‘Incentive good, but …’

Source: ‘Incentive good, but …’ – NewsDay Zimbabwe

TOBACCO associations have welcomed the incentive review but said the level of the incentive for the 2018 season would not address the current financial challenges stemming from rising cost of inputs affecting the industry.


Last week, the Reserve Bank of Zimbabwe (RBZ) reviewed upwards the incentive to 12,5% from 5% for the 2018 marketing season.

Zimbabwe Tobacco Association chief executive officer Rodney Ambrose said while the sector “sincerely appreciated the continued and important recognition that tobacco farmers receive in terms of their social and economic contribution to the country”, the tobacco planting season was at its peak and a number of farmers were already facing financial challenges.

“The new level of the incentive for the 2018 season will not address the current financial challenges affecting tobacco farmers between now and the opening of floors. While appreciating the increase, it is important to note that the selling season is four to five months away and no mention is made of reviewing it for the 2017 difficult season. There may be a need to review it before the opening of floors. Tobacco farmers’ viability remains precarious,” Ambrose said.

Besides pushing for an incentive review of the past season, Ambrose acknowledged that the quantum of the increase from 5% to 12,5% was significant as it was important to further incentivise tobacco farmers to produce high yield, quality tobacco.

He said the need for an urgent review of the incentive for this past season was based on the continued rising costs of inputs against stagnant tobacco prices and the 5% incentive paid earlier.

“Input costs continue to rise unabated, with recent calls by authorities for farmers to now utilise “free funds” to import inputs cheaper. We would like to call upon the RBZ to urgently consider the joint extensive lobbying efforts by farmers’ unions to review the incentive for the 2017 selling season,” Ambrose said.

Federation for Farmers Union president Wonder Chabikwa applauded the move by RBZ saying the review would incentivise the farmers.
Under the current framework of the 5%, the RBZ will pay about $28 million incentive at the end of this year, with the industry maintaining that the quantum needs to be urgently reviewed for the season as it has been fast-eroded by lower grower price averages, low yields and rising costs of production, especially those costs with a foreign currency element.

Last November, RBZ paid $29,8 million incentive to tobacco growers.

Tobacco, gold, platinum and diamonds are key generators of foreign currency in the country.

In 2014, the tobacco export earnings raked in $772,6 million, rising to $855 million in 2015. It further grew to $933,3 million in 2016 and it is projected to grow to $980 million by year-end.