ZIMBABWE can ramp up its tobacco production significantly and achieve the country’s aim of building a US$5 billion industry by 2025, key stakeholders say.
However, and to realise this goal, farmers want a number of challenges that they are facing to be dealt with urgently — including financing, as well as better prices and payment terms for their crop.
While tobacco output tumbled precipitously in the wake of the country’s chaotic land reforms two decades ago — hitting a low of 48 million kg in 2008, which was a mere 21 percent of the 2000 figure — things have been looking up since then.
As a result, the country produced 211 million kg in 2021 and 212 million kg in 2022 despite the drought which affected production then. This followed a record high of 252 million kg in 2019.
At the same time, tobacco land use has grown to 118 000 hectares this year, from 110 000 hectares in 2022, with prices for the current marketing season opening at US$4,35 a kilogramme, compared with US$4,20 last year.
All in all, the industry expects more than 230 million kg of the crop, at firmer prices too, this year, due to improved leaf quality.
The secretary general of the Zimbabwe Farmers Union (ZFU), Paul Zakariya, said while growers could produce more tobacco, financing for the sector remained a major concern.
“Contract financing schemes that in most cases are foreign-backed are unprofitable for the country. They are also highly unsustainable. “The contractors collect the leaf and process it outside the country.
That also means that the country misses out on huge opportunities to value add and realise optimum value. “Local funding is definitely the way to go. We call on the government to expedite the implementation of this noble idea to fund primary production,” Zakariya said, referring to the US$60 million revolving fund which was announced in 2021, but is still to be rolled out. This comes as more than 90 percent of all local tobacco is produced under contract.
Bergattal Tobacco Incorporated managing director Moses Machine echoed the same sentiments saying the tobacco industry was a very important sector contributing significantly to the country’s GDP and employing thousands of people hence should be supported. He said more quality tobacco could be produced if financing is not a big challenge.
But economist Vince Musewe feels that the current system can be tweaked to make tobacco more viable for both the country and farmers in the absence of other funding mechanisms. “I think the model is okay as it gives access to inputs and not cash. What needs to change is the pricing formula where small-scale farmers are sometimes exploited.
A profit share arrangement would be better,” he said. Officiating at last week’s opening of this year’s marketing season, Vice President Constantino Chiwenga reeled off statistics, which confirm the tobacco industry’s continuing steady growth.
“Well done for the perpetual improvement. Now we aim to increase production … to 300 million kg annually as stipulated in the government’s Tobacco Value Chain Transformation Plan. “This sector alone has the potential to anchor the Zimbabwean economy and it possesses huge opportunities for growth.
“Agriculture contributes to export earnings and the flagship is tobacco. I am proud that tobacco production in the country has rebounded significantly since the land reform programme,” Chiwenga said.
However, the remarkable turnaround masks the many serious challenges facing the sector, particularly in relation to the funding model and the continued exportation of raw tobacco. While there has been some progress on value addition and beneficiation, the situation remains unsatisfactory. Indeed, value addition still stands at a mere two percent of all the tobacco produced in the country despite the government’s plans to increase this to more than 30 percent.
“The next thing we want to do is to ensure more value addition and benefi ciation. We export 98 percent of our tobacco in raw form, therefore exporting jobs and value. “Annually, we produce more than 200 million kg of tobacco and as it crosses the border the same tobacco fetches US$15 billion on the international market, and yet Zimbabwe only gets a billion.
We want more tobacco products produced in Zimbabwe … The Tobacco Industry and Marketing Board (TIMB) has since licensed Cavendish Lloyd to produce and process Shisha tobacco. Cutrag is in the process of constructing a huge processing plant. “We as government are here to create an enabling environment for entities interested in value addition and benefi ciation of Zimbabwean tobacco,” Chiwenga observed last week.
“Concerns have been raised about growers facing viability challenges as a result of the increased cost of production. “To alleviate that, we spoke to the Reserve Bank of Zimbabwe (RBZ) and, consequently, increased the foreign currency retention threshold from 75 percent to 85 percent. “Increased US dollar retention will go a long way in cushioning the tobacco grower, increasing the viability and helping improve livelihoods.
“The viability of the farmer is the staple of the tobacco industry’s future. For many years, the tobacco industry has been the envy of many sectors on account of its strong regulations and discipline,” Chiwenga added.
“With more stakeholder collective effort, improved collaboration, 100 percent compliance with regulations and a sharper focus on consolidation and growth, we will have orderly tobacco marketing this season maintaining the integrity of the marketing system that we are replicating in other agriculture commodities.
“As the regulating board, TIMB should be fixed on the entire value chain, that is fairness, ethics and probity, transparency, accountability, discipline, equity and sustainability because these are the values that set aside our tobacco industry … our eyes are fixed on the role of tobacco in uplifting livelihoods,” he said further.
On his part, Agriculture minister Anxious Masuka said the government was alive to the concerns of the sector, including the threat from international health and environmental campaigns. “We seek to ensure that there is traceability and sustainability in the production of tobacco, so that we can assure the market that we are producing this tobacco responsibly.
“We will not necessarily grow the sector through horizontal growth, which is area extension, but through vertical growth, which is an increase in yield, especially in the small-holder sector,” he said. TIMB chairman Patrick Devenish said the regulator was only too aware of the many diffi culties facing the sector. “
We are aware of the perennial challenges and complaints by farmers and other actors along the whole value chain. “The rebranded TIMB has considered these issues holistically and has found long-lasting solutions, and implementation has commenced. “To start with, the industry together with the Reserve Bank of Zimbabwe has jointly put in place improved payment measures to ensure that tobacco growers get full value for their crop and are simultaneously paid within the shortest possible time,” Devenish said.
“To enforce this, we stand guided by the Contractors’ Compliance Administration Framework. “All tobacco merchants and contractors have signed it and have been made aware that they are supposed to pay growers within 48 hours of sales completion,” he added.
TIMB also promised stiff penalties, suspensions and cancellations of operating licences for errant parties. Further highlighting the extent of the industry’s problems, Devenish said he was aware that some tobacco growers had not been paid since last season.
“Agreements were made with the responsible tobacco companies and plans are in place to ensure growers are paid in full. “Some growers have outstanding debts to contracting companies as well as TIMB for the Tobacco Inputs Credit Scheme from previous seasons. “We intend to ensure those loans are paid back as well so that all players in the value chain operate profitably,” Devenish added.
“In the past years, complaints were levelled against the transparency in our contracting system, adhering to agreed terms, and executing obligations and responsibilities timeously. “Reports of collusion by merchants and manoeuvres by middlemen to re-handle tobacco bought cheaply from farmers were also brought forward.
“Our inspectorate unit has been expanded and now they are armed with SI 77 of 2022 prohibiting side marketing as well as the Contractors’ Compliance Administration Framework,” Devenish said further.
