Cash Strapped Zimbabwe Struggles to Pay Tobacco Farmers

Source from:  The Africa Report 04/25/2017

Tobacco Farmers in Zimbabwe are demanding their money after weeks of payment delays as the country continues to experience a cash shortage.

Small scale farmers have been camping at various tobacco auction houses in the capital, Harare waiting for cheques and even staged a demonstration last month in protest of payment delays.

Cash shortages in recent months have forced banks to impose daily maximum withdrawals for most Zimbabweans of sometimes as little as 50 US dollars per day.

At the start of the annual tobacco auctions in Harare last month, Agriculture Minister, Joseph Made told farmers that they would be allowed to withdraw 1,000 US dollars from banks per day to allow them purchase farming inputs for next season.

"I have been for coming here for three weeks and even spent Easter holiday here and there is still no money. I sold my tobacco and was given a voucher which means my payment should have been processed by now. I don't understand why I have to still wait for another 72 hours to get my money," said Rejoice Horona, a tobacco farmer.

"We were not expecting our money in bond notes only, but half in bond notes and the other half in US dollars. Also we are expecting all our payments in full as per tradition and we ask the minister responsible to intervene. We also understand that the buyers have poured in money and we wonder why we cannot get paid. Where is it?" said another farmer, Abel Dinha.

Zimbabwe is expected to produce 205 million kgs of tobacco this year, slightly more than in 2016, and sales of its main export were expected to improve dollar supplies in the cash-strapped economy.

Farmers adjusting to new system

Buyers had borrowed 700 million US dollars offshore to purchase the crop from farmers.

The merchants process the leaf before exporting it, mostly to China, the largest investor in the Southern African country.

The Boka Auction Floor operations manager, Moses Bias, says farmers are not receiving their payment on time because most don't understand new government regulations on processing their funds.

"If you look back, before framers did not have bank accounts, they would come in, sell their tobacco and we would give them a cheque voucher which they would then go to the bank and present to the bank and then they would get all the cash out and now it's a different story now and for them to try and adjust from the old system to the new system. I think there is an acceptance issue which is there now, and farmers thinking maybe if they just come in without banking details maybe the auction floors would change their mind and try and pay them in cash, of which would then go beyond the rules and regulations for the reserve bank of Zimbabwe."

Tobacco is Zimbabwe's single largest export commodity, ahead of platinum and gold.

Official statistics indicate that over 50 million US dollars has so far been traded in tobacco sales but farmers are worried that they may not have enough time to prepare for the next season if they don't get their money in good time.

Zimbabwe introduced a 'bond notes' currency last year to ease the cash shortages.

The country abandoned its own hyperinflation-hit currency in 2009 in favour of the U.S. dollar, but a widening trade deficit, lack of foreign investment and a decline in remittances by Zimbabweans abroad have helped to fuel foreign currency shortages. Enditem