Is Zimbabwe’s tobacco a ‘new diamond curse’?

 My Two Cents

Curses don’t manifest immediately. It took Zimbabwe about six years for the diamond curse to be acknowledged. The tobacco industry in Zimbabwe is very unique. While the industry grew rapidly in the past 10 years, the regulators who maintain orderly marketing of the crop seem to have lost the plot on how to leverage the true potential arising from growth of this lucrative sector.The discovery of diamonds about a decade ago was largely greeted with a lot of enthusiasm and optimism that the mineral would anchor Zimbabwe’s economic development.

The sector was expected to create thousands of jobs, new infrastructural developments, and perhaps quality foreign investors would stampede for a piece of the cake. But as it turned out, all these were trinkets of deception.

Like the diamond industry, predicting gloom and doom in Zimbabwe’s tobacco industry may not make sense today in view of the fact that crop production spectacularly rebounded from a low of 50 million kilograms to the current production levels of around two hundred million kilograms.

This spectacular rebound in output can be attributed to a number of factors, key among them the land reform programme which allowed more people to participate in this lucrative industry.

Zimbabwe experienced its lowest tobacco output during a transitional period where agents of tobacco production were changing.

The other major reason why tobacco production rebounded is, unfortunately, the collapse of other vibrant agricultural sectors in Zimbabwe which include cotton, grains, horticulture, livestock, and many others.

Reasons for the demise of these sectors vary, but chief among them is cronyism, poor regulation, particularly for the cotton industry, conflicted regulators, and outright plunder of resources in a manner that eerily resonates with what happened to Zimbabwe’s diamonds.

We would not want to believe that the growth of the tobacco industry can be entirely attributed to the regulator, Tobacco Industry and Marketing Board.

While some want to give credit to the regulator, industry analysts believe it has performed below par in terms of discharging its roles. If fact, they believe a lot can be done.

Curses don’t manifest immediately. It took Zimbabwe about six years for the diamond curse to be acknowledged.

The tobacco industry in Zimbabwe is very unique. While the industry grew rapidly in the past 10 years, the regulators who maintain orderly marketing of the crop seem to have lost the plot on how to leverage the true potential arising from growth of this lucrative sector.

Indulging in incest with impunity!

It has been widely speculated and seriously thought that the regulator in one way or the other, could be seriously conflicted with people or companies it regulates. These alleged incestuous relationships could be floundered, and justified with impunity.

And probably this explains why the now defunct Millennium Tobacco Floors were issued with a licence despite clear evidence that they did not qualify. This may also explain the mushrooming of dubious tobacco contractors and buyers whose sole purpose is arbitrage.

For instance, regulations in the tobacco industry require ‘A’ class buyers to export over 90 percent of their purchases. However, a number of ‘A’ class buyers are getting licences when they do not have any export markets. In some cases, tobacco had been resold after leaving auction floors and higher prices paid. This has happened under the nose of the regulator. Going into the next season, the authorities should keep an eye on this!

We have also heard about companies converting levies paid by growers to their own use, but getting away with it. Recent reports indicate that Premier Tobacco Floors have done exactly that.

Let’s see what will happen.

Having said this, the regulator should be on the forefront of enforcing the regulations, without fear or favour. It will be suicidal to allow this sector, which is earning the country the huge foreign exchange to fall because of flawed regulatory enforcements.

As said earlier in this article, it must be remembered that poor regulatory enforcement contributed to the poor performance of the cotton industry and we do not want similar thing to happen.

Concerns have been raised over laxity of TIMB’s to control of side marketing yet in fact is supposed to raise stop signs. It must be remembered that at some point TIMB approved creation of multiple grower numbers used for arbitrage and side-marketing.

The justification then was that they were busting sanctions. Incredible! Players in the diamond industry played the “sanction-busting” mantra ad nauseam. We now know they were busting the fiscus, not sanctions. We now know they were not smacking ZDERA in the face, but the poor man from Marange, Chiadzwa, whose ancestral graves were destroyed in search of a gem that left aboard a looting plane.

Transparency — defunct, dead and buried!

