Harare – The Zimbabwe Tobacco Association says farmers will like to sell back on the free market called the auction floors arguing that most contract buyers are not adding value to the chain but risks grower’s viability.
To date, the Tobacco Industry and Marketing Board has only licensed three auction floors — Boka Tobacco Auction Floor, Tobacco Sales Floor and Premier Tobacco Auction Floor — with no known prospects of adding new players.
Tobacco contract farming was introduced in Zimbabwe in 2004 to boost output which had tumbled in the wake of the fast-track land reform exercise that decimated agriculture production at the turn of the millennium.
Prior to the introduction of contract farming, tobacco selling was done through auctions where tobacco farmers would take their crop to an auction floor of their choice for its marketing.
Under the auction system, the tobacco grower is solely responsible for securing all the production inputs and for delivery of the tobacco to an auction where the highest bidder secures the produce.
Thus, the production and marketing risk lies with the producer. Under contract farming, tobacco buyers provide the inputs required for the production and guarantee to buy all the tobacco contracted at prices equal to or higher than those prevailing on the auction floors.
Presenting oral evidence to the Parliamentary Committee of Agriculture, ZTA CEO Rodney Ambrose said although contract farming is responsible for the growth of production from low levels of 48 million tonnes in 2008 to highs of 253 million tonnes last season, contracting came with the danger that viability of auction floors has actually declined.
“Yes, production levels dropped down to about 48 million in 2008, and with the coming of dollarization, and there was more contracting and the crop grew from that lows of 48 million to highs of 253 million. However, that came with the danger that more and more farmers became contracted and now constitute 85 to 90 percent whilst 10 to 15 percent is under the free market which we call the auction floors.
“As farmers we will like to sell back on the free market and its our concern that viability of the auction floors has actually declined. And we have only seen that for the past five years or three auction floors have been participating yet we have seen a number of tobacco buyers under contract growing to 23 and this year there will be plus or minus 41 buyers.
“We feel sometimes that contracting is restricting farmers and I think there are contracts that have to be thoroughly investigated because there are a lot of middle contractors that are not providing the full package to farmers.”
Ambrose added that the trend is seeing more and more buyers coming in and most of them are not adding value to the whole equation thus impacting on grower’s viability.
In the 2019 Monetary Policy Statement, the central bank pegged the tobacco farmer’s foreign currency retention at 30 percent and 80 percent to tobacco merchants, drawing a backlash from farmers.
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