Tobacco season to improve liquidity

Government sees revenue streams improving going forward buoyed by tobacco sales and improved tax collections in the second quarter of the year.

Staff Writer

This comes after the 2014 tobacco marketing season officially started on Wednesday this week with an opening price of US$4,85 per kilogramme of the golden leaf.

A total 180 million kilogrammes are seen coming to the country’s three auction floors – Tobacco Sales Floor, Boka and Premier – as the sector continues on a growth trajectory.

Last year, farmers failed to meet a target of 170 million kg with only 166 million kg being delivered.

Government has now pinned its hopes on the tobacco season and improved revenue collections in the second quarter of the year.
Traditionally, government’s revenue collections improve in the second quarter of the year, a government official said.

Analysts see tobacco sales improving the liquidity situation in the country in the short-term and stimulating the economy.

Consumer spending, a key indicator to economic activity, could improve in the short-term, an upside for an economy desperately in need of a stimulus plan.

The season comes against a background of massive liquidity constraints.

Consumer spending is considered to be one of the most important determinants of short-term demand in an economy.

About 50% of the population now depends on tobacco earnings and accounts for around 20% of gross domestic product. The sector account for 40% of exports and supplies 63% of raw materials for agro-industries.

More than 88 000 growers were registered compared to about 65 444 who had registered in the same period last year.

This means there were about 26 816 new growers. TIMB licenced three auction floors, 20 companies as “A” class or auction floor buyers and 15 contractors for this year’s marketing season.

These were Tobacco Sales Floor, Boka Tobacco Auction Floor and Premier Tobacco Auction.

One company has been licensed as a sole buyer of burley tobacco.