via ‘Processed tobacco would have earned Zim $65 billion’ | The Herald 5 September 2014
Zimbabwe could have earned $65 billion instead of $650 million that it realised from tobacco sales in the 2014 marketing season had it processed the crop into finished products, an industry expert has said.The country produced over 200 million kilogrammes of tobacco most of which was exported to China, Belgium, United Arab Emirates, Russia and South Africa in raw form.
Savanna Tobacco executive chairman Adam Molai said the country would have generated a minimum of $6,5 billion had the golden leaf been value added.
“We are at the whims of global fluctuations and market prices but ultimately once we go to the final beneficiated product, the price is constant and at times increases,” he said at an agro-forum.
“The current output this year would have generated $6.5 billion for us. The value addition premium is $5.8 billion”
Mr Molai said the country earned on average $3,50 per kg of raw tobacco sold but could have grossed $7,30 per kg had the leaf been threshed or processed into cut rag.
Had it been further processed into cigarettes, Zimbabwe would have earned between at $30-60 per kg.
The country currently has seven firms involved in tobacco value addition, with Mr Molai’s Savanna Tobacco and British American Tobacco being the major players.
The firms, which are processing a small fraction of the total output, produce over four billion cigarette sticks annually.
Mr Molai said Zimbabwe must create an environment which encourages investment in value addition and allows investors to recoup their investment.
“What worries me is we have Dubai producing 68 billion sticks of cigarettes per annum, they do not produce one kilogramme of tobacco but what do they have, they have an enabling environment,” he said. “What makes it even worse is that 18 percent of the cut rag tobacco going into Dubai is produced by a Zimbabwean national in Dubai because they are running away from the conditions in their own market.”
He said government must come up with policies that give direction and targets to stakeholders on value addition, targeting not only in the tobacco sector but in other sectors such as mining.
“We must create investment incentives from when you start the business to when you recoup your investment that is the only way people can invest.”
Value addition had the potential to help government mobilise funding to meet its obligations such as the external debt estimated at $10 billion – New Ziana.
COMMENTS
US$65 billion irregardless of how you look it at that figure is not right, processed or not, would appreciate if someone in the know actually explained how they got to that figure (Some Zimbabweans are still stuck in the Zim dollar era where they talked on billions)
It is a shallow view from a “top” business person. Everyone knows finished tobacco products ie cigarettes attra punitive taxes into importer countries. So high are the taxes it makes no business sense to import cigarettes. Why isn’t Molai exporting billions of cigarettes into RSA? For this precise reason. To give such figures to assume there is a ready market wide open like the Zambezi entering the sea ready to take our cigarettes. How sad and shallow thinking this is? Maybe he should cite one country only that is exporting billions of dollars worth of cigarettes. Idea of value addition is good but give all the facts and stop playing big when you know it is not possible. Misleading Mr Molai. Tell us why you are not export big? You know why? Because you know it’s not possible, at least properly unless the cigs are, well, smuggled!!
Let that national stay in Dubai….in Zim he’d be harassed, ministers asking for shares, Chiyangwa saying he should be licensed with the aim of taking over his business when he’s denied a license etc etc
Once zpf is no more we can embark along that route which Rhodesia perfected pre-1980 !!!!!!!!!!!!
Perhaps the country should take it all the way and open smoke shops around the world, selling Zim rag exclusively!
I recall Mudhara has been saying to SADC – we must beneficiate our local products; we must add value. Yet here is a story where our own business policies are such that our producers prefer to export raw tobacco.
As usual with Mudhara, its all cheap rhetoric.
Problem is when we talk of value addition our stupid minds go to platinum and we completely loose focus. This is an example of the blind leading the blind .
Well done to Savanna ……yu should be the official adviser
mr molai – i think you should go back to school and learn some sums and also a bit about the difference between zimababwe dollars and US dollars
This fellow is living in the ZW$ era
I workeed for BAT in the 60’s and
they produced most the world’s
Rothmans, Peter Styvesant, Dunhill,
Pall Mall, Matinee and others.
Talk about value added, BAT was the
world’s premier producer of the best
Virginia tobacco the world had ever seen –
grown by experienced, (non-deforested)
farmers of exceptional high standards.
We were then the envy of the world!
No more, we can’t even grow medium
quality leaf, it’s now air cured like the
awful American burley tobacco, yuck!
Another failure of ZPF and Mugarbage!
But is must be the sanctions, no?
What must we do. we have identified the money generating scheme which is not benefiting us and the gvt is aware of us. let us invest in it instead of visiting china for nothing but zhiu zhangu
Ban the export of tobacco like all other products until there is value added. Why should this be different from other products?