Tobacco sales approaching US$400 million as pricey momentum continues

But analysts raise a red flag as black market premiums widen

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HARARE – At least 138.43 million kilograms of tobacco worth US$374.99 million have been sold so far at auction and contract floors in the country since the selling season opened, statistics from the Tobacco Industry and Marketing Board (TIMB) show.

In a trading update on day 41, TIMB said the sales were 48.08 percent higher than that in the last year, which stood at US$253.24 million.

The average price at auction and contract floors was US$2.71 per kg, higher than US$2.36 in the same period of last year.

Commenting on the pricey momentum, Equity Axis Analyst Zvikomborero Sibanda said, “This development is very key in supporting ZW$ on the interbank market (Auction). Exchange rate stability is vital if National Treasury is to meet its 7.4% GDP growth target for 2021.”

“However, thanks to widening black market premiums, farmers are losing substantial amounts of their hard-earned US dollars. RBZ liquidates 40% of farmers’ forex earnings using an overvalued auction rate. The black-market premiums which are now hovering above 50% will disincentives participation in the tobacco farming especially non-contracted farmers next year.”

Last year, Zimbabwe earned US$713.8 million from 184 million kg of tobacco sold.

Tobacco is one of Zimbabwe’s leading foreign currency earners in a category that features gold and platinum group metals, with China and South Africa being the major buyers of the golden leaf.

Over the years, tobacco production in Zimbabwe has steadily gone up driven by increased support mainly from the private sector and China, who have contracted tobacco farmers to produce the crop.

Equity Axis News

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