Zimbabwe Tobacco Earnings Down as Crisis Continues

Source from:  Reuters 07 September 2006 09/08/2006

Zimbabwe's annual tobacco sales end tomorrow with foreign currency earnings down 11%, shattering quick recovery prospects in a country fighting a deep recession linked to a plunge in the key agriculture sector. Tobacco exports used to be the major source of foreign exchange, but have been replaced by gold as sales of the crop steadily dropped from 236-million kgs in 2000, a trend blamed partly on President Robert Mugabe's controversial land reforms. Industry officials today saw the southern African nation facing another drop in gold leaf production next year after a disastrous season this year that saw tobacco output falling by 2% to 53-million kilograms, the lowest in decades. "We were unable to reverse the decline seen since 2001 and there are worries that preparations for 2006/7 indicate that production could fall further," said Stanley Mutepfa, the general manager of Tobacco Industry and Marketing Board. Zimbabwe has grappled with 8 years of recession widely blamed on official incompetence, with shortages of fuel and foreign exchange compounding problems in the farming sector. Record high inflation has pushed production costs beyond most farmers, some of whom have benefited from Mugabe's land seizures but are unable to secure bank loans because they do not have collateral. "The selling prices were ok this season but our cry is that the inputs are too expensive because they are priced using parallel market rates," said Tongai Mandeya after selling the last of his crop at a Harare tobacco auction floor today. The central bank in July devalued the local dollar by 60% and reintroduced foreign currency accounts for farmers where they would retain 15% of earnings in hard cash. Farmers said the official rate of $1:250 Zimbabwe dollars was about 3 times less than the black market price while costs have soared more than 20 times since September last year. "In the short term we will probably go down but the central bank incentives which come into effect next year will have a bearing on the 2008 crop," said Rodney Ambrose, CE of Zimbabwe Tobacco Association. He said 9 000 small-scale members had quit tobacco farming in the last year due to spiralling production costs. Zimbabwe has not received balance of payment support since 1999 over policy differences with international lenders, hitting an economy which Mugabe argues has been sabotaged by Western countries opposed to his drive to seize white-owned farmland. Enditem