Zimbabwe could be losing out on at least US$ 5 billion annually on account of exporting raw tobacco, missing out on the lucrative global cigarette manufacturing market, experts have said ahead of the tobacco marketing season expected to be open on the 21st of March.
Zimbabwe is now Africa’s biggest producer of tobacco following last year’s record output, but owing to multiple manufacturing bottlenecks, the bulk of its produce is exported in raw form.
Business and economic analyst, Victor Bhoroma believes the country stands to rake in more foreign currency if it crafts policies that incentivize value addition while suppressing appetite for exporting raw commodities.
“The average export price for raw tobacco from Zimbabwe was $4.85/kg in 2018 while the average price for cigarettes was $32/kg. By exporting the same amount of kgs (after factoring in weight losses inmanufacturing), Zimbabwe could have realized $5.8 billion in one year. Zimbabwe exports raw tobacco to China, South Africa, UK, UAE, Belgium, New Zealand and Turkey which proceed to manufacture billions of cigarette sticks and export them at higher values under renowned brand names such as Marlboro, Camel, Davidoff, Newport and Dunhill,” said Bhoroma.
According to global tobacco giant, British American Tobacco (BAT), the global tobacco market is worth approximately US$ 760 billion (excluding China) while, US$ 680 billion of this comes from the sale of conventional cigarettes, further showing that cigarette manufacturers are the biggest winners along the tobacco value chain.
However, value addition of tobacco faces several challenges such as weak policy frameworks, market size, capital constraints, cumbersome export processes and a volatile business operating environment.
“The Zimbabwean market is relatively small in terms of cigarette consumption and consumers lack the necessary buying power due to economic downturn. As such export oriented production should be our priority focus as a country,” added Bhoroma.
Tobacco remains the country’s biggest cash crop and since Government liberalized its production, 80 percent of the total output now comes from approximately 171 000 small holder farmers across the country.
In 2018, Zimbabwe produced a record 252.6 million kgs of tobacco, raking US$ 892 million in export receipts of 184 million kgs of the commodity to the world market, but observers say the figures could be more if the commodity was value added.
The same year raw tobacco from Zimbabwe was pegged at US$ 4.85 per kg while average price for cigarettes stood at US$ 32 per kg, building a strong case for value addition of the golden leaf to augment profits.