The ManicaPost
Samuel Kadungure
Senior Reporter
TOBACCO experts have applauded the Government’s decision to inject US$60 million towards the resuscitation of the tobacco auction system which has been under threat from the contract system.
Last season the contract system financed 96 percent of crop last season and experts say the restoration of the auction system will restore sanity and put the sector firmly on track to achieve Vision 2030.
The 2020/21 season was dominated by 30 contractors – most whom were fronting merchants that dominated 96 percent of the market, amid indiscipline, which saw some allegedly involved in smuggling and side-marketing of the golden leaf.
Some of the contractors have not paid for tobacco delivered to them in May, putting farmers in a quandary and throwing their preparations for the next farming season into disarray.
The dual marketing system of tobacco was introduced in 2004, with tobacco that is free funded being sold to the traditional auction system, while the one financed through contract farming being sold through the contract system.
The latest initiative was announced by Lands, Agriculture, Fisheries, Water and Rural Resettlement Minister, Dr Anxious Masuka last week.
Dr Masuka said this was meant to preserve the dual marketing and strong auction system.
“Government is putting in place a US$60 million localisation fund, as seed money, to ensure that the auction system is re-established and that it grows. Government is very mindful of the need to preserve the dual marketing system and to have a very strong auction system,” said Dr Masuka.
Statistics from the Tobacco Industry and Marketing Board (TIMB) show that the planted hectarage of tobacco went up by 6.84 percent from 117 000 hectares in 2019/20 season to 125 000ha this year.
About 96 percent of it was grown under contract farming – an arrangement in which a farmer enters into a contractual agreement with a buying company, who provides inputs upfront with the costs then deducted from the farmer’s earnings at the end of the season.
This has seen some surrogate merchant buyers wreaking havoc by swindling growers their crop and smuggle the plants to South Africa at the expense of the national interest of value addition.
Once smuggled to South Africa, the cartels remove the stem and process it into cigarettes and cosmetics, earning themselves millions, at the expense of the nation.
This fuelled concerns that the auction system, which buys locally funded tobacco, was on its way out, marking the end of transparency in tobacco marketing.
Zimbabwe Farmers’ Union executive director, Mr Paul Zakaria said farmers resent the contract system because of its stringent requirements, and the US$60m facility will give growers a huge lift as banks remain unforthcoming.
Mr Zakaria said the fund will save the sector from going the same route as the cotton industry which was almost destroyed by huge influx of contractors.
“What we were doing, leaving the auction system to collapse, was wrong. We were taking the wrong direction because only locally funded tobacco develops the economy. 96 percent of tobacco grown last season was funded by contractors, and once farmers produce, you pass it on to the contractor. Most of these contractors are fronting merchants,” said Mr Zakaria.
“The real value of tobacco is in value addition, yet as a nation we retain only four percent, which is free funded, out of 200 million kg. We have no power over the rest as it is exported in its raw form by these merchants. We need to reverse that and revive our auction system where free tobacco goes.
“We need to make sure that we have our own localised financing mechanism to produce on our own tobacco, value add value by processing it into cigarettes and then export to earn huge foreign currency earnings. What we are currently doing is as good as exporting jobs and foreign currency.
“We should actually work with 20 percent of contractors and 80 percent of locally funded, which puts us on track to attain Vision 2030 of an upper middle income society as we will be putting more money in the pockets of local people, not foreigners like we are doing,” said Mr Zakaria.
Tobacco Farmers’ Union Trust president, Mr Victor Mariranyika weighed in, saying despite the bulky of golden leaf being grown under contract farming, prices on the auction floors were used to generate the price matrix on the contract sales.
“It is a bizarre arrangement because four percent of the crop was used to determine the price for the 96 percent of the crop.
“We are lobbying Government to craft laws that protect and promote the tobacco industry in line with Vision 2030. The laws should also place tobacco growers as game changer in the economy as defined in the National Development Strategy (NDS1),” said Mr Mariranyika.
