Zimbabwe Tobacco Sector Chokes From Land Reform

Source from:  Financial Gazette (Harare), July 29, 2004 07/30/2004

ZIMBABWE requires five years to restore the tobacco industry to its former glory, analysts say. Industry players said the tobacco sector, Zimbabwe's one-time principal foreign currency earner which has fallen behind mining, had been hammered almost beyond repair. International investors have now shifted their attention to nascent regional tobacco-growing competitors such as Zambia and Malawi, which are taking steps to ramp up their output. The industry players noted that tobacco would this year generate less than 25 percent of the foreign currency raised five years ago before the eviction of white farmers from their land. They said the state of the tobacco industry would reflect and contribute to an overall contraction in the economy. Tobacco output has been declining sharply, eroding gains achieved over decades - before the government unleashed chaos on the farms under its controversial land reform programme. This was after it lost a constitutional referendum in February 2000. The downward trend in ouput has been despite an increase in the number of farmers in the industry. The Tobacco Industry and Marketing Board (TIMB) says 46.5 million kilogrammes at an average price of US2.01c per kg have been sold so far this year, compared to 48.6 million kgs at an average price of US216c per kg sold during the same period last year. TIMB statistics show that weekly throughput was on the decline, with more than two-thirds of the estimated crop having been sold. Zimbabwe has traditionally enjoyed the position of second largest tobacco exporter after Brazil on the international market. The country's seasonal export volumes up to the end of June 2004 were 37 000 tonnes, valued at US$122.5 million. Tobacco merchants had to import the golden leaf from neighbouring countries to cover up for the deficit from a reduced domestic crop, the TIMB said. "While Mozambique and South Africa have become the major suppliers of foreign tobacco, new sources of tobacco imports have been established in Bangladesh, Madagascar and Vietnam," it said. The Tobacco Reporter of June 2004 says multinational tobacco companies were increasingly shifting their attention to neighbouring countries. Major companies such as Dimon were channelling millions of dollars towards growers to fund crop inputs, barn construction and technical advice. In Malawi, production of flue-cured tobacco has almost doubled from 13.5 million kgs to about 22 million kgs in 2004. The country's burley tobacco output is estimated at about 122 million kgs, up from 102.7 million kgs in 2003. The Zambian Tobacco Association has said it plans to quadruple its flue-cured tobacco volumes in the next 10 years, from 5.8 million kgs in 2002 and seven million kgs last year to 28 million kgs in 2010. Current production, which was earlier estimated at 12 million kgs, is now expected to be around 15 million kgs, with the next crop target at 22 million kgs. The Zambian government is offering incentives to investors, including 15 percent corporate tax instead of a standard 35 percent. The Tobacco Reporter reports that Zambian tobacco farmers are allowed to carry over losses for a period of five years. Tobacco merchants sponsoring farmers in Zambia include Dimon Zambia, Stancom, Zambia Leaf, a subsidary of Universal Leaf Tobacco Company, and assistance is in the form of inputs such as seed, chemicals, fertilisers and techincal advice. "The tobacco industry is going to recover but it is going to take more than five years. New farmers have limitations in terms of capitalisation and knowledge of the industry," said economist Rungai Chizema. "It would have been good for the government to appreciate the progress which had been made in developing the industry before it started evicting commercial farmers," said Chizema. He said the sector had lost 50 percent of growth achieved from 1990 to 2000 in a period of four years. "The sector has lost 50 percent of the growth generated during the past 10 years," he said. The drop in ouput is despite a sharp rise in the number of tobacco growers. In 1990, the country had 1 493 commercial tobacco farmers growing on an average 59 425 hectares. About 133.8 million kgs of tobacco were sold in 1990, according to statistics from the Zimbabwe Tobacco Association (ZTA). The number of growers rose to 8 531 in 2000 when a record crop of 237 million kgs of tobacco was produced on 84 893 hectares. Latest statistics indicate that the country now has 12 700 tobacco farmers growing on an average 41 hectares. The projected output is 60 million kgs. For the past 10 years, farmers have been averaging 2 600 kgs per hectare but the average yield per hectare has fallen to 1 500 kg. "Output has been coming down faster and the big question is: why are we not surpassing the 2000 record output?" queried Chizema. James de la Fargue, the new ZTA president, told The Financial Gazette last week that the country was losing more of next year's production, with both large- and small-scale farmers quitting the industry. De la Fargue said underutilisation of tobacco irrigation and curing capacity accounted for the largest slice of loss in production, with access to finance being the final blow to recovery prospects for the industry. He noted that while Zimbabwe had been losing prduction, regional competitors and countries such as Brazil were raising their production levels. "We are going to have to work doubly hard to refine our markets, and again the only entry is in flavoured tobacco," De la Fargue said.