THE Reserve Bank of Zimbabwe (RBZ) has been forced to raise foreign currency retention thresholds for tobacco producers by 10% following pressure from farmers.

RBZ also scrapped the compulsory liquidation of the retained forex amount by the tobacco farmers, but this has done little to calm down producers.

The Tobacco Farmers Union of Zimbabwe (ToFUZ) had demanded that the foreign currency retention ratio should be increased to 70% up from 50% that was used during the previous marketing season.

Mangudya on Friday responded to the ToFUZ petition where he announced the revised thresholds.

“Further to our telephone conversation, I would like to confirm our discussion that we have taken note of the issues you raised and we are pleased to advise that we are increasing the growers’ retention from 50 to 60% this year. To allow flexibility in planning, there will be no compulsory liquidation of the retained forex amount,” Mangudya said via email.

“Farmers are also free to purchase or supplement their foreign exchange requirements from the auction system through their bankers.”

Believe Tevera, ToFUZ president, told The Standard that an increase in foreign currency earnings would rescue farmers from accruing huge debts with contracting companies since they will have enough money to buy their own inputs.

In the petition to Mangudya, Tevera had argued that the cost of production for growing tobacco was pegged in US dollars, while  retailers of the inputs were using the black market exchange rate, which was not being considered by the government in coming up with the retention ratio.

“After the announcement of the monetary policy statement, which stated that retention schemes for gold producers would be increased, those for tobacco farmers and other exporters remained unchanged,” reads part of the petition.

“As a union, we still believe that you should revisit the issue of forex retention and review the retention threshold specifically for tobacco farmers because the current retention ratio is not benefiting us as tobacco farmers.”

He added:  “Maintaining the retention policy might be important for the sustenance of the foreign currency auction system, but we believe that we should turn to look on the other side of the coin and consider the sustenance of tobacco production.

“It is important also to make sure that farmers benefit and are happy because they are the key players in the production of the crop.”

Zimbabwe Progressive Tobacco Farmers Union president Mutandwa Mutasa said the government must address the three- tier pricing system for tobacco.

“I think it is encouraging to farmers that the government has resolved to consider our concerns,” Mutasa said.

“However, we ask the government to value tobacco farmers the same way they are regarding gold miners.

“The retention ratio for gold miner is 80%, which is practical in business management.”

Pius Moyo of the Tobacco Farmers Union Trust said the 60% foreign currency retention threshold was still very low to manage tobacco farming without incurring losses.

“With the 60% ratio, farmers will still be disadvantaged as they cannot meet the production costs with the forex earned,” Moyo said.

“We, however, acknowledge government efforts because the consideration of the 10% upward review is pushing us forward to achieve the 80% ratio we are demanding.

Tobacco is the country’s second largest export after gold, but Tevera said many farmers were now shunning the cash crop due to poor payment procedures and treacherous bidding practices at tobacco auction floors.

“We are calling for government’s intervention on the issue of the mushrooming of bogus and incapacitated contracting companies that don’t have farmers at heart,” he said.

“The contracting companies do not give farmers enough inputs required for their respective crop and this in return affects the quality of yields and the income of farmers.

“The companies charge exorbitant interest rates on the inputs, straining the farmers, resulting in many quitting growing the crop.”

Farmers also urged government to address the various challenges that were being faced in the production of the cash crop.