Tobacco Farmers Expect Forex Retention Threshold Review

Source from:  The Herald (Harare) New Ziana 04/30/2005

TOBACCO farmers said on Wednesday they anticipate that the Reserve Bank of Zimbabwe (RBZ) will soon review the foreign currency retention threshold from 15 to 25 percent to ensure the viability of the industry through increased access to foreign currency to purchase inputs. Zimbabwe Association of Tobacco Growers president, Mr Julius Ngorima, said that the tobacco industry would be viable if the retention threshold was increased to 25 percent. "Farmers are waiting in anticipation that the Monetary Policy statement due to be announced soon, will increase the retention threshold from 15 percent to 25 to ensure the viability of the industry," he said. Central Bank Governor, Dr Gideon Gono, announced in the previous Monetary Policy review that tobacco growers wishing to retain foreign exchange for importation of chemicals and other inputs, would be entitled to a 15 percent retention threshold that would be held in a pooled tobacco growers Foreign Currency Account fund. "The Reserve Bank will, therefore reserve 15 per-cent of tobacco auction-floor related foreign exchange inflows, to allow growers to seed 15 percent of their proceeds in foreign currency under the pooled facility," Dr Gono said. The funds are accessed against authorised import invoices. Mr Ngorima said the Government should also review the support for tobacco growers from $2 000 per kilogramme to $5 000 to improve the industry's viability. The support price was raised from $750 to $2000 in the fourth quarter monetary policy statement. Zimbabwe Tobacco Association (ZTA) chief executive, Mr Rodney Ambrose, said farmers were looking forward to a favourable Monetary Policy statement that would improve the viability of the industry. He concurred with Mr Ngorima that the retention threshold and growers' support price should be reviewed to boost the industry's fortunes. Mr Ambrose said a number of farmers who had indicated their willingness to grow the irrigated tobacco crop were delaying to plant their crop until the announcement of better incentives by the RBZ. "A couple of commercial farmers want to grow the irrigated tobacco but they have resolved to do so only if the Reserve Bank Governor announces favourable incentives for the growers," he said. Mr Ngorima said for tobacco to remain an attractive crop to grow, US$3 should be offered per kg compared to an average of US$1 currently being given to farmers at the auction floors. However, Mr Ambrose was optimistic that the buying prices would increase as the auction progressed. He said farmers were currently selling the lower leaves, which attracted lower prices compared to the middle and upper leaves that would be of higher quality. Since the opening of the auction floors on April 5 to date, more than two million kg of flue-cured tobacco valued at over US$2,4 million have been sold. The opening of the floors started on a chaotic note with farmers boycotting the sales in protest against low prices. Merchants offered a high price of US$2 per kg and a low price of US0,30 cents per kg against the US$3 farmers wanted. The output of the crop this season is projected at between 85 and 100 million kg, up from 68,9 million kg worth US$140,2 last year. Tobacco is one of the country's top foreign currency earners. Enditem