• Tue. Jul 16th, 2024

Curtain comes down on tobacco selling amid talk of US$5bn industry

ByEconomic Times

Oct 27, 2022

By ETimes

At least 212.71 million kilograms of tobacco worth US$650.30 million have been sold so far at auction and contract floors in the country since the start of the selling this year, statistics from the industry regulator show.

Tobacco production is a key economic activity for small-scale farmers. The small-scale tobacco growers at its core are dependent on contract programs since they are unable to fund themselves. But, due to unreliable rainfall patterns this year, experts say most farmers did not get the expected yields. Therefore, it is likely that those in credit will not be able to settle their loans, leaving them in credit.

After gold, tobacco is the country’s second-largest source of foreign exchange earnings; the two biggest markets for the golden leaf are China and South Africa. The United Arab Emirates, Indonesia, and Belgium are some of Zimbabwe’s other major exporters of tobacco that has been flue-cured.

In a trading update for day 124, the Tobacco Industry and Marketing Board (TIMB) said sales had increased by 10.30% from the US$589.57 million recorded in 2021.

“The increase in tobacco sold as well as the value is evidence of our efforts as an industry to establish a US$5 billion industry by 2025,” said TIMB.

Through the tobacco transformation plan, the country wants to create a US$5 billion tobacco industry by 2025. Under this plan, tobacco production will be improved to 300 million kilograms of the good quality desired by international markets.

The final tobacco sale for the 2022 tobacco marketing season took place on October 21, 2022.

“Therefore, all contract and auction floors are closed.”

The average price for auction and contract floors stood at US$3.06 per kg, which is 9.47% higher than the US$2.79 of the 2021 marketing season. 

The crop has so far fetched the highest price of US$6.80 per kg while the lowest was at $0.10.

Rejected bales declined to 77,116 from 88,364 in the same period last year.

This year’s tobacco marketing season saw the first bale (tobacco) being sold at US$4.20 a kilogram, which is marginally lower than the US$4.30 a kilogram in 2021.

Although the nation is the continent’s top producer of tobacco, only 2% of the crop is used locally; the remainder is exported in its unprocessed form. It is impossible to overstate how important value addition is to Zimbabwean tobacco. It is unacceptable to ship tobacco that is 98% raw. By allowing the export of unprocessed tobacco, the nation suffers greatly. Therefore, the government must equip local businesses to add value.

Boosting value addition from the present 2% to 30% is one of the goals of the Tobacco Value Chain Transformation strategy 2021–25. This will be possible if the government increases local funding (one of the goals of the strategy) and releases money as soon as possible.

Government officials and other industry participants should encourage the decision of one of the locally owned businesses to build a processing facility since it will increase the local beneficiation of our tobacco. By doing this, we will be able to achieve our goal of increasing the country’s value addition to over 30% by 2025. Additionally, the benefit will see a boost in foreign currency inflows.

Commentary on the US$5 billion industry by 2025

The million-dollar question to the authorities will be how much the industry is worth currently, because 2025 is 3 years away. Those figures are attainable, but outstanding issues raised by farmers ought to be addressed. For instance, payment modalities, structure of contracts, buyers that fail, neglect, or refuse to pay for tobacco – Harare

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