Zimbabwe: Tobacco Growers, Merchants Close Ranks to Face Govt

Source from:  Financial Gazette (Harare) May 3, 2006 05/08/2006

ZIMBABWE'S tobacco growers and merchants have closed ranks to lobby government for the economic pricing of the country's former prime export crop. The country's three tobacco growers' bodies and two merchant associations met in the capital yesterday and resolved to pressure the government to review the current pricing system which they criticise as unprofitable. The associations included the Zimbabwe Farmers Union (ZFU), the Zimbabwe Association of Tobacco Growers (ZATG), the Zimbabwe Tobacco Association (ZTA), the Zimbabwe Association of Tobacco Merchants (ZATM) and the Tobacco Trade Association (TTA). Sources who attended the meeting said the tobacco bodies had put together a joint position paper entitled "To Grow the Tobacco Industry With Confidence", which representatives of the associations will present to Agriculture Minister Joseph Made and Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono early next week. "We have come up with an indication that the reason for the slump in tobacco over the past three years has been the viability model which is not sustainable. The real problem is there has been little movement in the interbank exchange rate and that is causing the viability crunch for tobacco growers," said one official who attended the meeting. "We must ensure that there is movement in the interbank rate," he added. Although auction floors opened last week, farmers have expressed concern over what they deem to be unviable prices and a static exchange rate. This has seen only a few deliveries coming through to the auctions. A new tobacco support framework announced late last month has seen some growers opting to delay further deliveries to the floors. The central bank announced a 35 percent bonus on all early deliveries of tobacco, which replaced an earlier announced $180 000 per kg support price. Although the new system rewards quality, growers say it discounts representations made in earlier consultations. Growers had pushed for an exchange rate of US$1:180 000, a continuation of the 15 percent retention scheme with improved access for smaller growers, and a possibility for merchants to bring in US Dollar inputs to set off against leaf purchases. The new system gives an implied exchange rate of US$1:134 000, which growers say is below their breakeven level, and below a return of 35 percent. The official said there is need to restore confidence in a sector that has traditionally nourished Zimbabwe's comatose economy. "The individual must be confident and happy to grow tobacco," he said. Zimbabwe has in the last six years witnessed a drastic and agonising drop in the output of the golden leaf. Only 45 million kgs, the lowest output since independence, is expected to pass through the country's three auction floors this year. But in 2000, shortly before the launch of a controversial land confiscation programme commercial farmers produced well over 200 million kgs of the crop. Enditem