eBusiness Weekly
Business Writer
Two confidence boosting developments took place in tobacco marketing this past week that are likely to see many farmers warming up and increasing deliveries of the golden leaf to the sales floors.
But the most critical thing is the Reserve Bank of Zimbabwe and the Tobacco Industry and Marketing Board should put their houses in order lest the foreign currency the country desperately needs from the sale of tobacco might not be realised in its entirety.
The idea is not for the two arms of Government to create bottlenecks that result in poor farmers surrendering their tobacco to them for a song, but to obtain a win-win position for all parties.
There is bad communication among key parties to the tobacco sector; farmers, the RBZ and the TIMB, resulting in the existing impasse that has slowed down activities at the tobacco floors. The impasse should be threshed out immediately because some of the desperate farmers holding onto the tobacco do not have proper storage facilities and fears abound that growers might suffer heavy post-harvest losses given that most of them lack proper storage facilities.
The longer the farmers hold onto their crop, the longer it also takes for the foreign currency from international buyers to be released for use by whoever needs it.
The RBZ and TIMB should take the blame of failing to properly explain to some farmers and their representative bodies on the new regulations and procedures of marketing tobacco this year.
Reports say right now many farmers are yet to open Foreign Currency Accounts and it is critical that through community peer groups, community radio programmes, national media such as radios, televisions and newspapers there was supposed to be a blitz explaining changes brought by the Monetary Policy and what it meant to this sector.
Is forex retention thresholds the major bottleneck?
There were numerous conflicting reports attributed to the Apex Bank saying farmers would get 100 percent payment in RTGS dollars, while others claimed they will get 50 percent foreign currency. In protest the farmers reportedly withdrew their crop.
This resulted in the central bank issuing another statement reaffirming its commitment to pay tobacco farmers in the United States dollars.
Responding to media reports, the central bank in a joint statement with the TIMB said it shall ensure that “all tobacco growers have accessed their entitlement of 50 percent of the net tobacco sale proceeds into their Nostro FCA bank accounts.”
The RBZ also added that, ‘‘in addition to accessing cash at a rate of RTGS$0,50 per kg of tobacco sold and up to a maximum of RTGS$300, the small-scale tobacco growers, (those growers with 2 hectares and below), are eligible for a United States dollars cash withdrawal of US$0,10 per kg sold per sale, up to a maximum of US$50 after their Nostro FCA bank accounts have been credited with foreign currency entitlement.”
This information is critical to the growers but the challenge is the medium used to communicate the messages that result in some of them not receiving it.
The 2 percent issue and the tobacco merchants and agents
In as much as activities at the country`s tobacco floors are expected to improve following scrapping of the 2 percent electronic transfer tax on all activities being done at the country`s tobacco floors, reports from TIMB spokesperson Isheunesu Moyo while speaking on Capitalk Radio programme, revealed the situations was still desperate.
The marketing season, which started a fortnight ago begun on a low note, as some farmers adopted a wait-and-see attitude, while others who sold their crop were not happy with the low prices on offer. The first bale was bought for US$4,50 per kilogramme, which is 40 cents less than the price of the first bale last season. Some bales were sold at low prices such as US$0,20 per kg.
In a snap survey carried out at three auction floors-TSF, Boka Tobacco Floors and Premier Sales Floor prices ranged between $0,50- $4,60 per kg.
Tobacco merchants and auction floor operators, through the Tobacco Industry and Marketing Board requested the Government to scrap the 2 percent tax, arguing it will seriously hurt their margins.
Some of the transactions that are exempted from the 2 percent tax include transfer of funds between an individual’s mobile wallets and or bank accounts, transfer of funds from mobile money trust funds for the purchase of electricity, transfer of funds to mining houses by the Minerals and Marketing Corporation of Zimbabwe (MMCZ) as well as transfer of money to producers or sellers of gold by Fidelity Printers and Refiners.
Tobacco industry players had argued that their operations were similar to that of the MMCZ and Fidelity Printers and Refiners. As such, they also wanted to be exempted from the tax. They had also warned that additional costs arising from the 2 percent tax might result in deliberate lowering of prices by the tobacco merchants.
Buyers respond to the scrapping of the 2 percent
In an interview recently, Boka Tobacco Floors operations manager Moses Bias said they had registered an increase in the amount of buyers who were participating in tobacco buying and prices had also significantly rose compared to last week.
“Farmers are excited because buyers have started to come in this week and participate in the buying of tobacco unlike last week where there were other issues which needed clarity (the main one was the 2 percent which we have negotiated with the Government and this has been agreed on because it had a ripple effect into the transaction of funds from both the merchants and the auction floors).
“Last week we had only three buyers who were participating at the auction floor so there was no real competition because there was a limited number of buyers, but now because of those compliance issues we are now OK, as for today we had seven major buyers who participated in today’s auction.
“Today I have seen a jump in prices from the original $4,35 to $4,60. It is still premature to talk about good prices because the tobacco which is still coming in at the moment is still the low quality primings and the primings usually do not sell much,” said Bias.
Some buyers remain optimistic
David Rhodes a buyer who also spoke to this publication remained upbeat about the marketing season saying that it is still early and they are expecting that when the good quality leaf comes in prices should go up.
“So far the quality is not too bad, what has been on offer so far is actually nice quality. Farmers are complaining that prices are a bit low but they are starting to come up on a daily basis, today we have noticed quite a bit of increase in prices. We are still not sure whether the farmers are going to be happy to be paid RTGS money.
“However, its early in the season so what is coming up now is lower storm quality product so when the proper leaf starts coming into the market that is when prices will shoot up and stabilise.
‘‘ Farmers are selling their low stock rippings, you can’t say its sub-standard tobacco but its low quality plant so in a few weeks’ time prices will go up,” said Rhodes.
