eBusiness Weekly
Business Writers
Thousands of independent tobacco farmers could be losing millions of dollars as they are being forced to sell their crop for a pittance to syndicates comprising corrupt merchants who register growers without their knowledge the auction floors.
Investigations by Business Weekly revealed several independent growers who fell victim to the ploy are being chased away from the auction floors on accusations of side marketing because their produce would have been registered under contract farming by the unscrupulous dealers.
Scores of farmers confirmed this unethical practice was taking place and becoming more pronounced each season, accusing the merchants of registering them without their knowledge.
Meanwhile, the Zimbabwe Farmers Union has since engaged lawyers to investigate the matter with intent to take legal action against the culprits.
A legitimate contractor provides inputs under a careful pre-season agreement to a farmer and in return will pay that farmer the average auction price for the quality and type of tobacco delivered, minus the cost of the inputs.
Auctions, although dealing with a minority of the crop, thus set the market price. The problem comes when some contractors do not follow this model.
It has emerged that contractors like Ethical Leaf Tobacco and Agritrade Leaf Tobacco have been adding tobacco producers to their list of contract farmers without the grower’s knowledge and consent.
Their list of contracted growers has been growing even after the selling season had started.
This unethical practice has resulted in farmers being held up at auction floors, unable to sell their tobacco as they are required by the TIMB to get a letter from the contractors to be removed from that contract list.
In desperation, some farmers end up selling to the contractors to avoid the frustration of de-contracting.
Surprise, surprise
Several independent farmers told Business Weekly that they were shocked when denied permission to sell at the auction floors because they were registered as contracted farmers.
“We are facing challenges in selling our tobacco as independent farmers,” said one farmers from Karoi. “What has been happening is that when we come to sell our tobacco here at the auction floors we are told that we are only supposed to sell to our contractors and yet we used our own resources to grow the crop.
“We are then told to go and clear our names with the contractor through what they call de-contracting but this process brings inconvenience to us as farmers.
“How we got registered under their contract scheme we don’t know but this is a scandal.
“Last year, the same thing happened and I had to approach TIMB to be de-contracted.”
When Business Weekly visited ELT offices at the Tobacco Sales Floor (TSF) auction floors on Wednesday morning, there were several farmers who expressed their disgruntlement at the contractor’s conduct, which they said has been going on for the past two years.
ELT chief executive David Machingaidze had not responded to questions from Business Weekly by the time of going to print. The questions were sent on Tuesday morning. Ethical Leaf Tobacco operates from TSF. TSF is a subsidiary of the Zimbabwe Stock Exchange listed TSL.
TSL head of agriculture cluster Peter Mujaya confirmed the developments, saying investigations were underway.
“We confirm that these complaints indeed come to our attention this week and are under investigation,” said Mujaya. “To the extent that ELT is a merchant operating on our floors along with several others, we consider it within our business and professional values and obligations to investigate any issue that might cast unfavourable light on the process at our floors. We provide a facility for farmers to market their product in an unfettered manner and take seriously allegations of real or perceived suspicious activity taking place.
“We have also intensified our efforts to make farmers aware of the required information and documentation needed before they can sell at the auction floor as per TIMB regulations and how they can prevent falling prey to unscrupulous practices.”
Government has already set aside $70 million dollars to support small scale independent farmers this year as it seeks to keep auction marketing system alive.
A collapse of the auction system could lead to massive price manipulation through contract sales.
Independent farmer Liberty Gobodza told Business Weekly he was surprised to realise he was contracted by ALT even though he had not received inputs or registered with the company.
“When I submitted my bills to the auction floor, I was told that I am registered with Agritrade when I had not received inputs from them. As you can see, they have now de-contracted me,” said Gobodza, showing a copy of a de-contracting letter.
It has emerged that the practice started two years ago but there were just sporadic incidences around the floors. Now, numbers are growing at an alarming rate.
A transporter who spoke to our team narrated the ordeal farmers from Shamva faced. “Some contractors have a tendency of hoodwinking farmers into registering with them and then claim ownership of the crop without providing funding or inputs to the farmers,” said Langton Makumborenga.
“This then delays the whole process and farmers end up spending more days and nights at the floors, which is a big inconvenience for the farmers. Unfortunately TIMB says it’s not aware that such things are happening. This was a similar situation when scores of farmers fraudulently contracted by Agritrade Leaf Tobacco.
