Disquiet over 75% forex retention threshold

LIVINGSTONE MARUFU

 

The Reserve Bank of Zimbabwe’s decision to lower the foreign currency retention threshold from 85% to 75% has alarmed tobacco and cotton farmers, who claim it will jeopardize their ability to remain in business.

Furthermore, a destructive El Nino is threatening the farmers, which might further lower their output.

The Zimbabwe Tobacco Association (ZTA) chief executive officer Rodney Ambrose told Business Times that the reduction to 75% will  cause  more growers  to fall into a serious debt trap  because production costs are significantly  higher than the retention levels.

“We were getting very thin margins at 85% and many were starting to clear debts but with the new retention of 75%, most farmers will see themselves in serious debts.

“The forex retention reversal to 75% is not viable as tobacco farmers cost structure is skewed in US$.

“We are therefore engaging the Reserve Bank of Zimbabwe to  return the retention level to 85% to be viable though the best key scenario will be 100%.If we get back to 85% it will be very effective for us,”Ambrose said.

Chairman of the Cotton Producers and Marketing Association Steward Mubonderi  told Business Times that since the economy has become more dollarized and farmers are facing insurmountable obstacles, there is no need to review forex retention lower.

“All our inputs and costs are indexed in United States dollars therefore there was no need for the government to reduce retention levels to 75%.

“Besides the economy facing serious economic headwinds, the farmers are facing  El Nino induced drought which will further erode  growers returns.

“How are we  going to manage that situation with the current retention levels? There is a need for the government to reconsider that position,” Mubonderi said.

He added: “We are engaging the government to  go back to 85%.The 75% export retention will only work if the government subsidises the farmers on inputs and other costs that the farmers incur during the farming processes,” he said.

 

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