Tobacco merchants ready to pay US$500m

Source: Tobacco merchants ready to pay US$500m | Herald (Top Stories)

Elita Chikwati and Walter Nyamukondiwa
Tobacco merchants are preparing to pay around US$500 million for this year’s tobacco crop, significantly above the US$440 million they shelled out last year, with auction floors expected to open on April 7 for the self-financed growers, while the contract sales for the overwhelming majority of farmers begin the following day.

Tobacco Industry and Marketing Board chairperson Mr Pat Devenish on Monday said preparations were advanced for opening the marketing season.

“We are well prepared for the marketing season. We are expecting a crop of 200 million kg and at an average price of US$2,50 per kilogramme. We expect an estimate of around US$500 million.”

TIMB has put in regulations that merchants must abide by before they are registered to eliminate fly-by-night players.

The regulations include submitting copies of legally binding contracts by September 30 of every year and proof of inputs distributed either paid up invoices or payment plans with suppliers.

Contractors also had to send TIMB a complete schedule of inputs and their costs by June 30.

Mr Devenish said most merchants had met the requirements.

This season, tobacco growers will get 60 percent of their earnings in foreign currency while the remaining 40 percent will be paid in local currency using the auction rate.

Farmers had applied for 80 percent foreign currency retention.

Unlike last year when farmers were hit by a static interbank rate that had lost touch with reality, this year they are getting the market-related auction rate.

Farmers complain that some suppliers of equipment and other needs tend to price at the black market rate, which is still running a modest, although much smaller premium.

Zimbabwe Farmers Union director, Mr Paul Zakariya, said the adjustment of the forex retention from 50 percent to 60 percent was a welcome gesture, although farmers would have settled for more.

“It is an open secret that prices for all commodities on the open market are tracking the alternative market exchange rate,” he said.

Zimbabwe Commercial Farmers Union president Dr Shadreck Makombe said they were happy with the adjustment, and understood that Government required foreign currency for other operations.

Tobacco Association of Zimbabwe president, Mr George Seremwe said they appreciated the initiative, but would have wanted at least 70 percent which covers production costs.

One potential problem is looming in some areas where cash-rich middlemen are trying to buy harvests at fairly low prices for ready cash, which will present any contract farmer with legal problems when they come to deliver.

Up to now side marketing of tobacco has been rare because of the TIMB policing of contracts on both sides.

Farmers who are tempted will, apart from getting less value for their crop, be unable to repay their loans or meet expected deliveries.

The middlemen are apparently hoping to clean up with huge profit margins on the auction floors.

Speaking at the handover of Covid-19 personal protective equipment for health staff at Tengwe Clinic by Ethical Leaf Tobacco (ELT), Hurungwe East House of Assembly member Cde Ngoni Masenda warned farmers against selling to fly-by-night merchants as they stand to lose in the long run.

ELT Mashonaland West regional manager Mr Gift Chaitezvi called on farmers to hold on to their crop and avoid selling to unscrupulous middlemen.

One of the farmers in Tengwe Mr Noah Tafa said farmers were resorting to side marketing to meet some of the costs associated with curing tobacco including labour and fuel.