By Almot Maqolo
After gold, tobacco is the country’s second-largest source of foreign exchange earnings; the two biggest markets for the golden leaf are China and South Africa. The United Arab Emirates, Indonesia, and Belgium are some of Zimbabwe’s other major exporters of tobacco that has been flue-cured. The crop is primarily grown under a contract system, in which buyers give farmers the inputs they need to grow tobacco. Although the nation is the continent’s top producer of tobacco, only 2% of the crop is used locally; the remainder is exported in its unprocessed form.
It is impossible to overstate how important value addition is to Zimbabwean tobacco. It is unacceptable to ship tobacco that is 98% raw. By allowing the export of unprocessed tobacco, the nation suffers greatly. Therefore, the government must equip local businesses to add value. According to the industry regulator, sales may take place every Wednesday until all farmers have finished harvesting. Since the beginning of the selling season this year, at least 205,889,638 kilograms of tobacco worth US$629,440,097 have been sold at auction and contract floors in the nation.
It’s interesting to observe that 2022 auction sales have outpaced 2021 sales by more than 10,000 kg, a sign that farmers are gradually becoming self-sufficient rather than solely dependent on contracts. It might also be a sign that farmers are now choosing the auction method over the contract system. It has been proposed that it might be a warning sign for an increase in side-marketing. Tobacco production is a key economic activity for small-scale farmers.
The small-scale tobacco growers at its core are dependent on contract programs since they are unable to fund themselves. In theory, these programs should lessen producers’ exposure to price risk and increase their access to capital, but their dependence on them really has the opposite effect. The predatory contract methods may result in low margins, and in the worst circumstances, they may trap the farmers in debt. This could serve as a wake-up call for contractors to re-examine their pricing regime and input pricing methodology, both of which have been shown to be unfavorable and have resulted in some organizations charging up to 150% for working capital and inputs. As a result, the majority of contracted farmers are mired in unmanageable debt.
The fact that the contract sales are 4.16% lower than they were a year ago suggests that the nation actually harvested the same crop. Despite the difficulties farmers have endured this season, this is quite admirable and necessitates their full support to ensure that there is no drowsiness. The 300 million kg target by 2025 will be easily attainable at this rate. Boosting value addition from the present 2% to 30% is one of the goals of the Tobacco Value Chain
Transformation strategy 2021–25. T
his will be possible if the government increases local funding (one of the goals of the strategy) and releases money as soon as possible. Government officials and other industry participants should encourage the decision of one of the locally owned businesses to build a processing facility since it will increase the local beneficiation of our tobacco. By doing this, we will be able to achieve our goal of increasing the country’s value addition to over 30% by 2025. Additionally, the benefit will see a boost in foreign currency inflows.
With over 64% of contract sales taking place in the capital, Harare continues to control a large portion of the market despite efforts to centralize the tobacco floors. Marondera and Mvurwi are nearly tied for first place with 7% and 8% of the sales, while Karoi is in second place with 14% of the sales. Bindura controls 1%, while Rusape controls 5%.
