IN a desperate bid to pay off its US$273 million debt to the International Monetary Fund (IMF) the government has mortgaged this year’s tobacco crop to a tobacco marketing company, Mashonalan
d Tobacco Company (MTC).
Sources said this week the government has made a forward sale of 35 million kg of tobacco worth US$86 million, more than half this year’s expected yield. Between 45 million and 60 million kg is expected this year.
The US$86 million, sources said, would be used as part payment of government’s mounting debt to the IMF.
Agriculture minister Joseph Made is understood to have signed the deal on behalf of the government. Also present at the series of meetings that culminated in the deal were officials from the Ministry of Finance and the Reserve Bank of Zimbabwe (RBZ).
Contacted yesterday, Made would neither confirm nor deny the deal. He switched off his mobile phone as soon as the Zimbabwe Independent put the question to him.
The Independent heard this week that the arrangement also allows MTC to purchase tobacco directly from farmers.
Highly-placed sources say the government and the MTC signed the sale agreement on March 10 and finalised the logistics at a meeting held this week. MTC sales and administration director Rob Hacker could not confirm the transaction but said the company had been issued with a “special licence” two weeks ago.
“We have been awarded a special licence to purchase tobacco directly from farmers. Unlike other licence holders, MTC does not need to have supported the farmers in order to buy from them,” said Hacker.
Asked for details of the deal and what it entailed, Hacker said his hands were tied and he would rather wait for a statement from the Tobacco Industry Marketing Board (TIMB) before commenting.
“Those figures (US$86 million) are substantial,” he said. “We have an arrangement with government but surely we would not want to buy all that tobacco. It’s unfair to other merchants. We would rather have the TIMB comment first.”
He however confirmed that talks between the company and government over “some arrangements” had been going on for some time. But he could not say whether the deal represented a mortgage on the national tobacco crop for this year.
Experts in the industry say the deal means government has already ensured that MTC becomes the biggest buyer of tobacco this year.
TIMB general manager Stanley Mutepfa was evasive.
“We will be issuing a statement on that today (yesterday) or Friday,” he said. “That statement will explain the issue better. Phone me then,” said Mutepfa.
Analysts see this as part of government’s attempt to entice the IMF to give the country financial support.
Zimbabwe urgently needs balance-of-payments support from the IMF. The IMF team is in the country for annual consultations. But analysts are sceptical about it yielding much due to government’s poor governance record.
Economist John Robertson said the system of forward purchase has been used in Brazil but it hinges on guarantees of quality and the track record of both buyer and seller.
“The forward sale will only bring in money sooner but it will not change the debt situation,” he said. “That situation is likely to be the same.”
The figure of US$86 million for 35 million kg was quite a “brave” figure to attach, he said, because it was based on the assumption that the quality of Zimbabwe’s tobacco was going to be high enough to fetch US$2,39 a kg. “Judging by the quality this year it is highly unlikely they will get that amount,” Robertson said.
Last year tobacco sold for an average US$2,30 a kg.