Tobacco Farmers to Retain 100 Percent Sale Proceeds in Forex

Source from:  Financial Gazette (Harare) 01/28/2005

THE government, whose controversial policies have been blamed for the collapse of the tobacco industry, will from next month allow tobacco growers to retain 100 percent of their sale proceeds at the ruling foreign exchange rate in a bid to restore long lost lustre to the golden leaf. Presenting his fourth quarter monetary policy review yesterday, Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono said the existing blend rate valuation would fall away and the new framework come into effect from February 1. For a YEAR IN REVIEW excerpt from the Africa 2005 guidebook, click here. (Adobe Acrobat). To buy the book, click here. Previously, tobacco farmers earned 75 percent of their proceeds at the auction floor rate of $5 700 to the greenback. The 25 percent balance was paid at $824 and the government offered a support price of $750 per kg. Gono also said that the government's support price to the tobacco farmers had been increased to $2 000 per kilogramme and draw-downs on tobacco pre-financing facilities by merchants would be sold at 100 percent at the ruling auction rate. The blend rate valuations of drawdowns also fall away. The government has also introduced a pooled Foreign Currency Account for tobacco growers in its bid to retain glory to the sector, which is arguably the country's single largest foreign currency earner. "Furthermore, those tobacco growers wishing to retain foreign exchange for importation of chemicals and other inputs, will be entitled to a 15 percent retention threshold, which would be held in a pooled tobacco growers FCA fund, managed by the Reserve Bank of Zimbabwe," Gono said. The growers would, however, access the funds against "authorised, authentic import invoices". The new framework comes in the wake of the global threat against tobacco and countries such as Zimbabwe, whose economies are heavily dependent on the sector, are under threat. The government has set its sights on a target of 160 million kg of tobacco for the 2004/05 season, but Gono admitted that the crop estimates would only register a success rate of 60 percent, with yields coming to around 100 million kg of the golden leaf. Tobacco output has nose-dived during the past four years from a peak of 300 million kg in 1999 to 64 million kg this year because of a myriad of viability problems including lack of inputs, finance, erratic weather as well as low international prices. Enditem