The success story of land reform in tobacco has been well documented and is reflected by the normalisation of national production volumes to levels above 200m kg as well as the over 70 000 farmers who are now tobacco growers.

This success has not come without its fair share of challenges which have included environmental degradation as well as regulatory challenges. Tobacco is, arguably, the best performing sector in the country and as a result of this it has attracted a multitude of vendors and traders who are seeking to make a living along the tobacco value chain in defiance of established statutes.

The current liquidity constraints and the lack of financial inclusion has created an army of “vultures” who prey on the smallholder farmer either at the tobacco floors or by offering illegal sales of tobacco from the farm gate and loans advanced against the strength of illegal tobacco delivery.

The sheer numbers involved in tobacco production has created a huge challenge with respect to regulation of the orderly marketing of the crop.

As such, transparency in the tobacco industry seems to be now compromised. Zimbabwe used to be the model of tobacco marketing in the world, but that is now history.

Twenty five percent of the crop now determines pricing for 75 percent of the crop. Marketing of 75 percent of tobacco in Zimbabwe is done behind closed doors, allowing for segregation of farmers by race, level of education and well being.

Tobacco buyers are gradually pulling out of buying from auction floors in favour of buying behind closed doors.

Could TIMB be blind to the repercussions of this trend or they simply do not care?

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  • Gundwane

    A well researched article. It is indeed true that the chickens are coming home to roost.

  • Dzapasi

    “buying behind closed doors” means away from the prying eyes of competition, casual observers, other growers. Tobacco is a strategic crop and it should not be bought privately! Yes, growers should have the opportunity to receive funding from contractors, but the marketing of tobacco should remain in the public eyes! Ever asked yourself why diamond is auctioned and not bought privately?

  • murimi

    In India, tobacco is sold from a central place and prices are even displayed on huge monitors for all to see. In Malawi, tobacco is sold through Auction Holdings, again, from a central place. In Zimbabwe, “privately buying” of tobacco is what is killing this industry. Contractors can still buy from a central place where transparency is ensured. Trusting TIMB to monitor is like trusting a thief to guard your valuables. There is too much corruption at TIMB! We know that contractors give kick-backs to senior people at TIMB to get away with “murder”! For example, you see a contractor just issuing hessian only, and still being called a contractor!

  • murimi

    Lets name them. India is 100% Auction! There is still contract growers in India, but still, tobacco is auctioned. In Malawi, tobacco is sold through Auction Holdings, contracted or not contracted. Its not like the contractor will not recover their money. If the contractor is really concerned about being guaranteed of the crop that they support, they can still buy it from a common buying point! All contractors used to buy their tobacco through TSF. Not buy auction, but buy contract. TSF was like a common buying point. The reason why they retreated to “behind closed doors” was because they did not want transparency. They also did not want complains from growers who would have seen other contractors genuinely paying real and competitive price. So, going “behind closed doors” was a way to muffle the farmer. Tobacco is like diamond to Zimbabwe. Why is diamond sold through auction?

    Its clueless people like you who give support to systems that leave a farmer poorer

  • murimi

    Again, lets name them. We do not want subjective views but objective analysis:

    1. 25% of the crop determine pricing for 75% of the crop. TRUE. The auction floors handle 25% of the crop yet the price matrix is generated from auction tobacco only!

    2. Tobacco buyers are gradually pulling away from Auction. TRUE.

    3. Dubious ‘A’ class buyers. TRUE.

    4. Corporate incest. TRUE. Ask who funds senior TIMB management.

    5. Abuse of levies. TRUE.

    Now, tell me which points are not true!!!