Regulator caught unawares
When contacted for a comment, TIMB public relations and communications manager Isheunesu Moyo said it was the first time that they were hearing about this issue.
He said it was difficult to use farmers who were seeking to be de-contracted as evidence as there was already a process of de-contracting farmers who would have met their obligations with the contractors prior to the opening of the floors.
However, Moyo could not rule out the possibility of such shenanigans saying the regulator would launch an investigation.
Restmore Mataure, a farmer from Mvurwi said TIMB was not helpful on the matter; yet the regulator was supposed to protect the farmers from such practices.
“If you look at the TIMB, they are the ones who regulate the market and compile information on growers, so we wonder how these contractors end up with growers’ information.”
Marian Shonhiwa, a food vendor at TSF said farmers are generally unhappy about their tobacco disappearing at the action floors only to resurface at with contractors. “The first time I heard of such stories was last year, and we thought it was just an excuse by the farmers to get food without paying, but we have since discovered that this is rampant as we hear such stories every day. “I have had farmers claiming that while they were clearly booked by TSF their bales were, however, missing and only to be found at Ethical.
“So I think something is happening because all these people can’t be lying,” said Shonhiwa.
Investigations underway
ZFU executive director Paul Zakariya said the union has engaged lawyers to investigate the matter and possibly come up with a value in terms of what farmers have been prejudiced with a view to seek compensation.
“On Wednesday, we engaged a group of lawyers and a team of legal experts to investigate the alleged deceitful acts by some contractors,” said Zakaria.
“We want to get to the bottom of the matter to expose the ongoing prejudice by these contractors. If the findings happen to be saying indeed these contractors were fleecing farmers, they will pay back all the money that they prejudiced our farmers and they will also compensate our valued farmers for the wasted time.
“We can’t have the highest earners of foreign currency being abused for generating foreign currency. They deserve better from these dirty dealers and anyone. This (act of sabotage) must stop now. They should just stop it,” added Zakariya.
Industry players said the dubious contractors have also carefully crafted ways to lure farmers by offering high prices to very few bales from one or two farmers and buy at below average prices from the rest of the farmers. They will then widely advertise their highest prices to deceive farmers even though their average prices are below the market levels.
The contractors, should never have average prices below that of average auction floors.
The TIMB price matrix, if followed, makes it impossible for contract average prices to be below auction floor average price. According to TIMB regulations, contractors are supposed to pay a minimum of the auction floor average for any grade.
Despite these provisions to protect the vulnerable farmer, many contractors have been paying average prices, which are below auction floor average prices. This essentially means they have not been following the TIMB Price Matrix. “With the country riding a wave of positivity underwritten by the President’s clarion call to turn around the country, it appears some players in the tobacco industry are still stuck in the old dispensations, where looting and arbitrage at the expensive of vulnerable people is the order of the day,” said an official with a local tobacco company.
Zimbabwe Tobacco Association chief executive Rodney Ambrose told Business Weekly that with poor monitoring, more unregulated players in any industry could spell doom.
“It is sad that some contractors are taking advantage of the unsuspecting small scale farmers to fleece them of their hard earned tobacco. These contractors are well aware that large scale farmers cannot tolerate such unscrupulous acts,” said Ambrose.
“Going forward there should be stricter way of monitoring by TIMB on the contracting and registration processes. It’s the role of the regulator to ensure the process of de-contracting happens expeditiously. The regulations are very clear, only companies who have provided growers with inputs are deemed to be contractors.”
Analysts say the opening up of the tobacco industry to more players and investors has brought mixed fortunes to farmers. At face value, more players means more money in the industry. This theoretically means more money to the farmer.
“But the rich pickings associated with it has attracted a pack of wolves dashing to grab and exploit the vulnerable farmer. “These hungry and marauding wolves are mainly coming in the form of dubious contractors who are out to reap where they did not sow,” said an analyst, formerly with TIMB.
“This act of sabotage has been happening and at some point the authorities were informed but no action was taken. It is our hope that with the new dispensation decisive action will be taken against these saboteurs. The Government needs to protect this important industry by flushing out undesirable elements.”
According to TIMB regulations, a contractor is supposed to submit their final list of contracted growers before January of every year. The reason being that by that time, genuine contractors would have already finalised their list of contracted growers.
