Zimbabwe Hit by Tobacco Sales Crisis

Source from:  By Lebo Nkatazo 04/25/2007 05/17/2007

ZIMBABWEAN officials on Tuesday said they needed seven more days to come up with new tobacco prices as the annual selling season for the crop opened on a low note. Farmers met Reserve Bank governor Gideon Gono and Agriculture Minister Rugare Gumbo trying to resolve an impending crisis with many tobacco growers withholding their crop pressing for improved prices. "The governor and the minister said they would announce a new package in due course. I presume that they meant a week," said Zimbabwe Tobacco Association vice president, Andrew Ferreira. He added that farmers were selling at last year's prices and they had been assured their money would be topped-up with the difference when the government settles on a price. Ferreira added: "Farmers have started delivering. On a positive note, the government has increased the foreign currency retention for farmers from 15 percent to 20 percent." There was no indication that the exchange rate would be adjusted from the current US$1 to Z$250, which has been a sticking point in the ongoing price dispute, Ferreira said. On the thriving black market, the US dollar can fetch up of Zim$14 000 but the government refuses to devalue. "They did not mention anything to do with the exchange rate," he told New Zimbabwe.com. The annual opening of the tobacco auction floors hung in the balance on Monday after Gumbo failed to get government approval for the new prices on the same day. Tobacco farmers had gathered at a Harare hotel waiting for Gumbo to clear up the dispute over pricing and and other incentives, but the minister staged a no-show, raising fears that the tobacco selling season could be delayed. Tobacco used to be Zimbabwe's biggest foreign currency earner, but deliveries have slowed in recent years following disruptions on commercial farms by government-backed peasants and veterans of the independence war. Gold is now the country's main foreign currency earner. The Zimbabwe Tobacco Industry and Marketing Board (TIMB) last year said the deliveries had fallen to 50 million kgs from 74 million kgs in 2005, a multi-year low from the 2000 levels of 236 million kgs. Foreign currency earnings from tobacco fell 14 percent to $118.2 million in 2005 as a result of both low tobacco leaf prices and output. Enditem