IF there is any important development that has come out of the agrarian reforms that kicked off at the turn of the millennium, it is the rapid transformation of thousands of rural farmers into small-scale tobacco producers.
The dramatic change has had its own problems such as the frightening decimation of forests by the new entrants, which the government must immediately address.
But generally, a revolution that turns peasants into self-sustaining businesspeople can potentially mark the start of far bigger developments to come. These include the establishment of processing industries that boost foreign currency earnings for farmers and the government.
This is important because as has been seen in platinum and diamonds, the exportation of raw products limits what could potentially be earned.
In the case of tobacco, the African Institute for Agrarian Studies has said foreign companies that buy Zimbabwe’s unprocessed tobacco earn 14 times more than the prices they pay here, after adding value. That is a huge loss for a country that sacrifices its natural resources to grow the golden leaf.
But as the Zimbabwe Tobacco Association said this week, the most worrying thing may not be how much importers of our tobacco generate when they turn it into finished products. Of concern should be the actions of the Reserve Bank of Zimbabwe (RBZ).
Instead of coming up with a payment model that encourages producers and promotes tobacco farming, the RBZ has turned into a huge impediment to the growth of this important foreign currency earning sector.
The central bank seems to be more worried about maintaining healthy foreign currency reserves in its vaults than making sure these mostly small-scale farmers, after toiling for a year under hard manual labour, can earn something that develops and sustains their families, helps them buy inputs and return to the fields the next season.
Last year, 50% of farmers’ revenues were retained by the RBZ under its controversial retention system. The farmers were then paid that money in Zimbabwean dollars at a fixed rate of US$1:ZW$25.
Herein lies the problem. Zimbabwe was fast relapsing into dollarisation at the time, and most of what farmers required would only be bought in foreign currency. It meant farmers would take their meagre earnings to buy foreign currency on the parallel markets, where rates were running amok. At one point they coughed out ZW$165 to buy US$1. The level of losses that farmers suffered were astounding. Did the RBZ ever care to look into this bad practice and help out our farmers?
The sad reality is that two weeks before the start of the 2021 marketing season, these issues largely remain unresolved. Most tobacco farmers are broke even before they step into the auction floors to donate their produce to the rich and to an uncaring government. Sadly, tobacco auction floors have mutated into centres of exploitation. This has to be corrected.