CONTRACT marketing of tobacco has failed to take off because the contractors cannot meet Reserve Bank requirements to purchase the crop leaving the farmers stuck with their produce, the Zimb
abwe Independent heard this week.
Government changed the marketing system for tobacco from the traditional auction floors to a dual system where contract tobacco production and marketing operate alongside auctions.
Under the new system nine contractors and the three traditional auction floors were expected to buy the crop.
Approved contract buyers include FSI Agricom, TSL, Zimbabwe Leaf Tobacco, Tobacco Growers Trust (TGT), Farmers World, Arda-Gold Driven Investment, Wedzera Petroleum, and Tobacco Development Corporation.
A memorandum of understanding signed between government and the contractors stipulates that for a contractor to buy tobacco he should have provided 100% support to the farmer.
Almost all the contractors fall short of this requirement as they only partly funded farmers according to need. But a farmer on contract cannot sell his tobacco directly on the floors, hence most of them have been left stranded with their crop.
Another requirement on the MoU was for contractors to deposit US$1 million with the RBZ before they were allowed to buy the tobacco, and be able to buy a minimum 500 tonnes, a capacity which most contractors don’t have.
Sources said the chaos that has rocked the tobacco industry could spell doom for contract producers and the marketing system the government intends to launch.
TGT vice chairman Thomas Nherera this week said contract buying has not yet started because of logistical problems on how the system would work.
“There was a serious underestimation on the requirements of the new system from the onset,” Nherera said.
“Preparations for setting up the system is taking more time than anticipated. The delay has created a lot of anxiety on the part of farmers since they are stuck with their crop while their neighbours selling on auctions have already sold their crop. However, the contractors are still required to meet their farmers’ needs.”
Nherera said contractors on Tuesday were locked up in meetings with the Reserve Bank of Zimbabwe drafting details of how the system could work in the same manner as the auctions.
“RBZ is currently putting in place payments systems that would ensure that the money is disbursed with the same efficiency as the auctions but this will take much time since it’s a new setup,” he said.
All contractors confirmed to the Independent that they had not started buying tobacco because of logistical problems caused by the MoU. They however said they were in negotiations with government to plug the loopholes in the MoU. They expect to start buying the crop in the next two weeks.
TGT general manager Arnold Jaure said some of the demands of the MoU such as 100% support to farmers were only theoretical since farmers had to show some commitment and expertise by investing in their projects.
“Most contractors could commit themselves to support a farmer if he had shown commitment in tobacco production,” Jaure said.
“Commitment was shown in various ways including having seed-beds and land preparation.”
Sources in the industry said some contractors might not buy any crop this year because they had not met their contractual obligations.
“Wedzera Petroleum and FSI Agricom have ruled out buying tobacco this year despite the fact that they had partly supported the farmers,” sources said.
“The companies could not support the farmers 100% either because they secured the MoU well after the season had started or could not raise the forex for deposit.”
Contractors were expected to start purchasing tobacco on April 1, a day after the opening of the auction floors. Contract tobacco purchasing had to be delayed for a day so that prices could tally.
Meanwhile, the future of the current crop remains uncertain.