TOBACCO farmers who sold their crop during the just ended marketing season will receive a cumulative $30 million as export incentives by the end of this month, the Reserve Bank of Zimbabwe has said.This comes after a total of 73 343 growers delivered 202 million kilogrammes of tobacco during the 2015 /16 marketing season, earning just short of $600 million from tobacco sales.Tobacco is one of the biggest export earners along with gold and platinum. Reserve Bank governor Dr John Mangudya said the central bank was rewarding exporters, including tobacco growers, with an incentive for their efforts in generating the much needed foreign exchange.
As such, like other exporters, tobacco farmers who delivered their crop starting from March 30 this year, are entitled to a 5 percent export bonus. He said the incentive, to be funded through bond notes, a medium of exchange and legal tender in Zimbabwe, would be paid into the bank accounts of all eligible farmers by end of this month.
The central bank chief said the bonds, which will come into circulation at the end of November, were a financial instrument to fund the export incentive and can only be printed to a maximum $200 million. The African Export and Import Bank provided the facility to back the financial instrument meant to incentivise the growth of export earnings.
Dr Mangudya made the remarks on Friday last week at the 2016 tobacco marketing season closing ceremony organised by the Tobacco Industry and Marketing Board.
“As for tobacco farmers, the total incentive is $29,8 million, you are the biggest beneficiary. By end of November (2016) that amount will go into the accounts of producers,” Dr Mangudya said.
“We need to have this incentive so that you can continue to produce.”
He said the incentive will cut down cost of production for farmers. Dr Mangudya said the solution to Zimbabwe’s cash crisis lay in increasing production and exports to generate hard currency.
The central bank chief underscored the need to expand production in major sources of foreign exchange into Zimbabwe, especially tobacco and gold, which account for over half of the earnings.
In this regard, Dr Mangudya pointed out that the liquidity crisis in the economy tends to get worse during the tobacco off season, as such; he implored TIMB to open the marketing season earlier next year.
“When we borrow cash to close the liquidity gap, we will be assuming that the tobacco selling season will start earlier,” he said.
Importing cash, he said, however, comes at a high cost to the country. Zimbabwe uses a basket of foreign currencies, dominated by the US dollar, after scrapping its own currency in 2009 due to inflation, which peaked at 231 million at the last official update in 2008.
Dr Mangudya noted that there is growing pressure on nostro accounts, external bank accounts used to make foreign payments, due to the country’s huge appetite for imports against falling export earnings. Capital flight, including smuggling, and Zimbabweans’ fixation with holding physical cash instead of alternative payment systems such as electronic transfer, mobile money and point of sale machines, was part of the reason the prevailing banknote shortage was worsening.