Tobacco Industry Marketing Board (TIMB) this year approved four new firms to finance contract farming,

CONTRACT farming is arguably the new force propelling agriculture in Zimbabwe.
The system refers to an arrangement where agricultural production is carried out on the basis of an agreement between the buyer and the farm owner.
Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.
Zimbabwe has practiced contract farming for many years, albeit at a small scale.
Back then, the system covered crops such as sugar cane, tea, groundnuts, paprika, chillies, a variety of export vegetables and the production of seed for a variety of crops.
What has given rise to contract farming at a large scale in Zimbabwe is the illiquid financial market.
Farmers have been unable to access funding from the banks at the levels they would have required because the farms they were allocated during the land reforms cannot be used as collateral.
Even in cases where farmers have been lucky to access the funding, the interest rates accruing on their loans make agriculture unviable.
For indigenous farmers keen on venturing into commercial agriculture, contract farming remains the only viable alternative.
But while the system has its successes, it also has its failures.
The story of Zimbabwe’s golden leaf — tobacco — and its white gold — cotton — clearly shows the successes and failures of contract farming.
For tobacco, despite having their own challenges with their contractors, at least these farmers have been able to smile all the way to the bank.
Farmers contracted to grow tobacco, which is Zimbabwe’s single largest foreign currency earner, are being provided with training and inputs to boost output.
As a result, tobacco output has been rising steadily over the years.
It has, however, not been easy for cotton farmers.
The entry of more players in the cotton sector has been the tipping point that triggered chaos.
According to agricultural economist, Peter Gambara, about 90 percent of the cotton crop is usually funded by the cotton merchants.
In total, contractors are pouring about US$90 million into the crop.
He said the challenge that keeps nagging contract farming business has been side marketing.
Those who have contracted soyabeans have had to make sure the crop is combine-harvested in the presence of their representatives to avoid side marketing of the crop.
Economist, John Robertson agreed, saying side marketing has caused the withdrawal of some of the major contract buyers.
“Government is now said to be making what it claims will be a preferable arrangement with large corporations who will invest heavily in large tracts of land occupied by thousands of small-scale farmers. Under instructions from corporate farming managers, the belief is that high output volumes will be achieved and fair incomes earned by the small-scale farmers.
“However, this would not be new to Zimbabwe. When Kondozi Farm was producing very large outputs of a wide variety of produce, and sustaining good incomes as well as good export revenues, it had precisely the same corporate structure and derived inputs from many out-growers who were able to meet the required standards. The business was not actually closed down by land reform; it was confiscated in terms of the land reform legislation. Then it was run into the ground at enormous cost to the whole country, but especially to the thousands of people who had depended upon it for a living,” Robertson noted.
Analysts, however, further argued this week that the contractors were their worst enemies.
They said the terms offered to the farmer were at times unreasonable, which forces the producers to side market their crop.
Robertson weighed in to note that with contract farming, all the money offered to the farmer has to be used for the contracted crop and nothing else.
The contract buyers alone make the decision on how much to pay for each delivery of the crop.
Many contract buyers insist that the growers should buy all their inputs from the buyers’ own stocks, and the prices of these inputs too are set by the buyers.
These purchases, from the contracting buyer, are added to the grower’s debt. Even if the grower can find cheaper supplies from other sources, they are not allowed to buy them.
“Several disadvantages have impacted upon Zimbabwe because of the forced move to this system. Perhaps the main one is that the contract buyers are interested only in non-food agricultural products and in Zimbabwe; this has confined them to tobacco and cotton. As a result, Zimbabwe’s most active farmers are not growing food, and ever since land reform the food import bill has constituted the largest part of its total import costs. The food deficits started 15 years ago and the imports have cost about US$1 billion a year,” Robertson said.
Farmers have also often complained that contractors inflate the prices of inputs, thereby compromising their profitability.
Few farmers have had problems clearing their loans under contract farming and ended up having their assets being auctioned by the contractors to recover the outstanding debt.
Another sad story meanwhile has unfolded in the horticultural sector.
In the 1990s, the country’s horticultural export sector grew at 30 percent and brought in US$350 million per year, thanks to contract farming.
At the time, Zimbabwe was on the threshold of overtaking Kenya’s as Africa’s prime horticultural exporter to the European Union.
But that sector’s revenue has dropped to less than US$20 million; and many companies have since gone bust since 2000.
Agricultural expert and researcher, Ian Scoones, however, insists that contract farming still offers a “win-win” scenario, as smallholders get access to inputs and markets, while the agribusiness gets guaranteed products at good prices and at scale, without having to take over large areas of land and produce everything themselves.
On a brighter note, Gambara said some soyabean merchants have indicated that they are interested in contracting farmers for next year’s crop.
All in all, about US$30 million is required to fund soyabean in the coming season.
This means that a significant portion of the US$30 million will come from contractors.
Agriculturalists like Joseph Hanlon believe that, with support, Zimbabwe could be a major maize exporter and probably produce other food crops like soya and oilseeds.
But that requires both political will and money.
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