Tobacco farmers want full payment of their foreign currency earnings in United States dollars, instead of the current 75 per cent which they say is insufficient to cover inputs.
Tobacco farmers are getting 75% of their earnings in foreign currency and the remaining 25% in Zimbabwe dollars.
Speaking to Business Times, a representative of all farmers’ unions in Zimbabwe, Bright Bvukumbwe, said:
The 75% US$ retention level is insufficient to cover the required input components. Therefore, we require 100% retention.
The increasing costs of production are not matched by floor prices plus a margin as 2022/23 recorded high costs of production at an average of 35% – broken down into a 25% average increase in inputs and +10% increases in local costs.
Some of the challenges affecting tobacco growers include low foreign currency retention levels, high taxes, selling charges, and levies, according to Bvukumbwe.
According to Research International, it costs US$2.60 for a small-scale farmer to grow a kilogramme of tobacco and the average selling price is US$2.65/kg. Added Bvukumbwe:
Our conclusion is that growers are producing tobacco because there are no alternate crops.
Growers are continually seeking alternatives to complement their tobacco production as growing tobacco alone is not profitable.
Bvukumbwe appealed to the government to avail concessionary funding for tobacco growers to restore their viability. He said:
Golden leaf production needs local independent, concessionary funding outside of contractors and financial institutions.
Borrowing at +100% interest rates for ZWL loans and +12% for US$ loans is not viable for growers.
Various announced facilities like a US$60m, and US$10m facilities have not come to fruition resulting in new foreign currency generation on the decline each season due to extensive offshore borrowings to fund production.