Zimbabwe: Tobacco Stakeholders Prepare for Selling Season

Source from:  The Herald (Harare) 4 March 2008 03/05/2008

STAKEHOLDERS in the tobacco sector have begun making preparations ahead of the 2008 tobacco-selling season set for next month. The stakeholders discussed a number of issues that related to the delivery and sale of tobacco and also agreed a tentative date for the start of the selling season. Tobacco Industry Marketing Board chief executive Dr Andrew Matibiri confirmed that a date for the official opening had been set although he declined to give detail as the date still had to be confirmed by the TIMB board. The stakeholders pointed a number of sticky issues that have to be addressed before the start of the season to ensure a smooth flow of the season. A shortage of wrapping paper last year led to the temporary suspension of tobacco deliveries to the auction floors. The paper was readily available on the parallel market at very high prices, and most farmers failed to gain access. It took the injection of about US$167 000 by Government through the Reserve Bank to salvage the situation. Dr Matibiri said the stakeholders had agreed that representations should be made to the Reserve Bank for foreign currency provisions to be made for the sourcing of the material ahead of the start of the new season. In addition the stakeholders also voiced concern about their outstanding foreign currency payments under the Foreign Currency Retention facility. Some tobacco farmers who spoke to the Herald Business have threatened that they would not deliver their tobacco if the RBZ fails to honour out-standing foreign currency -- denominated debt. Central bank governor, Dr Gideon Gono had indicated in his mid-year monetary policy in October last year that all outstanding payments would be paid before the end of October. The stakeholders also raised the issue of the exchange rate, which they wanted to be revised so as to cover them from loses incurred due to ever increasing costs. Farmers noted that the costs of producing a tobacco crop had risen drastically with at least $40 billion now required to grow tobacco per hectare. Dr Matibiri said stakeholders wanted a price that was reflective of such changes in production costs and they were also approaching Government on the issue. The official opening of the tobacco-selling season has in recent years been littered with hiccups and false starts stemming from the producer price and exchange rate. During the past two years the Government has had to intervene to enable the season to progress as farmers have now developed a tendency to withhold their tobacco during the first few days of the season. In the last season farmers demanded the review of the exchange rate applying then of US$1 to $250 and the reinstatement of the foreign currency retention facility. The exchange rate was subsequently moved to US$1 to $3 000, which the farmers believe is still low. Last season's impasse took the effort of two ministers and the Reserve Bank governor, the then acting minister of Finance, Mr Patrick Chinamasa, the minister of Agriculture, Mr Rugare Gumbo and Dr Gideon Gono to persuade the farmers to deliver their crop. The impasse was resolved after Government announced a support price for the farmers and that they would also retain 20 percent of their foreign currency. Government initially pegged its support price at $40 000, calculated on a pro-rata basis benchmarked at US$1,50 per kg, which was increased to $55 000 per kg towards the end of the season. A total of $5,217 trillion in Government support price had paid out to the growers in December. Enditem