eBusiness Weekly
Nelson Gahadza
The Zimbabwe Tobacco Association (ZTA) has said the tobacco cost of production model requires a minimum of 82 percent foreign currency retention ratio to enable continuity in a sector that is one of country’s largest foreign currency earners.
In a recent Monetary Policy Statement (MPS), Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said tobacco and cotton farmers can now retain 75 percent of the proceeds of their crops in hard currency, up from 60 percent for tobacco and 30 percent for cotton farmers, with manufacturers, those in the horticulture and cross-border transporters export retention hitting 100 percent up from 80 percent.
ZTA chief executive officer, Rodney Ambrose told Business Weekly that the farmers appreciate the increase from 65 to 75 percent; it is still insufficient to motivate farmers to continue with tobacco production.
“Our submissions to the authorities indicate that our cost of production model needed a minimum of 82 percent as retention.
“So the 75 percent falls far short of what a tobacco farmer needs.
“We are also of the view that tobacco is the biggest foreign currency earner yet we were awarded the lowest retention when other sectors have been given between 80 to 100 percent,” he said.
He added, “I can assure you that the 75 percent and the 25 percent at the current official rate is not at all an incentive to increase tobacco production.”
According to the MPS, the financing models for tobacco and cotton required a refinement of the export retention threshold to increase participation by small-scale growers and to boost tobacco and cotton production in the country.
As a result, the retention threshold for tobacco and cotton growers was increased to 75 percent for the forthcoming tobacco and cotton marketing seasons and the funds retained by the growers shall continue to be treated as free funds.
Ambrose said the farmers will continue to engage authorities because there is no way the farmer can market the crop at the current retention level.
“But we thought in our submissions we had made through the Tobacco Industry and Marketing Board (TIMB) and the Ministry of Agriculture, it was clear that we required a minimum of 82 percent as retention level,” he said.
Ambrose said this year’s tobacco marketing season will be a late season as most crops are still in the fields, yet to be reaped with some still on the growing stage, therefore, the marketing season is anticipated to commence late April when bulk of the crop shall be ready.
“What will be a challenge now is to motivate farmers what to do with the crop from now to April, because once they hear about the 75 percent, they will have no motivation to continue farming,” he said.
Zimbabwe recorded its biggest ever tobacco output in the 2017-18 season at 252 million kilogrammes. The previous record was 236 million kilogrammes in 2000.
The country’s exporters have various levels of foreign currency retention, with the balance being sold to the central bank at an exchange rate that is determined on an inter-bank forex market, following last week’s liberalisation of currency trade.
At the close of the last year’s marketing season farmers had delivered 185 million kg of the golden leaf worth US$517 million in 2021as compared to 159 million kg valued at US$394 million sold during the same period last year.
The average price for the 2021 selling season was 2,73 dollars per kg, up 13 percent compared to last year.
