/ 2 July 2008

Zimbabwe’s tobacco sector fizzles out

The perennial political and economic crisis in Zimbabwe has wreaked havoc with the country's once-thriving tobacco industry.

The perennial political and economic crisis in Zimbabwe has wreaked havoc with the country’s once-thriving tobacco industry.

Tobacco was the mainstay of the Southern African state’s economy during the 1980s and 1990s. The “golden leaf” was the county’s main export product, accounting for about 50% of Zimbabwe’s foreign currency earnings. About 700 000 people are dependent on the industry for their living.

For decades, Zimbabwean tobacco was coveted by blenders as among the finest in the world. According to statistics from the statutory body Zimbabwe Trade, the country was the second-largest producer of flue-cured tobacco after the United States in the 1990s. Its crop was recognised for its quality in major tobacco markets in Europe, Asia and the US.

But, since 2000 when the government introduced chaotic “land reform” policies, the tables have been turned. Brazil has since taken over as the world’s second-largest flue-cured tobacco producer.

Production of tobacco plunged from a record level of 267-million kilograms in 2000 to a dismal 73-million kilograms last year, according to the Zimbabwe Tobacco Association (ZTA).

In an ostensible bid to redress the racial inequities in arable land ownership, white farmers who were more experienced have been displaced from tobacco farms. These farms have subsequently been taken over, in some cases, by inexperienced and underfunded communal farmers and, in other cases, by friends of the rulers.

Farmers have to put up with a plethora of problems. For example, the government is not providing sufficient support for tobacco production, and banks are reluctant to offer loans in the light of the uncertainty of the situation, including the expropriation of farms.

All these problems have contributed to a very low yield of tobacco of which the quality has also been reduced.

Selling woes
Since 2000, every other tobacco-selling season has been plunged into disarray as tobacco farmers hold on to their crops, complaining about low prices and delayed payment.

This year’s season was characterised by on-off selling as farmers clamoured for better prices — which were quickly wiped out by the country’s staggering inflation rate of more than 100 000%.

The official opening of the tobacco-selling season this year was scheduled for the month of April. It was delayed by more than two weeks as farmers refused to send their crops to the tobacco sales floors in Harare, demanding a review of prices.

Farmers have been objecting to the tobacco being sold in US dollars while they are paid in local currency at the official exchange rate, which is not commensurate to their labour input.

Last year, similar wrangles were witnessed. Sales were postponed indefinitely after farmers indicated that they were not ready to sell their tobacco until they got a special exchange rate. They rejected the exchange rate of one US dollar to Z$250 that applied at the time.

Although the rate was adjusted upwards to a special rate of one US dollar to Z$30 000, farmers insisted that this was still not enough. The US dollar was at the time fetching 20 times more on the parallel market, which is where most of them were getting money to buy farming implements.

The impasse was only resolved after the intervention of the government. The price of 1kg of tobacco was pegged at 1,50 US dollars last year. This year the price was moved up to $2,26 per kilogram, although the farmers had demanded a rate of $4 per kilogram.

In May this year, farmers stopped selling their crops in protest against non-payment. Most of the communal farmers prefer to be paid in cash rather than cheques as they need the money for food and school fees for their children and for the purchase of farming implements.

Auction problems
Since April, business has grounded to a halt at the country’s three main auction floors — Burley Marketing Zimbabwe, the Tobacco Sales Floor and the Zimbabwe Tobacco Auction Centre, all located in the capital, Harare.

Some disgruntled farmers complained that they had sold their crop 21 days previously but had still not received payment despite government promises.

A few farmers said they had received Z$5-billion, which is equivalent to only $5, while the remainder was deposited in their accounts or paid out in cheques.

In Zimbabwe at the time of writing, Z$5-billion was only enough to buy a five-litre pack of orange juice.

“What can we do with Z$5-billion? It all goes to settle food bills that have accumulated during the period that we have been here waiting for payment,” said a disgruntled farmer at the Tobacco Sales Floor.

An official at the Tobacco Sales Floor acknowledged that there was a crisis but nothing could be done until the currency crisis gripping the country was resolved.

“It’s a problem of cash, but we hope that once we start getting special cheques from our banks the payment situation will improve,” said Wilson Gopoza, Tobacco Sales Floor MD.

The “special cheques” come in the form of promissory cheques that can be used as money. These were introduced by the Reserve Bank of Zimbabwe in May in a desperate bid to solve the cash crisis in the country’s banking system and to make trading easier.

Before the introduction of these cheques, farmers were forced to liquidate their cheques through illegal cash dealers. They were being charged a commission of up to 70%, a situation that ended up diverting money from the farmers to the cash dealers.

“These disruptions cost farmers a lot of money. Why can’t the government just put its house in order and set prices well in advance so that we don’t have to pay for storage facilities in Harare while we await the resolution of price issues?” asked a tobacco farmer from Headlands, about 50km north-west of Harare.

A representative of the Tobacco Industry Marketing Board said the delays are caused by the government, which takes time to determine the price of tobacco.

Decline in production
Meanwhile, the Zimbabwe Tobacco Growers’ Association (ZTGA) projected at the beginning of the year that tobacco production for 2008 would decline by 20%.

ZTGA president Julius Ngorima said the initial target of 120-million kilograms of tobacco in 2008 would not be achieved due to a combination of factors, including late planting, shortage of diesel and fertiliser, and heavy rains.

“We are now expecting an output of below 100-million kilograms,” Ngorima said.

Other organisations are, however, expecting the yield to be much lower than 100-million kilograms.

ZTA president Andrew Ferreira said: “We’re expecting a crop of less than 70-million kilograms because drought earlier in the season and incessant rains more recently have affected the crop. Some growers have opted out of tobacco because of the problems related to obtaining inputs.”

ZTA figures show the decline in output: from 267-million kilograms in 2000, when the ruling Zanu-PF started to turn the screws on its political opposition, to 202-million kilograms in 2001; 165-million kilograms in 2002; 80-million kilograms in 2003; and a paltry 68-million kilograms in 2004.

Statistics for this year’s crop yield were not available at the time of writing but analysts projected that the season might just be the worst in the history of the country, given the extreme social upheaval caused by new heights of state-sponsored torture and murder. — IPS