HomeBusiness DigestFinance constraints hamper tobacco industry revival

Finance constraints hamper tobacco industry revival

FINANCIAL constraints are a hurdle to the revival of the tobacco industry, where output  plummeted in the last seven years.

There are serious liquidity problems with financial institutions struggling to raise funds, not only for the support of the agriculture sector, but for all the sectors of the economy.

Zimbabwe is targeting a total 65 000 hectares for tobacco cropping which could translate to around 80 000 tonnes at an average yield rate of 1 330 kilogrammes a hectare.

Tobacco Industry and Marketing Board chief executive officer Andrew Matibiri confirmed that they were targeting 65 000 hectares which would be a slight improvement on the 48 000 hectares planted last season.

“We are targeting a total of 65 000 tonnes and right now preparations are underway,” Matibiri said. “Planting of the crop would start in mid October and that is when we would be able to tell what area is under the crop.”

Tobacco farmers used to rely on loans from financial institution, but they now have to use own resources or enter into contract farming.

Part of the crop is now being financed under contract farming and more than half of the tobacco sold this year was through that mode.

Past president of the Zimbabwe Association of Tobacco Growers, Julius Ngorima, said the financing of this year’s crop was still hazy.

“As tobacco farmers we are told that we can get loans from the banks, but what is surprising is that we are not being told which financial institutions would give us the loans,” he said. “What is happening is that we are going to rely on the contractor for the bulk of this year’s crop.”

Ngorima said it was only a fortnight before the start of the planting season yet farmers were to get full details as to which financial institutions would support them.

Contractors still get value for their investment in the tobacco industry because there are tight regulations pertaining to the sale of the crop.

Tobacco produced in the country has to be sold at the three auction floors or to the contractor and this has completely eliminated side marketing which has wiped away investments in other crops, especially cotton.

However, contract farming should complement other avenues of financing in the agriculture sector.

Analysts in the tobacco industry said the contractors’ role would have been more pronounced if there were other players supporting the growing of the crop.

The analysts said in the absence of support from the financial sector, it would take longer before the tobacco industry rebounds to the levels of 260 000 tonnes as was the case in 1998.

Ngorima said though the average selling prices during the just ended selling season were slightly lower than the preceding season, there were growers who had abandoned the crop who were now growing it because of the pull of a stable currency.

Tobacco farmers were put off by prices which were being offered at the auction floors especially after 2002.

There were problems as farmers were offered local currency for the crop yet it was auctioned in hard currency.

At times there were clashes over what exchange rate should be used for the crop that was delivered and this saw farmers either holding on to their crop or venturing into other crops they could directly export.

Conflicts over policies and the disruptions of the farms saw a sharp decline in tobacco production and Zimbabwe lost its position as the largest producer of the crop on the continent.

Tobacco, at its peak production levels, accounted for more than 50% of total agricultural exports, which was 30 percent of the country’s total exports. Export receipts from the crop ranged between US$270 million and US$593, when the crop was on its peak.

Tobacco production in the country surged from around 125 000 tonnes in 1980 to a peak of 260 tonnes in 1998.

There was also an improvement in terms of yield per hectare, rising from 1 951,6 kg per hectare in 1980 to 2 626 kg per hectare in 1998.

Yield per hectare has been above 2 000 kg since 1983 but there has been massive reversal of this as it has dropped ton 1 500 kg per hectare in 2003.

During the 2008/9 tobacco season, a total of 48 000 hectares was under the crop with a total yield of 64 000 tonnes which translate to 1 330 kg per hectare.

The crop also accounted for close to 10 percent of the country’s gross domestic product. Tobacco production also generated employment of up 117 000 long term jobs and around 100 000 seasonal hirings.

An estimated additional 30 000 were employed in research, marketing, service and manufacture.

Leonard Makombe

Recent Posts

Stories you will enjoy

Recommended reading