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Edgar Vhera

Agriculture Specialist Writer

WITH the opening of the 2024 tobacco marketing season fast approaching, the Tobacco Industry and Marketing Board (TIMB) has advised growers that the 75/25 percent foreign and local currency ratio would be used with liquidation only applicable on net earnings.

This comes on the backdrop of appeals by farmers for Government to increase the retention percentage to at least 85, as was the case last year or better still to 100 percent as production costs are predominantly foreign currency based.

In a notice written to all tobacco stakeholders titled tobacco farmers’ US$ retention for 2024 tobacco marketing season, TIMB acting chief executive officer, Mr Emmanuel Matsvaire said: “Reference is made to a letter received from the Reserve Bank of Zimbabwe (RBZ) dated January 29, 2024 referenced EXP/REBZZWHA/2024/001954; the US dollar retention was standardised at 75 percent in line with the retention level for other market players. This effectively means that the 25 percent will be paid to tobacco growers in local currency.”

The notice said given the fact that the 25 percent to be paid to tobacco growers in local currency is applied on the net sale proceeds after settlement of all loans, levies and other marketing costs, the net effect of this arrangement is that the tobacco growers shall effectively have a foreign currency retention, which is higher than 75 percent.”

Furthermore, tobacco growers shall be eligible to participate at the foreign exchange auction for the purposes of importing key inputs required in the production of tobacco, continued the notice.

The RBZ established a formal market based foreign exchange trading system in 2020 on June 23 to bring transparency and efficiency in the trading of foreign currency in the economy.

The system has evolved over time to be the market upon which exporters lean to support their business operations. The foreign currency recipients use the funding to backstop their activities. Small and medium-scale enterprises (SMEs) have also been included under the auction system. Now tobacco growers can also participate in the auction system by utilising proceeds from liquidation to get foreign to import important raw materials to fund their operations.

Meanwhile, Zimbabwe Farmers Union (ZFU) secretary general, Mr Paul Zakariya said with what is currently obtaining on the market, where goods and services are being exchanged in US dollars, tobacco farmers were expecting to be paid 100 percent in foreign currency.

“Twenty-five percent of the tobacco proceeds is a very significant portion to be lost to exchange rate inflation and acts as a tax to growers,” he said. The gap between the official interbank and the parallel rate is widening implying growers will be able to buy less foreign currency from the informal markets.

However, all hope is not lost among some growers in social media groups who are still confident the RBZ governor would increase the retention level from 75 percent when he announces the monetary policy statement later this month as profitability of the crop has vanished for many farmers.