Negotiations that began two years ago between tobacco farmers and the Government of Zimbabwe to provide golden leaf growers with US$60m in revolving funding appear to have collapsed, leaving them at the whim of cunning merchants, it has been learnt.
It was anticipated that the funding agreement would lessen reliance on merchants, who finance more than 90% of the crop.
“The US$60m local funding deal collapsed a long time ago and it has left farmers at the mercy of the tobacco merchants who determine the crop prices.
“We only hear about the fund at the start of each tobacco selling season. To tell the truth it’s simply not there,” Zimbabwe Tobacco Association CEO, Rodney Ambrose told Business Times this week.
According to him, the country only receives a pitiful 15% of the total revenue from tobacco sales. Therefore the lack of local funding will further reduce the new foreign currency inflows.
Consequently, the number of tobacco farmers registered decreased by 24% to 109 061 from 144 434 registered last year.
The Tobacco Farmers Union Trust vice president Edward Dune weighed in saying: “Tobacco farmers are getting poorer every season as they are failing to clear loans from the tobacco merchants who would have extended loans to them as the inputs are provided at inflated prices and the tobacco output prices at the contract floor are subdued.
“Year in, year out, tobacco growers are working hard to repay loans but they are failing to do so as the debt continues to swell yearly,” he said.
The farmers receive inputs from the tobacco merchants because most of them are unable to raise the funds necessary to start a tobacco farming operation.
Farmers are currently in a very difficult situation.
Growers of tobacco assert that their output has not generated enough revenue to cover all loan repayments and earn a respectable income.
This suggests that most tobacco farmers are now living on the margins due to the heavy strains they face.
Contacted for comment, the Tobacco Industry and Marketing Board (TIMB) said the Treasury and central bank are responsible for the US$60m issue.
All efforts to get a comment from the Ministry of Finance, Economic Development and Investment Promotion and the Reserve Bank of Zimbabwe were futile.