Eric Bloch Column

Distressed state of tobacco industry

By Eric Bloch

THE governor of the Reserve Bank of Zimbabwe (RBZ), Dr Gideon Gono, has recently been quoted as saying that “vigorous efforts must be made to ensure that next year the tobacco crop be at least three times the size of the current crop”. That he should have such an aspiration is readily understandable, for in the past tobacco has been the strongest single element of Zimbabwe’s economy. Between 1992 and 2000 the average annual production of flue-cured tobacco was 190 million kilograms, and in 2000, an all-time record crop of 237 million kilograms was produced. That represented export earnings in excess of US$400 million, being an amount of foreign currency greater than the total annual import cost of Zimbabwe’s need for petrol, diesel and other petroleum products.

The past importance of flue-cured tobacco to the Zimbabwean economy cannot be over-stated. It used to generate over 30% of the country’s foreign currency, being considerably more than the foreign currency generation of any other sector of the economy. Its contribution to Gross Domestic Product (GDP) exceeded 10%, and provided employment for more than 200 000 Zimbabweans. And yet, in doing so, it used only 3% of the country’s arable soils, leaving most of Zimbabwe’s fertile lands available for other agricultural operations.

But that is now almost history, for the past four years have witnessed the abysmal, and wholly avoidable decline of that economically vital industry. As compared to the mythical projections of the size of the 2004 crop that emanated only a few months ago from the Ministry of Agriculture and other governmental spokesmen, who repeatedly cited projections ranging from 150 to 200 million kilograms of tobacco, which they begrudgingly reduced in the last eight weeks to 80 million kilograms, and then to 65 million kilograms, it is now becoming apparent that the probable size of the crop is approximately 45 million kilograms, or less than 20% of the crop in 2000. More than 70% of the large-scale producer farms are now totally out of production, with the former, provenly successful, farmers having been forced off their lands and those then vested by government with the usage of the lands not availing themselves of the opportunity of economic empowerment bestowed upon them by a government which had unhesitatingly replaced the productive with the unproductive.

Admittedly, small-holder production (as distinct from large-scale commercial production) increased from an insignificant 2 million kilograms in 1995 to over 18 million kilograms in 2003, with the number of small-scale producers rising from 1 000 to over 20 000 in that 8 year period, but in 2004 their production has shrunk to 12 million kilograms only, or only 5% of the very substantial 2000 total production of 237 million kilograms. Moreover, the small-scale producer’s average yield is 900 kilograms per hectare, compared with an average yield of approximately 2 400 kilograms per hectare consistently attained by commercial, large-scale growers.

There are numerous reasons for the near demise of Zimbabwe’s most important industry. First and foremost has been the government’s implementation of the land reform programme, re-distribution and resettlement in the most ill-conceived, destructive and foolhardy manner possible. Instead of adhering to its avowed principle that any farmer is entitled to one farm, albeit with a limitation on size, it pursued the programme with almost no considerations other than racism. It demonstrated a determination to dispossess almost all who were not regarded as being indigenous. It sought to justify the policy of dispossession with spurious allegations that the land had been “stolen” from the indigenous population, in complete and deliberate disregard for the fact that prior to the colonial era, the total population was less than 250 000, occupying less than 5% of the land. The remainder of Zimbabwe’s vast land expanse was both unoccupied and unutilised.

In reducing the total number of commercial farmers by more than 90%, Zimbabwe’s government deprived the country of a very considerable skills’ resource developed over generations, replacing that resource with a few new farmers with like skills, but no capital, and with a great number of new farmers who did not have skills of a comparable nature, but who could progressively acquire such skills, and who did not have the capital or other resources required for production and which would be the catalyst of developing the skills.

Government obdurately resisted all recommendations that the new farmers be accorded title to the land, thereby giving them collateral to access necessary funding, and thereby also motivating the new farmers. Instead, the government showered the new farmers with promises of all required production inputs. In the main, all the farmers ever received were the promises, and to the limited extent that the inputs were provided, they were invariably forthcoming too belatedly to be of meaningful use. This appalling state of affairs was compounded by a gross inadequacy of extension services and training, further hampering production, growth and development.

Other factors contributing to the demise of the tobacco industry included the massive escalation in production costs, due to the rampant hyperinflation which has become endemic in the economy. The catastrophe in that never-ending rise in costs was that there was no commensurate rise, in Zimbabwean dollar terms, in sole prices, for driven by misguided political considerations and a myopic disregard for economic realities, government steadfastly refused to effect meaningful and realistic devaluation of the Zimbabwean dollar. Had it done so, the Zimbabwean dollar yields would have compensated for the immense cost increases, preserving viability for the tobacco industry.

Amongst the cascading costs borne by the few who remained active in the tobacco growing industry have been funding costs. Interest rates have soared upwards, to levels seven to eight times greater than a few years ago. Some limited relief has been forthcoming from the RBZ driven productive sector concessional facility at a rate of 30% per annum. However, that relief does not suffice, for tobacco is a 16 to 18 month crop, from when seed-beds are prepared to when sale proceeds are forthcoming, whereas the concessional facility is limited to a period of six months only.

Yet another major constraint upon the industry has been the progressive collapse of the infrastructure. Repeated breakdowns in energy supply by Zesa, inadequate production of coal by Wankie Colliery jeopardised tobacco-curing operations, and the NRZ was unable to deliver such limited quantities of coal as were produced. Erratic availability of fuel also impacted adversely upon operations. In addition, many of those who were not settled by government upon the lands, but who unilaterally settled themselves on well-established, previously highly productive farms, looted and vandalised much of the farm infrastructures. They destroyed farm improvements essential for operational efficiency, and removed pumps, equipment and the like to sell to third parties, denuding the farms of that required for purposes of production.

Immediate recovery of the tobacco-growing industry is an impossibility. However, if government heeds the governor of the RBZ, who recognises the critical need for that recovery, it must take definitive actions. First and foremost, it must restructure its land reform programme to one which is just, facilitative of return of commercial farmers to some of the lands, and effectively settling those who can and will be productive. Concurrently, government must ensure that law and order is fully restored.

Government’s response is invariably that total law and order exists and, therefore, that there is nothing to restore. But the populace and the world know otherwise! When hordes can trespass and expropriate properties, can threaten, assault and victimise, can vandalise and loot, and are allowed to do so unhindered, law and order does not exist. When the supposed guardians of law and order are appealed to for assistance and such appeals are denied, law and order does not exist.