The cost of contract farming is hitting hard on the country’s tobacco earnings, with 40 percent of cash receivables returned to external financiers trimming the sector contribution to the economy, 263Chat Business has established.
This was revealed by Tobacco Industry Marketing Board (TIMB), CEO Andrew Matibiri today while giving oral evidence on the state of the tobacco industry before the Parliamentary Portfolio Committee on Lands and Agriculture.
Matibiri said financiers take 40 percent of raw tobacco as repayment for their assistance to growers in financing production inputs.
Asked by the Committee Chair, Justice Wadyajena if the country was returning 40 percent of the total tobacco earnings to external financiers based on evidence he earlier made, Matibiri said, “If put like that, that’s very correct,”
“Our biggest contractor in tobacco borrows from Hong Kong 100 percent foreign currency for inputs to growers and as farmers sell, they recover it in form of tobacco they export. So in other words we don’t get the full value of our exports. Some of our tobacco is used to repay the loans,” he said.
He said his judgment is informed by a study they did with Tobacco Associations.
The development exposes the disenfranchisement of the country’s total output as the raw tobacco can further be value added by the financiers at a far greater profit.
This means Zimbabwe could have returned US$ 296 million (40%) to externally out of its US$ 741 million worth of export tobacco, and only receiving US$ 445 million.
This has raised concerns over the tobacco industry cost structure and the exact contribution the sector yields to the economy.
“We exported US$ 741 million last year. I estimate about US$ 250 million would have been used to repay outside loans,” Matibiri added.
Finance came in form of buying inputs like fertilizers, chemicals and insecticides among other items.
However, Matibiri said this year the country performed better than earlier anticipated following erratic rainfall which affected the quality and quantity of the crop.
Mid-season, there were fears that output would be seriously depleted as compared to last year but the late stages of the marketing season has seen quantities gaining and prices also firming.
As at the 19th of July, 233.6 million kg had been sold at an average price of US$ 1.97 per kg, a 33 percent decrease from last year’s average price of US$ 2.92 per kg.
The country now expects to reach 245 million kg of tobacco, a slight fall from the 253 million recorded last year.
