Normalcy returns to auction floors

Source: Normalcy returns to auction floors | The Herald 26 MAR, 2019

Normalcy returns to auction floorsBuyers bid for the golden leaf at the official opening of the tobacco selling season at Tobacco Sales Floor (TSF) in Harare recently. — Picture by Justin Mutenda

Kudakwashe Mhundwa and Kumbirai Tarusarira
Activities at the country’s tobacco auction floors are expected to improve this week following the scrapping of the 2 percent electronic transfer tax on all activities at the floors, with prices being offered for the crop beginning to firm.

The Tobacco Industry and Marketing Board (TIMB) and the Reserve Bank of Zimbabwe also re-affirmed their commitment to give farmers their entitlement of 50 percent payment in US dollars in their Nostro FCA and the remainder in local unit at the ruling interbank rate.

The marketing season, which started last week begun on low note, as some farmers adopted a wait-and-see attitude, while others who sold their crop were not happy with the low prices on offer.

The first bale was bought for US$4,50 per kilogramme, which is 40 cents less than the price of the first bale last season. Some bales were sold at prices as low as US$0,20 per kg.

In a snap survey carried out at TSF, Boka Tobacco Floors and Premier Sales Floor, prices ranged between $0,50-$4,60 per kg.

Tobacco merchants and auction floor operators, through TIMB, requested the Government to scrap the 2 percent tax, arguing it will seriously hurt their margins.

Some of the transactions that are exempted from the 2 percent tax include transfer of funds between an individual’s mobile wallet and or bank account, transfer of funds from mobile money trust funds for the purchase of electricity, transfer of funds to mining houses by the Minerals and Marketing Corporation of Zimbabwe (MMCZ) as well as transfer of money to producers or sellers of gold by Fidelity Printers and Refiners.

Tobacco industry players had argued that their operations were similar to that of the MMCZ and Fidelity Printers and Refiners. As such, they also wanted to be exempted from the tax. They had also warned that additional costs arising from the 2 percent tax might result in deliberate lowering of prices by the tobacco merchants.

In an Interview with The Herald Business, Boka Tobacco Floors operations manager Moses Bias, said they had registered an increase in the amount of buyers who were participating in tobacco buying and prices had also significantly rose from last week’s prices.

“Farmers are excited because buyers have started to come in this week and participate in the buying of tobacco unlike last week where there were other issues which needed clarity (the main one was the two percent tax which we have negotiated with the Government and this has been agreed on because it had a ripple effect into the transaction of funds from both the merchants and the auction floors).

“Last week we had only three buyers who were participating at the auction floor so there was no real competition because there was a limited number of buyers, but now because of those compliance issues we are now alright. As for today we had seven major buyers who participated in today’s auction.

“Today I have seen a jump in prices from the original $4,35 to $4,60. It is still premature to talk about good prices because the tobacco which is still coming in at the moment is still the low quality primings and the primings usually do not sell for much,” said Mr Bias.

Mr David Rhodes, a buyer, remained upbeat about the marketing season saying that it is still early and they are expecting that when the good quality leaf comes in prices should go up.

“So far the quality is not too bad, what has been on offer so far is actually nice quality. Farmers are complaining that prices are a bit low but they are starting to come up on a daily basis. Today we have noticed quite a bit of increase in prices. We are still not sure whether the farmers are going to be happy to be paid RTGS money.

“However, it’s early in the season so what is coming up now is lower storm quality product so when the proper leaf starts coming into the market that is when prices will shoot up and stabilise. Farmers are selling their low stock reaping, you can’t say its sub-standard tobacco but its low quality plant so in a few weeks’ time prices will go up,” said Mr Rhodes.

Meanwhile, the Reserve Bank of Zimbabwe has reaffirmed its commitment to pay tobacco farmers in United States Dollars.

Responding to media reports, the central bank in a joint statement with the TIMB said it shall ensure that “all tobacco growers have accessed their entitlement of 50 percent of the net tobacco sale proceeds into their Nostro FCA bank accounts”.

The RBZ also added, “In addition to accessing cash at a rate of RTGS$0,50 per kg of tobacco sold and up to a maximum of RTGS$300, the small-scale tobacco growers, (those growers with 2 hectares and below), are eligible for a United States Dollars cash withdrawal of US$0,10 per kg sold per sale, up to a maximum of US$50,00 after their Nostro FCA bank accounts have been credited with foreign currency entitlement.”