with more farmers opening accounts.

Had it not been for the massive withdrawals, the move by RBZ could have shored up deposits in the banking sector and increased money supply in the market.

The tobacco crop attracts huge export earnings with statistics from treasury showing that its exports were only second to gold, valued at US$481 million, accounting for 23% of all exports from January to October 2015.

Jose Jose, a farmer from Raffingora, 140km from Harare, said he has delivered 13 bales to the auction floors and has been shuttling from his rural home to withdraw his money for the past two weeks.

“So far I have managed to get US$1 500 out of US$2 300. My bank only gives US$500. I have been coming here for two weeks. They are refusing to give us more than US$500 per day. There is no bank in Raffingora, so I have to come here until I get all my money,” he said.

RBZ last month qualified tobacco farmers as corporate clients eligible to withdraw US$10 000 per day, but owing to the cash crisis banks are even struggling to give out US$1 000 per day.

Titus Makii, a Bindura farmer, said he has not been spared by the current debilitating cash shortages.

“I sold 31 bales of tobacco worth US$7 800. For two weeks, I have been here. On a lucky day, I have been withdrawing US$500 per day. So far I have withdrawn US$5 500 from my bank. They are not allowing us to withdraw US$1 000 per day at my bank. I need cash to pay our transporters and workers,” he said

Vengai Kandiye, who sold tobacco valued at US$3 600, said he only got US$400 through a mobile money card.

Kandiye said he has been struggling to withdraw his money, a situation which has forced him to solicit for cash from queuing customers in supermarkets who then use his card to buy goods.

Economist John Robertson said farmers have no option since they need to pay for services rendered to them.

“It will take a long time for farmers to leave their cash in banks. Up until a time all the people have bank accounts to pay services through bank-to-bank transfers. The option by farmers to change the way of doing things (cash basis) will take long,” he said

As of day 56, a total of 140,5 million kg of tobacco worth US$410 million has been sold at both auction floors.
A total of 47,2 million kg of tobacco has been exported realising US$259,1 million.