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Over the past years, informal traders made lucrative business, benefiting from the high demand of their wares and services from tobacco growers, mostly small scale farmers

Business Reporter

INFORMAL traders are likely to be the hardest hit by introduction of the new payment system to tobacco farmers which will eliminate spot cash payments at auction floors. Over the past years, informal traders made lucrative business, benefiting from the high demand of their wares and services from tobacco growers, mostly small scale farmers.During the previous tobacco selling seasons, the auction floors were a hive of business activities such as food, clothing, electronic and hardware vending.

Then, tobacco farmers would cash in their cheques at the banks at the auction floors and instantly start shopping around the auction floors.

Such state of affairs, in most cases, resulted in unplanned spending by tobacco farmers while some have fallen prey to thieves and unscrupulous dealers and traders.

Farmers now have to open bank accounts into which their cash will be deposited and so there will be reduced amounts of cash circulating at floors and informal traders are likely to experience less business and hyper-competition.

“I think it will be tough,” said one trader.

“But of course, they would be scepticism among some farmers since this is a new system. Since some banks have branches at the floors, farmers may opt to wait until cash reflects in their bank accounts. So we may get sales, but I don’t think it will be much.”

The Reserve Bank of Zimbabwe said the payments of proceeds from the sale of tobacco through banking accounts will allow farmers to plan appropriately and enable them to use other convenient payment systems such as mobile banking and point of sale when buying.

It will also allow farmers to create a track record which will help in accessing credit from the banks.

“Farmers have been making snap decisions when buying and ended up spending large amounts of money on impulse purchases while falling prey to dubious dealers,” said one analyst.

“As a result of the unplanned expenses, farmers ended up failing to do proper budgets.

“It is a new system and inducing confidence in farmers may prove to be so difficult. As such, farmers need to be educated on the benefits of the new system as well as its modalities in order to avoid a crisis of expectations. The new system needs to be followed up with some initiatives to teach farmers the business of farming, financial literacy as well as sustainable business practices such as tree conservation.”

The central bank said banks would offer concessionary bank charges as a way of motivating farmers to embrace the new system.

“Banks have been engaged and are going to offer bank accounts to tobacco growers at favourable conditions which include waiving of charges for maintaining the accounts,” said the RBZ in a joint statement with the Tobacco Industry and Marketing Board.

Analysts say better viability with reduced losses and better budgeting will stimulate production. Financial inclusion will create banking relationship and ultimately credit rating.

In Malawi for example, farmers with no bank accounts are not given permits to sell their crop.

Last year, over 70 000 farmers, mostly small scale registered to grow tobacco. But most of them are unbanked. This year’s tobacco selling season will commence on Wednesday next week. Last year, the country earned about $815 million from tobacco exports.