HomeBusiness DigestZimbabwe’s tobacco industry continues to grow

Zimbabwe’s tobacco industry continues to grow

Zimbabwe’s tobacco industry continues to grow in leaps and bounds.

Collins Rudzuna

Although trading is still underway, statistics from the auction floors show that the 2014 crop is already more than what was achieved last year.

Statistics released by the Tobacco Industry Marketing Board (TIMB) show that after 68 weeks of trading, 173 million kilograms of tobacco have been traded.

That figure is an improvement of 31% from the 132 million kilogrammes that had been traded in the same period last year. More notably, it is also above last year’s season total of 156 million kilogrammes.

It has always been acknowledged the industry’s growth can to a large extent be attributed to the increased number of participants.

It is reported that in 2013 a total of 75,000 farmers delivered tobacco to auction floors. That is a significant increase from the 5,000 odd farmers that delivered tobacco before the land resettlement programme which paved way for wider participation.

Wider inclusion of participants is in itself a laudable development. The contentious political circumstances surrounding it aside, it represents one of the areas where people have been able to become self-employed in a gainful way. But this emancipation comes at a cost.

A cost which some argue far outweighs the benefits thereof.

Land reform changed Zimbabwe’s commercial farming landscape from one dominated by a handful of farmers with vast tracts of land to one where much smaller pieces of land were pieced out to smaller operators.

Where big operators had relied on hired labour and mechanised operations, today’s tobacco industry is characterised by small scale farmers, often relying on family labour and simpler technology.

The challenge with this model is that it is less efficient and loses some of the economies of scale that made the yesteryear model work which, at face value, is not a problem.

Most new farmers seem content with their lot. Many of them come from a peasant background or were themselves labourers on the pre-reform farms.

Their financial position has improved greatly.

Concern has however been raised on whether the new model is sustainable.

Those that are in favour say it is and point to the great leaps in volumes since 2008’s low of 48 million kilograms to last year’s 156 million kilograms as testimony.

Naysayers have however pointed out that while the jump in absolute figures is astounding, it is more the result of increased headcount in the participants than anything else.

Yields per hectare have reportedly dwindled. Crop quality has deteriorated as evidenced by the low prices that new farmers are always crying about. Farming standards, which are a necessity in tobacco because of its high proneness to disease, are reportedly being compromised by underfunded farmers eager to cut corners and turn a quick buck. The criticisms are many.

New farmers themselves have thrown in criticisms of their own at other industry participants. The banks have been accused of being discriminatory for not wanting to extent credit.

Before land reform farmers often relied on banks to provide working capital and funding for purchase of tractors and other necessary machinery. Banks have hit back, pointing out that the new land tenure system is not conducive to collateral based lending.

New farmers have, most recently, accused auctioneers of rigging the buying process and giving them unfairly low prices.

Acoording to disgruntled farmers, cartels of unscrupulous buyers operate at auction floor, artificially depressing prices. Buyers in turn say the quality of tobacco has gone down significantly, hence the low prices.

Whoever is right between the farmers and their industry peers, it is clear that there is urgent need for the concerns in the industry to be addressed. Government needs to devise a land tenure model which allows banks to hold some form of collateral against which they can lend. Without proper funding new tobacco farmers are doomed to remain small in scale and scope. Additionally, there is need for proper training.

While yesteryear farmers relied on trained management personnel and experienced workers, new farmers are typically self-taught and with little technical support.

Extension workers are available but the ratio between extension workers and farmers is so desperate that many cannot even access the service. Moreover the extension workers are often underfunded and unable to offer top notch service.

Contract farming has been suggested as a workable solution to the problems dogging the sector. The model is such that tobacco buyers provide farmers with technical and material support and in return are guaranteed access to the crop.

It solves the problem of funding because contractors themselves can access bank loans and on-lend them in the form of inputs. It also takes care of quality concerns because contractors will have their own men on the ground providing technical expertise.

The problem with the model of course comes at the marketing stage.

Farmers who are using this model have complained that contractors offer unfair prices because they have exclusive rights to purchase the crop.

Contractors themselves often complain that farmers are engaged in ‘side marketing’, the selling of contracted crop to third parties.
The solution may lie in making contracting supervised by government authorities.

Standards of practice can be established and where disputes still arise a technically competent ombudsman can be appointed to mediate.

Tobacco remains one of the few sectors showing robust growth, but if certain fundamentals are not taken care of then there is danger of all the gains made thus far being undone.

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