ZIMBABWE: Tobacco Projections Just a Dream

Source from:  tobaccojournal.com 10/26/2004

Zimbabwe's tobacco industry players predict an average crop estimate of 80 million kilograms, despite government's target for a miracle 160 million kg in the 2004/05 season reported the Financial Gazette on 21 October 2004. The Zimbabwe Tobacco Association (ZTA) said although the government, in conjunction with the Reserve Bank of Zimbabwe (RBZ), has embarked on a programme termed 'Vision 160' to target a crop of 160 million kilograms for the coming season, the projected crop output would be low because of inadequate funding and inputs shortage among growers. Although the projected output represents a 15 percentage increase from the 68.7 million kg obtained this season, the figure falls short of the glory that was associated with the crop four years ago. The golden leaf, which enjoyed a peak of over 200 million kg in 2000, has slid year on year over the last four years to an estimated 68 million kg in the current season. A shortage of inputs, undercapitalisation and the government's chaotic land reform programme have been blamed for the decline of the erstwhile principal foreign currency earning commodity. "The availability of affordable financing in particular the Productive Sector Finance, was cited as the main concern in all areas along with high borrowing rates. "Most growers have 80-90 per cent of requirements on farm except for coal. Very few growers have moved coal onto their farms. High transport costs is the main inhibiting factor," the ZTA said. The Tobacco Industry Marketing Board (TIMB) said it has managed to raise Z$ 232 billion for the financing of the 2004/5 tobacco crop, with 70 per cent of the funds going towards inputs while 30 per cent is for capital requirements. Three commercial banks, Syfrets Corporate and Merchant Bank, Agribank and the Commercial Bank of Zimbabwe are also working on raising Z$ 50 billion to re-establish Zimbabwe's long lost glory as one of the major tobacco producers. Up to 80 per cent of large-scale growers have signed growing contracts with British America Tobacco, Tribac or Zimbabwe Leaf Tobacco. Analysts, however, said money raised so far was just a drop in the ocean. Financing of the crop remains critical. Two batches of tobacco bills introduced early this month failed to raise the required amounts as bids were rejected with potential investors shunning lower yielding rates. Last season it cost Z$ 30 million to produce one hectare of flue cured tobacco but production costs have since gone up by nearly 40 per cent. "Looking at the calibre of most of our farmers not many could afford even half of that, they will be sitting on a farm with a potential to produce more than 100 hectares of the crop," said Moses Chundu CFX Financial services group economist. "Indications to date show that areas to be planted by large-scale growers are, at this time estimated to be below last year levels, but it is still very early to be entirely certain, as many growers are still planting or intending to plant," the ZTA also added. The US$ 120 million earned last year can only supply six weeks of foreign currency allocation at the central bank's auction floors and accounts for one week of Zimbabwe's foreign currency demand. Drop in output is despite a sharp rise in the number of growers who have increased from 1,493 in 1990 to 12,700 in 2003, the ZTA said. International investors such as Dimon, Stancom, Universal Leaf Tobacco Company, have now shifted their attention to nascent regional tobacco growing competitors such as Zambia and Malawi, which are taking steps to ramp up production. Enditem