Tobacco farmers are not getting the expected rewards as most of their money is lost through unfavourable payment regimes and as a result, they have lost ZWL$1.127bn on the sales proceeds that come in the local currency, an industry expert has said.
Zimbabwe Tobacco Association (ZTA) president, Rodney Ambrose said that growers’ representatives had discussions with the Reserve Bank of Zimbabwe (RBZ) on the exchange rate for the local currency component farmers will receive for their tobacco and were assured that this would be in place when the selling season opens. He said:
The previous floating exchange rate policy gave confidence that this would be achievable. However, came in the sudden fixed exchange rate policy aimed at stabilising prices of goods and services.
The hyperinflation environment and continued increase in retooling exchange rates, now at 1:60, against a fixed exchange rate 1:25 were highlighted to be the main viability concerns to the sector and these have been continually highlighted to the central bank and most recently to the TIMB.
Tobacco farmers retain half of their proceeds in foreign currency and get the remainder in local currency at a bank rate of 1:25, at a time the parallel market rate is at 1:60.
Ambrose said as an example of a rate disparity; tobacco seed is priced at US$4 or ZWL$220 and this implies a retooling exchange rate of 1:60 against a growers return rate of 1:25.
This means a grower has to sell US$8 worth of tobacco to buy ‘US$4’ priced tobacco seed and similar comparisons can be made for all key inputs. Effectively, US$ costs of production have doubled.