Govt yet to avail US$60m fund to TIMB

05 Aug, 2022 - 00:08 0 Views
Govt yet to avail US$60m fund to TIMB TIMB chief executive, Meanwell Gudu

eBusiness Weekly

Tapiwanashe Mangwiro

Government through the Reserve Bank of Zimbabwe (RBZ) is yet to release promised funds meant for localising tobacco production for the country to harness immense benefits from the crop, according to Tobacco Industry and Marketing Board (TIMB).

The idea to localise tobacco growing financing was mooted after the realisation that hundreds of millions in US dollars realised along the tobacco value chains were being enjoyed offshore by foreign financiers.

So the idea to locally fund tobacco production was meant to ensure that majority of tobacco proceeds circulate locally.

TIMB chief executive, Meanwell Gudu said; “The disbursement of the US$60 million revolving fund facility by the Reserve Bank of Zimbabwe is still to be rolled out. This fund can support 50 000 hectares with the potential of producing 60 million kilogrammes of tobacco as we move towards achieving the 2025 goal of producing 300 million kilogrammes of tobacco by 2025.”

This came as the farming community, economists and the Ministry of Finance and Economic Development said the relevant ministry should look at localising tobacco farming funding as a way to retain foreign currency in the country.

TIMB public relations officer, Chelesani Moyo, said TIMB is looking to increase local financing of tobacco production to 70 percent of total costs per hectare, through localisation initiatives to accelerate value addition and beneficiation from the current 1 to 30 percent by 2025.

Already, there are growing calls from industry players seeking a shift from the current financing model where about 95 percent of tobacco is financed by contractors.

While tobacco is touted as the country’s second single largest foreign currency earners after gold, net export proceeds are significantly less as most of the contract schemes are sponsored using borrowed offshore funds.

If the Government manages to avail the US$60 million facility to help fund tobacco production, agricultural economist, Crispen Maradze, said the fund will be a good starting point but we have not yet seen the benefits or heard of the roll out yet.

Tobacco Farmers Talk Club chief researcher, Phineas Mukomberanwa said; “Whatever we get from contact farming, 85-95 percent of that figure is going to contractors as debt repayment. Using a moderate figure of 85 percent it means that as of Friday July 29, 2022, the country has gained US$ of the total US$ earned from contract farming.”

According to TIMB, of the 135 000 growers registered for this 2021/22 tobacco marketing season, 74 000 of these are communal farmers, 46 000 are A1 farmers, 7 000 are registered as Small-Scale

Commercial and 8 000 are A2 farmers.

“This means that almost 90 percent of registered farmers are small scale doing 0,5ha to an average 2 ha per grower and most of these are contracted growers. There is a need for government and the regulatory authorities to protect these from the prevailing skewed pricing model especially from those merchants who have set pricing ceilings,” Mukomberanwa said.

Localisation of funding is critical, let us get to make banks to fund tobacco farming because if we subsidise tobacco it is useless because it will end up in the hands of the merchants who will forward price and export our raw tobacco.

Mukomberanwa said we should develop a vibrant value chain so that we process it and sell it as semi processed tobacco in order for us to gain more from the golden leaf.

Maradze said; “It is a mockery that 98 percent of our tobacco is being exported as unprocessed tobacco, which means we are getting nothing from such a good foreign exchange generator.”

The Government should come into play with legislation like they are doing with platinum miners that they have to process their product before exporting, as well as granite exporters should process it first before shipping out.

Another player in the tobacco industry who requested anonymity said; “The merchants are capping tobacco prices at a value of US$4.99 per kilogramme saying they export it at a price range of US$8-12 per kilogramme when in fact they sell it for $25-30 per kilogramme.”

TIMB said the average price of tobacco was US$3.04/kg compared to US$2.77 /kg during the same period last year, an indicator that prices were firmer this season.

“There is an improvement this season compared to last year and the (TIMB) is working towards more volumes next year to increase local tobacco production,” said Moyo.

Despite the marked increase in prices at auction, the market has managed to maintain a ceiling traditional price of $4.99. While all the lower grades seem to have appreciated in value or price, the top quality tobacco has not moved an inch for the past few years.

Anorld Mukaratigwa, a commercial farmer said; “With the increase in input prices over the past few weeks, this is worrisome, as farmers are concerned that come next marketing season, the same prices will be maintained for the upcoming season. This will negatively affect their income and viability for the 2022/23 season.”

TIMB said growers were still able to sell their tobacco even after July 20, which was the official date for the closure of auction floors.

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