  • Auctioneer

    I was driving along Gleneagles last week and saw a humongous building labeled, TIMB head quarters. Can somebody please enlighten me on the logic. That building definitely gulped upwards of $15 million. Now, taking $15 million and reviving the inputs scheme which TIMB used to offer would be a game changer! Have you ever visited AMA head office. If you are a true farmer, and note these arm chair critics I see writing comments here, you should not what AMA is and where they are. If you don’t, please SHUT UP! Now, AMA head office is very very nice, spacious and very very beautiful. But, nothing close to that humongous structure which they call TIMB head office! The AMA head office would probably cost, at most US$3 million. But AMA is charge with being a “TIMB” for all the crops and livestock. You do your maths. Somebody really wanted to loot

  • UriDununu

    Hanzi TIMB goes to India every year to under study their marketing setup. I mean, every year, Really?? What new stuff do you study every year? I think this OPS guy is one of the TIMB entourage who waste growers registration fees on shopping trips to India. Surely, how can somebody, who claim to know tobacco marketing see no logic with points raised here. I like the other point raised about Common Buying Points. If you expect the vulnerable farmers most of them with limited education to understand some of the contracts they sign, and stand up to some of these contractors, then you have no business being in tobacco marketing!!

  • VhiyaMbudzi

    Wareketa idi! Uyo anonzi Ops ndiye anovhiya mbudzi padare!

  • Ma1

    Munoziva here kuti at times, contractors actually put TIMB grades while waiting for a TIMB classifier! The TIMB classifiers then just comes and scans through. They do not even check every bale. The argument then is that the classifiers are overwhelmed so sometimes, they delegate the task to the contractor! Now, if you don’t see any problem with this, then we HAVE A PROBLEM!

  • Ma1

    Chimwe chinhu chausiri kutaura ndechekuti nyika dzese dzine 100% contract, the tobacco farmer is very poor! That is a bad sign. Brazil for example, tobacco farmers in that country are very poor.

  • FCV

    Ndakazoudzwa na bhururu vangu vari kuTIMB kuti that big building will enable TIMB to get lots of rentals since there will be many tenants who will occupy most of the space. Well, this friend of mine was innocently sincere and it appears its a strategy management agreed on – Rentals! Now this is comical for many reasons. TIMB’s mandate does not involve property business. The amount locked in that property can be recovered after more than 20 years through rentals. Supporting the farmer with that amount will lead to a direct benefit within one or two seasons only! Especially given the fact that farmers actually funded that building!

  • Mhepo

    Saka imi munoti vakanyima ma License kune ma Buyer vanoita resell, vanozorarama nei makorokoza aya? Ivowo veTIMB vanozoguma mari kubva kunani? Handiti pasina makorokodza kana ivo ve TIMB vanopinda panzara! Handiti zvinonzi kakara kununa hudya kamwe! Ivo ma Buyer aya nema Contractor acho vanodawo kurarama, saka regai murimi adyiwe aka svinura sedemba! Handiti ndivo vano vhota here. Ndivo vaka sarudza hurumende yaka sarudza TIMB people saka they deserve kulumiwa kwavari kuitwa! Pamberi ne TIMB! Iyo season yacho yanonoka kuvhurwa, tane nzara amana!!!

  • reality

    I have seen many articles with sentiments on the “malpractices” in the industry and from my observation we keep trying to clip leaves from the bush instead of cutting the actual bush. Pane ataura uyo kuti we need banks to fund farmers. I totally agree with that. That is the one way farmers can actually have an option to stay away from the contractors. With everyone (or most) on auction, the merchants will actually compete for the crop on the open market. All other wishes will follow thereafter. As long as farmers don’t have access to bank funding tingangoita hasha dzisina solution.

    • taneta

      The truth on the ground, sadly, is that Banks are funding farmers through contractors. The system has allowed the mushrooming of contractors, many with no off-shore capital at all. They are using local funds from local banks. The reason why banks have opted to fund through contractors is because to them, it makes business sense for someone else to take the risk. So, these contractors simply cushion themselves from the high risk which the banks run away from by pushing the cost to the farmer. Hence inputs being distributed by most contractors are very expensive because these contractors are trying to cater for the risk.

      They are very few contractors like Tian Ze who actually give good deals, but then, Tian Ze only has very few farmers – a few hundred. Northern Tobacco also give good deals to their commercial farmers, but again, they favour those farmers who want to work with white farmers disposed from the land.

      The rest of the contractors like MTC are literally riding on the poor farmers to make super profits. A lot of growers are never given a full package.

      If regulations had not allowed proliferation of dubious contractors, banks would still directly fund farmers.

      Also, because of the lack of transparency, side-marketing is becoming a serious issue.