Zimbabwe: RBZ Mulls Special FCA Scheme for Tobacco

Source from:  Zimbabwe Standard (Harare) June 18, 2006 06/20/2006

THE Reserve Bank of Zimbabwe has announced that it will introduce the Foreign Currency Accounts scheme for tobacco farmers a move that they may come a little too late for an industry already battered by viability challenges. The scheme will be the first of its kind for an industry, which says past experience has taught them cynicism. RBZ Governor, Dr Gideon Gono, told farmers that the introduction of FCAs has been pegged for the 2006/7 season. "We will in the next season reinstate the FCA scheme. I am not at liberty to say at what proportion it will be done. All I can say is it will be sufficient to be able to cushion yourselves from the vagaries of distortions. Custody of funds will be left to bankers who will look after FCAs for growers," Gono told farmers at an AGM held by the Zimbabwe Tobacco Association last week. His announcement could as well have been inaudible to farmers who were crying foul over the operational environment, which they said, had wrestled control of the industry from market forces to a government that ignores their success factors. Outgoing ZTA president, James de la Fargue said their "cynicism was backed by raw experience" and added that the future of the industry can only be guaranteed by tackling grower issues linked to confidence-building and land ownership. "The process -- our destiny ...is now in the hands of the authorities, initially the Ministry of Agriculture, then the RBZ, now NERC and taskforces. Our influence over decisions that affect our future is limited and while it stays like that, any growth will be hampered. We cannot talk about crop size unless we tackle grower issues," De la Fargue said. He said the exchange rate differentials coupled with subsidies were creating an undesirable dependence syndrome among farmers who still had to contend with a mismatch between production costs and revenue. "Growers have become debt junkies -- the tough weaning off process lies ahead and quick changes in policy could make this adjustment brutal. With input pricing at rates now over of 300 000: 1, the tobacco framework is starting to show the same cracks as its predecessor last year. If this goes unchecked, the downward trend in production will continue. Any viability gap through exchange rate differential will need to be filled by ASPEF - this only perpetuates the dependency syndrome," said the outgoing president. ASPEF is the Agriculture Sector Productivity Enhancement Facility introduced to enable farmers to access concessionary funding at rates of 20 %. Production declined to 50 million kg this season from the previous season's 73 million kg and so far 16.7 million kg have been sold. Prices peaked to US$1,85 compared last season's peak of US$1,21. However, the high prices have not given farmers any reason to smile with some predicting worse to come. A farmer, who declined identification said: "I started farming 60 years ago and I have never been as worried as I am now. I am not a cry-baby but I am in a worse off position now. Times are changing so fast and with inflation going mad production costs for the next season will be so horrendous. Our worry is: Is there enough funding for ASPEF and will it be timeous? Banks are charging 700 % interest and if nothing is done by this time next year we will be holding a wake for the industry." Enditem