Tobacco farmers, merchants on collision course

BY FIDELITY MHLANGA

TOBACCO farmers are on collision course with merchants who are demanding repayment of loans issued to farmers in United States Dollars, as the contract tobacco sales commence.

The tobacco marketing season officially starts today with auction floor sales.

Contract farming accounts for more than 70% of the country’s golden leaf.

Tobacco farmers, through various member associations, have sought recourse from the central bank and the Agriculture ministry over the matter, contending that the move by the tobacco merchants would strain them.

“We note with concern that where ‘RTGS’ loans were given to growers by contractors, these are now being treated as USD currency loans in growers’ loan accounts at a rate of 1:1. This is an unfair practice. We believe this will result in many growers not yielding any significant portion of a USD retention, which will have a serious negative impact on their viability,” the tobacco grower associations said in a letter addressed to the Agriculture ministry as well as the industry regulator seen by the NewsDay.

“We believe that “RTGS” loans should be settled with RTGS currency. We urgently need the Reserve Bank of Zimbabwe to intervene in this matter. We are only aware of one company, Northern Tobacco, who have separated their USD and “RTGS” loan accounts as agreed in meetings with the Reserve Bank of Zimbabwe.”

These associations include Zimbabwe Farmers Union, Zimbabwe Commercial Farmers Union, Zimbabwe National Farmers Union, Zimbabwe Tobacco Association, Tobacco Association of Zimbabwe and Tobacco Farmers Union Trust.

This comes after the central bank offered to pay tobacco growers 50% in foreign currency and the rest in RTGS dollars.

However, the farmers are demanding that the RTGS portion of their payment be paid at a rate above the current interbank market exchange rate of RTGS$2,76: 1 USD as of March 18, 2019 in order for them to be able to retool for the next season.

“All growers should be treated equally and, therefore, the retention period for large-scale tobacco growers of 180 days should be removed and all entitlements treated as “free funds”, as with small-scale growers. There should be additional flexibility on the use of funds through the issuance of tobacco specific visa debit cards,” the letter reads.

“We take note of the commitment to settle sales proceeds “within the shortest possible time”, however, the term used is subjective and indefinite.
Settlement timeframes both for RTGS and nostro FCAs proceeds need to be clearly defined. Speedy settlement of growers’ proceeds will ensure the smooth marketing process and fewer, unnecessary inconveniences to growers”.

Statistics from Tobacco Marketing Industry Board showing that 42 083 farmers from 34 025 last year had registered to grow tobacco as of March 13 this year.

Tobacco is the country’s second biggest export-earning commodity after gold.

Last year, the country’s tobacco output reached an all-time high of 252 million kilogrammes, earning at least $1 billion in revenue.

However, prospects of a bigger output in comparison to last year are slim, following this year’s poor rains.