Govt Urged to Play Leading Role in Financing Tobacco Industry

Source from:  All-Africa.com Financial Gazette (Harare) 05/08/2004

PLAYERS in the tobacco industry have urged the government to finance the golden leaf instead of relying on the recently introduced contract farming, which is still mired in controversy. The president of the Zimbabwe Commercial Farmers' Union (ZFCU), Davidson Mugabe, said although tobacco farmers got a major reprieve following the unveiling of a new marketing price similar to that extended to local exporters, they would hardly recover this season as the crop's financing was in shambles. "We are not sure when the contractors will come forward again because we have not seen any of them entering into any tangible commitment this season," Mugabe said. "What the industry requires is a basic crop that is financed by the state from as early as the seedbed stage. The farmers will not recover in these two seasons despite the new incentives." Tobacco output has nose-dived during the past three years due to a myriad of viability problems. Seventy-five percent of tobacco farmers' earnings are paid using the auction floor rate of $5 200 to the greenback and 25 percent paid at $824.They also enjoy a support price of $750 per kg from the government. The latest figures from the Tobacco Industry and Marketing Board (TIMB) reveal that the mass of tobacco sold through contract buying is far much less than tobacco sold on the open auction floors. According to TIMB, 4 332 665 kg of tobacco went through the hammer at the auction rate compared to 137 081 kg sold under contract buying on the 19th day of tobacco sales since the opening of the selling season. The TIMB has also noted that the last contract sales were held on April 27. Most of the merchants are failing to secure foreign currency and offshore lines of credit for tobacco purchases despite the fact that growers had already signed binding agreements with the buyers. The tobacco merchants (contractors) are under obligation to purchase the grower's entire production. Tobacco crop output is expected to be about 61 million kgs. Farmers have also expressed concern over the price of tobacco, which is still very low if compared to the 2003 price. Last year, the auction floors closed at a selling price of US$2.25 per kg. Currently, a kilogramme of the golden leaf is fetching US$1.88. Enditem