$19 Trillion Needed for Tobacco Crop

Source from:  herald.co.zw Herald Reporter 04/06/2006

The next tobacco crop requires funding to the tune of $19 trillion and a foreign currency component of US$32 million, Secretary for Agriculture Mr Simon Pazvakavambwa has said. He was giving an overview of the tobacco industry to the parliamentary portfolio committee on Lands, Agriculture, Resettlement, Rural Resources and Water Development on Tuesday. "The Zimbabwe dollar funding is estimated at $19 trillion assuming zero stock level holding by growers," he said. He said the returns in tobacco had been impressive over the years but the Government was concerned by the declining trend. Tobacco is one of Zimbabwe's key sources of foreign currency. Mr Pazvakavambwa said: "There are a number of challenges but we need to sing the same song and same tune of that chosen song to make progress." Curing facilities on farms had the potential to handle up to 250 million kilogrammes of flue-cured tobacco provided that 40 percent or more of that was irrigated. However, some of the structures need to be modified to suit the scale of operation of new farmers, said Mr Pazvakavambwa. The three tobacco processing plants in Harare were not being fully utilised due to a decline in production. Cigarette manufacturers were faced with a shortage of tobacco and were having to import to sustain operations. "If necessary funding is in place on time, forex for inputs made available on time, viability addressed, rebounding of the industry can be much quicker with tobacco assuming once again, its rightful role of being the leading generator of forex and driver of the economy," he said. Tobacco production decreased from 237 million kg in 2000 to 69 million kg in 2004. Despite the drought in 2005 the crop bounced back to 73 million kg due to adequate input and financial support. He said the average exchange rate for sales in 2005 was about $13 000 to US$1 whereas growers were purchasing inputs for the following season at between $26 000 to $100 000 to US$1. "Although growers were entitled to access 15 percent of their US dollar tobacco proceeds for importing 2005/2006 inputs, only a few large scale growers benefited from this facility due to forex unavailability," said Mr Pazvakavambwa. He said the average production budget for 60 000 hectares of flue-cured tobacco was $315 million per hectare inclusive of land preparation, fuel, coal, labour and marketing costs while costs for large scale growers could be more. "Costs will be regularly monitored and adjusted accordingly as these have moved from an average of $122 million per hectare in January 2006 to $315 million per hectare in March 2006. Giving evidence on the availability of power to farmers before the same committee Zimbabwe Electricity Transmission Company managing director Engineer Edward Rugoyi said electricity supply remained precarious because of an acute shortage of foreign currency to buy spare parts to maintain the supply chain. He said Hwange Power Station was currently producing 210 megawatts out of a possible 780 megawatts because a total of US$30 million was needed to buy spares to revamp the power station. "The quality of coal is also of concern to us as well as the supply of diesel," he said. Eng Rugoyi said the country's small thermal power stations were not producing any power at the moment. Payments for electricity from Cahora Bassa were up to date but EDM of Mozambique was owed US$8,2 million for transporting the power to Zimbabwe. The Democratic Republic of Congo (DRC), said Eng Rugoyi, was owed US$7,75 million for power supplies and that money should be paid first before the existing contract could be extended. "Energy could be saved if a meaningful demand side management is put in place. Expansion of our own electricity generation is required and cost reflective tariffs is a major issue," he said. Hwange Colliery company marketing and public relations manager Mr Clifford Nkomo said his company had been facing challenges of supplying coal to farmers and other customers because of constant breakdown of equipment. "Most tobacco industry organisations paid us in advance but we have not been able to supply the coal," he said. Mr Nkomo said US$8 million was required to refurbish equipment at the colliery. He said the company's major customers like Zesa and the Zimbabwe Iron and Steel Company (Zisco) owed it in excess of $600 billion. "If that money was paid, it would help to clear our US dollar debt," said Mr Nkomo. Enditem