Tobacco deliveries remain low

BY FIDELITY MHLANGA

Zimbabwe’s tobacco deliveries remain low as prices show little signs of firming up, statistics from the Tobacco Industry Marketing Board (TIMB) have shown.

As of day 37 of the 2019 marketing season only 87,8 million kilogrammes of tobacco had been delivered at both auction and contract floors, representing a 23% drop from the 115,1 million kg delivered last year, according to TIMB.

The average price being offered for the golden leaf has tumbled 37,6% from $2,89 per kg in the previous season to $1,80 per kg this year.

The sale price is in United States dollars, but payment to the farmer is made in Real Time Gross Settlement (RTGS) dollars. The farmers have an option to use 50% of their earnings to apply for forex at the official rate.

Tobacco Association of Zimbabwe president George Seremwe said the manner in which sales were being conducted has the potential of elbowing out many farmers.

“We want full value of our tobacco. The 50% US dollar component is not sufficient to cover the cost of production and not easy to access. We can’t retool for the coming season because of the RTGS component. Our farmers were hoping for an improvement on both the rate and prices. We, therefore, would like to call an urgent stakeholders meeting coordinated by TIMB and the Ministry of Finance. We are very much concerned by the manner this selling season has gone so far,” Seremwe said.

The season started off with merchants demanding an exemption from paying the 2% tax on intermediate transactions.

They have also voiced displeasure at the arrangement put in place by the Reserve Bank of Zimbabwe of directing tobacco farmers to pay 70% of the loan amounts they sourced from merchants in United States dollars, while the balance would be settled in RTGS dollars.

In 2018 the country produced a record 252 million kilogrammes of flue-cured tobacco, generating at least $1 billion in forex.

This year Zimbabwe has a target of 220 million kg, but output is likely to remain depressed.