Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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War over tobacco out-grower schemes

War over tobacco out-grower schemes

http://www.thestandard.co.zw

April 21, 2013 in Business

MULTINATIONALS and Chinese firms should leave tobacco out-grower schemes to 
indigenous players if government’s empowerment drive is to be meaningful, 
the Zimbabwe Economic Empowerment Council (Zeec) has said.

REPORT BY OUR STAFF

An out-grower scheme refers to an agreement between a buyer and farmers, 
which establishes the conditions for the production and marketing of an 
agricultural product. The farmer agrees to provide set quantities of a 
specific agricultural product, meeting the quality standards and delivery 
schedule set by the purchaser, while the buyer in turn commits to purchase 
the product.

Zeec and Tobacco Association of Zimbabwe president Temba Mliswa said Chinese 
companies were rapidly taking over the country’s tobacco sector through 
contract farming and making profits across the board.

“An overview of most contracted farmers in the tobacco growing areas will 
show that the majority of them are in arrears and can hardly break even. The 
[Chinese] firms have put substantial mark ups on inputs supplied, an 
administration fee, an extra top up charge on fertilisers, while tractors 
brought in from China are charged too,” he said.

Mliswa said the Memorandum of Understanding signed between the Chinese and 
the Agriculture, Mechanisation and Irrigation Development Ministry 
effectively pushed out the indigenous sector’s involvement in the out-grower 
scheme as the Chinese can easily secure capital amounts to be availed to 
growers.

He said the out-grower scheme was basically a response to the liquidity 
crunch that prevailed soon after the land reform programme as there were no 
banks available to support the agriculture sector at the time.

“The minister [Saviour Kasukuwere] has the whole empowerment concept with 
regard to the tobacco sector wrong. He is not consulting all relevant 
players and stakeholders in the tobacco industry. Let not empowerment be 
about allowing people to reap where they have not sown,” said Mliswa, adding 
that empowerment should benefit local companies already involved in the 
out-grower scheme.

Statistics from the Tobacco Industry Marketing Board showed that the average 
price for contract tobacco was US$3,70 on Tuesday compared to US$3,91 during 
the same period last year.

On Tuesday at least 58% of the tobacco sold came from contracted farmers 
with the remainder coming from auctions.

Mliswa said prices being offered for contract tobacco are being determined 
by a cartel made up of a few players.

“Why would the Chinese bemoan the quality of tobacco yet the tobacco is 
checked and supervised by field officers who monitor the process from 
planting and reaping, right up to harvest? Moreover, contract farmers are 
subjected to interest rates of 11% to 12,5% of the money availed to them by 
the Chinese,” he said.

Late last year, Chinese tobacco contract farming and purchasing firm Tian Ze 
Tobacco Company bemoaned what it termed  “poor quality” of last year’s cured 
leaf.

The company urged local farmers to invest in the process between the field 
and the auction floors in order to derive more from their produce.

However, some discontented farmers have approached banks attempting to gain 
independence from contract farming arrangements but have generally received 
little support from financial institutions.

Tian Ze Tobacco Company deputy managing director Cai Bing criticised 
contracted farmers who were involved in side marketing and said this would 
negatively affect funding.

Advantages of contract tobacco farming include access to inputs and 
production services, access to credit and assured markets.

Zimbabwe’s 2009 to 2011 economic growth was partly led by tobacco, produced 
increasingly by smallholder farmers in new contract farming arrangements, 
and supported by high international prices. 

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