TOBACCO Industry Marketing Board (TIMB) is working on various mechanisms to bring discipline in the tobacco sector at a time when the authority is anticipating the opening of 2022 tobacco auction floors.
TIMB has since slated the opening of tobacco selling season for the end of this month and its chief executive Meanwell Gudu (MG) took time to explain the measures the authority is taking to create a win-win situation for farmers and the industry.
Gudu spoke to NewsDay (ND) senior business reporter Melody Chikono on the sidelines of a media interface about some of the initiatives. Below are excerpts of the interview.
ND: Can you give us an update on the upcoming tobacco selling season?
MG: The tobacco season will kick off on March 30 (Wednesday) and contract floors on March 31. So far, we have registered around 122 000 farmers and 95% of them have been contracted. In terms of licensing of buyers, we have 33 tobacco contractors who have refinanced the crop and 31 class B buyers who are going to be buying directly from the auction floors. The sales will be decentralised as usual because of COVID-19 so it will be Harare and out of Harare sales. Out of Harare sales will be done in Karoi Mvurwi, Karoi and Rusape.
It is mainly contract sales that are going to be done out of Harare. Generally, the rainfall season was late with effective planting rains received around end-November to mid-December 2021. The irrigated crop is medium to heavy bodied, predominantly lemon in colour and reflecting fair to good quality.
The main dry land crop is medium bodied in the commercial sector while being light to medium bodied in the smallholder sector. The late dry land crop has poor stand due to a prolonged dry spell which was experienced post planting time towards end of December.
ND: You spoke about having more pressure on the demand side during the selling season. Can you elaborate on that?
MG: The market is in an undersupply situation on a global level because of too many reasons. The first one is that the crop size in Brazil came down by almost 80 million because of drought.
That creates an opportunity for us, unfortunately India increased its crop to 270 from 236 million last week. However, because of some kind of hoarding which is happening as companies draw from their own inventories and they want to replenish their stock, there is likely to be demand for tobacco this season which will likely influence good prices.
ND: Can you shed more light on compliance to sustainability?
MG: Compliance issues are becoming more prominent especially from our blue-chip companies which are the biggest companies that buy tobacco from Zimbabwe. The issues are to do with environment, social and governance investing. So, we need to make sure that we are compliant. What has happened is that leading global cigarette manufacturing companies developed a sustainable tobacco programme (STP) which generally guides international tobacco production which we are supposed to adhere to. The STP has a ranking/scoring that indicates the risk of purchasing tobacco from an origin. The higher the score, the lower the risk.
Currently, 20% of Zimbabwean crop is purchased by the STP market in Western Europe. China, which is Zimbabwe’s biggest market, has begun to embrace these STP guidelines. So, we are being compliant, so we need to be compliant and shouldn’t be complacent as time is not on our side. Zimbabwe is generally considered to be in high risks category because of sustainable curing fuel, climate change, human rights and child labour, traceability, safe working environments and so on. Sustainability is a major differentiator for different customers who are increasingly calling for environmental social governance so we really need to comply.
ND: Are there any deadlines and what does it mean to the tobacco industry in Zimbabwe if it fails to comply?
MG: There are no clear deadlines, but given that our competitors like Brazil are 100% compliant to sustainability, most likely our customers will focus on Brazil at our expense. That is what I said is the most important thing that we need to implement.
ND: You alluded to the fact that 95% of tobacco farmers are now contracted. What are the implications?
MG: Yes, it is true that 95% of tobacco farming is now under contract farming while 5% is under auction. It’s like that because many of our farmers do not have bankable title deeds so they are not able to self-finance and have to rely on contracts.
A farmer should be given options and all things being equal, they would want to self-finance and enjoy the independence of choosing who to sell his/her produce to. However, many farmers are left with no option but to get funding from the contractor.
Contracting has its advantages and disadvantages. If you look at it globally, there are only three countries that are still auctioning tobacco, that is, Zimbabwe, Malawi and India. India is 100% auctions because the farmers can borrow. The world is moving towards contract farming because there are certain advantages that come with it.
ND: I understand the government suspended talks with concessionary banks over a 99-year lease. What is your comment on that?
MG: We were very excited when the government rebranded Agribank to AFC Bank as well as at the introduction of the land bank which is a developmental bank. Once it has been capitalised it won’t be as stringent as other non-developmental banks and the interest rates will be concessional and we will see a lot of our farmers going for that. In fact, even the US60-million-dollar revolving fund is under funding of tobacco production. We believe that a lot of our auction farmers will be able to access it but there is a lot to be done in ensuring that farmers will have access to bankable title deeds.
ND: I’m sure you agree that pricing has been key in the issue of side marketing while farmers have fallen victims to their co-ordinators leaving them reeling in poverty. What is your comment on that?
MG: There is a lot of competition in the contracting space in terms of pricing. If a contractor does not pay the correct price, that contractor will not get tobacco. Last year, we had 42 companies and now 33. Some of them have fallen by the way side because they could not compete. They were paying very low prices and farmers didn’t like it. Remember a contractor is in the business of selling tobacco. They want the tobacco so they have to pay the right price. I have lost quite a number of companies, that I can’t mention but it’s because they were not paying good prices.
ND: If you go to rural areas there are also individuals who are buying tobacco. Are they regulated and what are you doing to curb side marketing?
MG: We are coming up with heavy penalties that are very deterrent. Remember we talked about reviewing the legislation. We are going to make it very difficult to side market and someone can spend 6 months in jail. We have got our inspectorate which started last year and there has been a call from stakeholders to expand the unit.
