Editorial Comment: Fixing sticking issues in tobacco plausible Tobacco growers

Government should be commended for taking swift action to suspend the two percent intermediated money transfer tax (IMTT) on all transactions at the tobacco auction floors.

Similarly, the Reserve Bank of Zimbabwe (RBZ)must be applauded for clearing apprehension among tobacco farmers by committing to honour its promise to pay 50 percent of proceeds in foreign currency.

With regard to the two percent tax, the cash constrained Government has made it clear that it needs to raise resources to finance key capital and social programmes, but given the potential negative implications the two percent would have had on the tobacco industry, the Government quickly heeded the outcry from tobacco merchants.

The issue of the two percent tax disrupted the commencement of the 2019 tobacco marketing season, one of the country’s largest foreign currency earners, with merchants arguing the tax made their businesses unviable.

On the opening day of the season last Wednesday, only four out of 32 auction centres opened their doors as buyers protested the levy on electronic payments, among others.

However, normalcy returned to the auction floors on Monday this week after Government indicated that all transactions at the tobacco auction floors would be exempted from the tax.

Farmers had also threatened to withhold their tobacco crop if RBZ failed to honour its promise to pay them 50 percent of their proceeds in foreign currency.

Notably, it is undeniable that the greenback has assumed golden status in the country on account of its universal functionality and advantages in transacting, especially foreign payments.

This is because holders of US dollars also have better chances of getting fairly priced products; critical inputs such as fertilisers, chemicals and seed in the case of tobacco farmers.

Prices in local currency normally track black market rates of foreign currency, putting certain key commodities beyond the reach of many, especially farmers.

As such, it is no wonder that farmers have insisted on having part of their tobacco proceeds paid in foreign, just like is the case with other key export earners, like gold miners. More importantly, this will give them a fair return considering that some farmers procured some of the inputs using foreign currency.

Addressing all issues around marketing and farming of tobacco is critical to keeping farmers motivated, hence maintaining foreign currency inflows. Tobacco exports earned Zimbabwe nearly US$1 billion last season, second only behind gold.

Without tobacco, Zimbabwe would struggle, at particular stages of the year, to make foreign payments for key imports such as fuel, chemicals, electricity and cooking oil and medicines.

Tobacco is the major complement to other key export earners like gold, platinum and chrome, which generate more than 50 percent of Zimbabwe’s foreign currency earnings.

Also, by addressing concerns of farmers and all critical stakeholders, Government has demonstrated its acknowledgement that ensuring sustainability of the tobacco industry is important to the country.

Since the successful completion of the land reform programme, thousands of black farmers are now eking out a living from growing the golden leaf, raising their standards of living.

Since farming is a business (especially tobacco), a business approach to dealing with sticking issues must be adopted all the time, as this is critical for farmers to return to the fields the following season.

The happiness of farmers and other key stakeholders is key to sustaining high tobacco exports. This is also in light of the fact that farmers are ripped off one way or the other every year at the beginning and during the tobacco marketing season.

We applaud the Government for its role in bringing normalcy to the tobacco industry and ensuring that all key stakeholders are happy, with benefit of hindsight to what happened in cotton.

Widespread side marketing and extremely low cotton prices that made viability of producing the crop difficult saw thousands of the white gold farmers dumping its production.

What followed was a slump in national output from peak levels of 352 000 tonnes around 2013 just 28 000 tonnes in 2015, the lowest in nearly two decades.

Deliberate efforts by Government, including the free input support scheme through the Cotton Company of Zimbabwe and reasonable producer prices, saw cotton out steadily rising to 142 000 tonnes by last year.

Lessons from the past, especially on key crops grown in the country such as maize, cotton and tobacco, showed need for meticulous planning ahead of time to avoid disruptive surprises.

Also, authorities need to be consistent on key policy pronouncements to guide industry players on what exactly they should expect, which boosts confidence in Government. Further, key policy pronouncements need to be communicated fully and effectively to avoid distortion of messages, which causes panics and disrupt efficient operation of markets.

This is particularly important in this day and age where social media has become an integral part of the communication system with unlimited ability to distort official messages.

In matters of national governance and economic management, constructive engagements will always bring results and please give it a chance.

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