eBusiness Weekly
Martin Kadzere
The Tobacco Industry and Marketing Board (TIMB) said there was a significant increase in the usage of credit verification systems by the merchants this year after some of them reported low investment recovery due to rampart side marketing.
Several farmers breached their contracts by selling to other companies, resulting in high levels of poor recovery by the merchants. Tobacco in Zimbabwe is largely grown by smallholder farmers who are funded by the merchants under contract arrangements.
The tobacco industry has two credit verification system — the one run by TIMB known as the Loan Clearing System and the Credit Rating System managed by the private sector.
“We have seen an increase in the usage of the systems as many tobacco merchants try to weed out defaulters . . . this will minimise potential losses in future,” TIMB chief executive Mainway Gudu told Business Weekly in an interview on Thursday.
Gudu said the “bad attitude” among tobacco farmers was a huge challenge, a situation that can be controlled by continuous engagement with tobacco growers. While Zimbabwe used to pride itself on a vibrant auction marketing system, the viability of tobacco farmers has, however, been seriously eroded as a result of the introduction of the dual marketing system now dominated by contract floors. This has created a scenario where rules are being violated by the merchant due to poor monitoring.
Presently, there are more than 65 contract floors around the country, with the majority being makeshift facilities that present major transparency risks and efficiency of tobacco marketing. Moreso, the current state of affair erodes the appetite of genuine investors to invest in modern marketing facilities in line with global trends.
This poses a major threat to the industry, which is arguably one of the most successful empowerment stories not just in the history of Zimbabwe but at a global level.
Strengthening of marketing system by eliminating “fly by night” merchants has been identified as key in improving transparent and efficient marketing of tobacco.
This will lead to improved production in line with the Government’s target of reaching 300 million kilogrammes and encourages investment in value addition and beneficiation.
Gudu admitted that while there was “overtrading” in the industry, a development that was creating marketing loopholes, the regulator would not stop licensing merchants with verifiable export markets and irrefutable proof of funding.
“On the funding side, it is the Reserve Bank of Zimbabwe which does verification and on our side, in conjunction with embassies, we verify the markets,” said Gudu.
