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The Demise of the Tobacco Industry
The Movement for Democratic Change has been waiting Zimbabwean tobacco growers to set out in clear terms just what is going on in an industry that is so important to the economy of Zimbabwe. This past week it was left to the small-scale growers to lodge the first effective protest at recent government actions and to demand redress. The large-scale growers remain silent and, by implication, complicent.
Once again Simba Makoni has rushed to he sees as a localized crisis and applied a patch up remedy to try and resolve the complaints of the small-scale growers. After three days of hurried consultation the government has given the tobacco industry the same treatment as that granted to the gold industry. They have agreed to a special exchange rate for tobacco sold on the local market in US dollars.
The facts of this action are quite clear – tobacco growers will get an 80 per cent premium, paid by the Reserve Bank, for the tobacco they sell on the auction floors in Harare. This will raise the Zimbabwe dollar price to about Z$180 per kilo on average for the season and represents an exchange rate of about 90 to 1 against the US dollar.
This will cost the Reserve Bank about Z$16 billion in the year and will allow farmers to earn a similar price in local dollars to that which they earned in 2001. In an environment where inflation is running at over 100 per cent per annum and actual costs on many items has escalated by two or even three times in the past year, this action will not solve the basic problem which is to allow farmers to earn a profit on their production. It is simply a palliative to try and get the small-scale growers out of the auction floors where they have effectively blocked the sale of the present crop.
The state, desperate for the nearly US$400 million that will be earned by the present crop is hoping that this action will bring the crop to the floors and that sales will now get under way in earnest. But it will do nothing to halt the decline in an industry that has been the corner stone of the economy for 50 years.
After 50 years of effort, Zimbabwe has captured 25 per cent of the global demand for flue cured tobacco. This makes Zimbabwe one of the top three exporters of flue cured tobacco in the world, along with Brazil and the USA. This is no small achievement. It is the result of many years of research and development and the training of farmers and their staff.
The industry employs directly and indirectly about 300 000 people throughout the economy and generates about 25 per cent of total export earnings. In addition the Zimbabwe industry with its well-developed technological base and industrial firms, has helped develop thriving industries in Malawi, Zambia and Tanzania. All these countries sell their crops to merchants who are attracted into the region by the Zimbabwe crop with its reputation for quality and presentation. The sale of the crop at free market auctions is also a feature of the Zimbabwe industry that buyers find attractive. Harare has some of the largest auction floors in the world.
In recent years the industry has sponsored the entry to tobacco production of some 10 000 small-scale growers who are now beginning to make a significant contribution to the crop. This is the first time that this has happened and is largely the initiative of the established large-scale growers. This is a commendable development which has received scant recognition from the Zanu PF led regime and the Minister of Agriculture.
The illegal and irresponsible programme of farm invasions and acquisition conducted by this regime over the past two years has reduced production from 236 000 tonnes in 2000 to 216 000 tonnes in 2001 and 165 000 tonnes in 2002. Weather has got very little to do with this decline in output and in fact it is remarkable that farmers were able to grow as much tobacco as estimated this year. Land preparation for the coming season – normally completed by now, is barely underway in most districts and if nothing is done to redress this, then the 2003 crop is likely to be well below 50 000 tonnes.
Not satisfied with the systematic and deliberate destruction of the farming industry that grows this lucrative crop in the face of intense global competition, the Zanu PF regime has now signaled its death warrant by in effect, stealing the crop for half or less of its real value.
By demanding that all buyers pay for the crop in US dollars on the pretext that this will ensure that all the foreign exchange comes into Zimbabwe and then denying the industry a special exchange rate to protect grower’s interests, tobacco farmers are being forced to sell their 2002 crop at prices that are a quarter of what they should be. Even with the 80 per cent premium paid by the Reserve Bank, growers will still receive less than they got last year. This is a blow to all producers but especially the newer growers and the small-scale growers whose costs are higher than the established large-scale growers. This could be a deathblow to an industry that has been a mainstay of the country for half a century. It also has serious long-term consequences for the region as a whole and for the food industry that employs the resources created by the tobacco industry to support the production of other crops.
The reason for the government action is a desperate attempt to secure supplies of hard currency at these dramatically discounted rates. Essentially they are asking the growers and their workers to subsidize government to the extent of over Z$40 billion dollars or Z$250 per kilogram. What government does with the hard-earned foreign exchange is also anyone’s guess. We can only hope they spend it on food and not more anti riot equipment to suppress the people’s democratic rights or luxury vehicles and travel for Zanu PF cronies and officials.
But for the workers involved in this vital industry, their employers and their families, this is yet another blow to the economy of Zimbabwe by an irresponsible, illegitimate and delinquent regime. It is a further example that it cares little for the country or its people and is only concerned about its own future to the detriment of everyone else, and especially the poor.
MDC Economic Affairs Committee.
23rd May 2002.