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Savanna Tobacco beating the odds

WITH Zimbabwe struggling to survive isolation, thriving cigarette manufacturer, Savanna Tobacco Company potrays a picture of the success of the country’s empowerment policies.

Report  by Revolution Media

 
Everyday, more than 1000 casual workers carrying thousands of cigarette sticks fan out across cities and towns in Zimbabwe on sponsored bicycles. The initiative is part of the Savanna Tobacco Company’s vendor capacitating project aimed at facilitating employment creation. Each bicycle has the capacity to carry 10 000 cigarette sticks and, in the process, empower previously unemployed people to earn a sustainable income through distribution of cigarettes to vendors who sell them in the various towns and cities in Zimbabwe.

 
In theory, initiatives such as these would have been unthinkable a mere decade ago when a somewhat cloistered elite of mainly white industry players and farmers held the purse strings to the tobacco farming and cigarette manufacturing industry. These days the total national tobacco output may be below its peak of 2000 when the crop hit 237 million kilogrammes, but Tendai Murisa, a researcher who has studied tobacco farming since Zimbabwe’s land reform, reckons production figures miss a crucial point. “No one ever argued that this is a more productive form of farming. But does it share wealth more equitably? Does it give people a sense of dignity and ownership? Those things have value, too.”

 
The point has been well taken, and Savanna has modelled its empowerment strategy and growth ambitions on a world class African tobacco manufacturing company that has earned it accolades and, lately, drawn the attention of the prestigious title, Forbes Africa magazine. In its September edition, Forbes noted that Savanna had skilfully navigated the currency crisis in Zimbabwe with grit by 2008/2009, having “grabbed the largest share of the Zimbabwean market and importing new and specialised equipment.” Two years earlier the company, Forbes acknowledged, won both bronze and silver at an international brand competition.

 
The simple fact of the matter is that when Savanna Tobacco struck out at the market from a paltry threshing operation on the outskirts of Harare a decade ago, few imagined a successful enterprise fanning across cities and towns of Zimbabwe and into neighbouring markets in the region and internationally. It was even harder to imagine in a context of massive trade imbalances, haemorrhaging interest rates and hyperinflation on the back of a beleaguered currency, so much so that critics of the country’s indigenisation policy were tempted to find explanations for the spectacular success of Zimbabwe’s tobacco manufacturing output in illegal cigarettes. After all, the state of the Zimbabwean economy at the outset of the government’s indigenisation drive was hardly a postcard image of optimism.

 
Yet the tobacco sector has been anything but beleaguered. True, small farmers do not produce yields that match those of white farmers whose land they were given. But in recent years many black tobacco farmers have been doing a brisk trade with indigenised cigarette manufacturers like Savanna. Formed in 2002 when Savanna purchased the Harare threshing plant, reconditioned plant machinery and started processing and packaging cigarette stems and selling them to a number of cigarette factories around the world, the company has become an emblem and harbinger of economic transformation and indigenisation. Having evolved over the past 10 years into a significant producer of tobacco products and brands in Zimbabwe, increasing its average monthly output from 3 000 master cartons in 2004 to between 35 000 and 40 000 master cartons per month, the spin-offs for communities and workers have been considerable.

 
Within the first two years of operation, the company had sold more than three million kilogrammes of farm stems. By this time the directors of Savanna had already identified an opportunity to add value to Zimbabwean tobacco by manufacturing quality cigarettes for the export market.

 
Until last year Savanna Tobacco was the only cigarette company in Zimbabwe financing small-scale farmers to grow burley tobacco, a much-needed component for American blended cigarettes.
For a while, the tobacco success story led some of the most virulent sceptics of indigenisation to reassess the legacy of Zimbabwe’s policies. To put this in historical perspective, when Savanna Tobacco entered the tobacco sector, a single market  player dominated the industry, along with a few select farmers. Savanna’s factory was staffed by six South African technicians and about 60 Zimbabweans.

 

 

To date, the expatriates have all except one, been replaced by locals and the total staff complement stands at 185 permanent employees. Since 2008, Savanna Tobacco has been integrally involved in contract farming, with the introduction of the Savanna Tobacco Contract Growing Scheme benefitting many families in rural and farming communities. Farmers in Nyamaropa, Burma Valley, Centenary and Honde Valley have dramatically and positively changed their livelihoods through assistance from Savanna.

 
Today, with stubborn optimism and entrepreneurial swagger, almost 50 000 Zimbabwean farmers and their families are benefitting from the industry compared to 4 500 mainly white farmers in 2000. The increase in the number of farmers is a result of the increase in the number of small scale farmers who were beneficiaries of the land reform programme. Most had no tobacco farming experience, yet managed to produce a hefty crop, rebounding from a low of 48 million kilogrammes in 2008 to more than 150 million kilogrammes this year.

 
However, the worry now is not whether empowered companies can succeed but whether their practical commitments to Zimbabwe’s growth and development can be sustained in a currency crisis.
On the balance sheet of debacles, that’s not hyperbolic repartee. According to some analysts, small-scale  businesses and tobacco farmers face an uphill battle as the country’s currency woes cut off a vital source of liquidity to strategic sectors such as tobacco.

 
That’s understandable in a country confronting trade imbalances and high poverty levels. But those aren’t answers that satisfy a glut of small businesses and empowered companies. For them, the big issue, beyond the cacophony of multinational corporations, is an indigenisation programme, the ingenuity and determination which is being challenged. At issue is the egalitarian promise held out by the government’s indigenisation policy that’s required a far-reaching reorientation: in corporate ownership, management and employment levels. In part, the problem seems to have spread from a liquidity crunch to false perceptions that indigenisation has failed.

 
And that’s the all-important point. At a time when the success of companies such as Savanna is starting to positively impact on the country’s unequal legacy, a liquidity crisis threatens to reverse the gains of the last decade.

 
If that’s true, the overriding question, then, is whether a resolution of the problem can be managed with minimal collateral damage to indigenised businesses and jobs. A long-range, balanced perspective is never easy in an economy hobbled by an uneasy legacy fraught with old obstacles and new challenges.

 
The bottom line is this: For the majority of Zimbabweans disadvantaged by a legacy of deprivation, the most significant fact of indigenisation is the advent of locally-owned companies such as Savanna in growth sectors such as tobacco farming and manufacturing and an economically functional small business sector and labour market.

 
Indigenisation remains a net plus for Zimbabwe and neighbouring economies. To adapt the aphorism of Western financial gurus, Zimbabwe’s indigenisation programme is too big to fail.

 

 
And that’s not a theoretical abstraction. For the 1000 casual workers employed by Savanna delivering cigarette sticks on bicycles everyday, it is the difference between dignity and deprivation.

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