Currency headache for tobacco growers

Source: Currency headache for tobacco growers – The Standard February 17, 2019

BY FIDELITY MHLANGA

FAILURE by the Reserve Bank of Zimbabwe (RBZ) to make a commitment on the currency it will use to pay tobacco farmers during the forthcoming marketing season has caused uncertainty in the industry, insiders have said.

Zimbabwe’s tobacco industry is on the rise with the number of farmers who have grown the golden leaf jumping to 169 875 this season from 118 048 the previous year.

However, industry players argue that payments for tobacco in local currency will reverse the gains as the farmers would not be able to buy inputs priced in foreign currency.

Stakeholders in the tobacco industry recently met the RBZ top brass to discuss the currency concerns ahead of the presentation of the central bank’s monetary policy statement (MPS), but no concrete solution was found.

Zimbabwe Tobacco Association (TAZ) CEO Rodney Ambrose confirmed the meeting and said the industry was now waiting for RBZ governor John Mangudya to present the MPS before deciding on the way forward.

“Please allow time for the governor to announce his MPS, we will respond accordingly thereafter,” he said

The governor was made aware of farmers’ requirements regarding sustained viability of our farmers at the meeting.”

Mangudya was expected to present the MPS early this month, but shelved the plans under unclear circumstances.

According to reports, Mangudya and Finance minister Mthuli Ncube differed on the policy direction proposed by the RBZ, hence the delays.

An acute shortage of foreign currency has weighed down Zimbabwe’s economy and the tobacco marketing season usually brings short-term relief for the economy as most of the golden leaf is destined for export.

The Tobacco Industry Marketing Board (TIMB) said a number of proposals on how to pay the growers had been submitted to the RBZ.

“There was a meeting with the Reserve Bank of Zimbabwe where proposals were put forward for consideration,” TIMB said.

“The proposals are under consideration and decisions will be announced in due course.

“It is premature to discuss the outcome of the meeting as the consultative process is ongoing and this meeting was just one of many.”

At some point the RBZ offered to pay farmers 80% of their proceeds in local currency and the rest in United States dollars.

However, TAZ president Guy Mutasa said such an arrangement would be unsustainable as farmers needed to use foreign currency to buy equipment.

“It is not yet clear what form of currency will be used to pay farmers,” he said.

“We want the RBZ to review upwards its offer to give farmers 20% of their earnings in foreign currency.

“Farmers need to recapitalise and buy equipment such as tractors and centre pivot irrigation systems, which need foreign currency.”

Federation for Farmers’ Union president Charles Chabikwa echoed the same sentiments, but said they were waiting for the monetary policy statement to get direction.

“What I know is that a meeting was convened by the TIMB, tobacco growers’ associations and the central bank, but nothing conclusive came out of it because the monetary policy statement is yet to be presented,” he said.

“But my personal view is that tobacco farmers want more than 20% and if possible 100% payments in foreign currency.

“They are citing inputs, spare parts and chemicals that need to be paid for in foreign currency.”

Last year, the RBZ paid tobacco farmers 50% in foreign currency and the balance in real-time gross settlement.

In 2018 Zimbabwe produced a record 252 million kg of the golden leaf, which dwarfed the previous record of 235 million kg achieved in 1999.