More questions than answers to goings-on in the tobacco industry

Source: More questions than answers to goings-on in the tobacco industry | Herald (Opinion)

Last year alone, five tobacco exporters lost US$57 million to several unorthodox ways of doing business, key among them side-marketing

Obert Chifamba
IN recent seasons, the country’s tobacco regulatory authority — the Tobacco Industry and Marketing Board (TIMB), has been monopolising the limelight, albeit, for the wrong reasons!

A lot has been happening in the tobacco industry, with farmers and merchants threatening to throw in the towel at different points in time, thanks to a myriad of problems some of which ended up courting the attention of Government to intervene and restore normalcy.

The unfortunate observation is that the bulk of the problems involved regulatory matters, which TIMB is mandated to superintend.

Courtesy of the Tobacco Industry and Marketing Act [Chapter 18:20], TIMB is expected to regulate the tobacco industry to guarantee sustainable tobacco production, formulate policies and oversee their adoption and implementation.

At the moment, TIMB is expected to be spearheading efforts to ensure production of the golden leaf plays a critical role in the success of the nation’s Vision 2030 of achieving an upper middle income economy.

TIMB’s submissions that they de-registered 37 000 growers for not delivering their tobacco to either auction or contract floors yet they were registered can easily confirm that there was laxity in the enforcement of regulations somewhere.

On the one hand, this has also given credence to the strong suspicion that these growers had been engaging in side-marketing activities even way before their chicanery was unearthed.

Registration of all types of tobacco growers remains one among the many functions of TIMB as spelt out in the Tobacco Industry and Marketing Act [Chapter 18:20] and after this, TIMB is then expected to regularly check on the status of its growers in terms of either being active or not.

Active growers are those who deliver tobacco at various selling points while those who do not are obviously inactive and therefore in the industry for other motives.

In the 2020/21 season, for instance, active growers were 120 467 out of 155 097 total registered growers, which represents 78 percent while in the 2019/20 season, 122 367 out of 166 959 registered growers were active, which represented 73 percent compliance.

It seems TIMB may also have taken too long to react while a lot of revenue was being siphoned out of the economy and denting figures on yield estimates that would have been made during the growing season.

What this also means is that whoever bought the tobacco from the registered farmers either re-sold it to floors or buyers of their choice yet some of the tobacco would have been produced under contract arrangements.

TIMB’s role of regulating the exchange of all tobacco produced in Zimbabwe between growers and merchants promoting, protecting and maintaining the sale of the crop at all authorised selling places before collating statistics relating to the provision, marketing, manufacture and consumption of tobacco does not seem to have been done to completion from the look of things.

Under normal circumstances it is the mandate of TIMB to distribute market studies and information relating to the marketing, manufacture and consumption of tobacco while monitoring all tobacco handling premises for pest control then advising the Minister responsible for Agriculture on all matters relating to the marketing of tobacco on progress.

The long and short of it is that the farmers and whoever they were dealing with were committing a crime leading to the loss of millions of dollars, which has the potential to kill the tobacco industry.

The matter is even made more complex by the fact that the board cannot accurately establish how much is lost yearly because side-marketing is an illicit activity whose figures cannot be easily determined.

Last year alone, five exporters lost US$57 million to several unorthodox ways of doing business, key among them side-marketing.

One thing for certain is that side-marketing is a form of contract breaching where contracted growers sell their crop to third parties in violation of the contractual agreement, which states that tobacco shall only be sold to or bought by the contractor who provided inputs to the grower.

Essentially, the offence can either be perpetrated by the farmer or illegal buyers who also include delinquent licenced contractors that reap where they did not sow.

Traditionally, tobacco selling in Zimbabwe was done exclusively through the auction system with growers mobilising the crucial cropping resources on their own before selling the final product at auction floors of their choice while the highest bidding buyer always prevailed over other bidders.

The system was to change in 2004 following the emergence of contract growing and marketing of tobacco.

Licenced contractors who eventually become the buyers, are required by the law to provide inputs required for the production of the crop on the backdrop of guarantees to buy all the tobacco contracted at prices (per grade) equal to or higher than those prevailing on the auction floors.

This will naturally enable the farmer to gain more.

However, this is not the way things have been happening with the clause of prompt and fair payment being sent flying out through the window, as one party or both engage in illicit dealings with sellers or buyers not supposed to be part of the matrix according to contractual agreements.

Losses incurred through side marketing can also be attributed to illegal acts by licenced contractors buying tobacco, which they did not sponsor.

The natural order is that when contracted tobacco is sold through the correct channel, both parties — farmer and contractor will realise profits entitled to them in the game of fair play. Such a scenario will enable the farmer to grow the crop again the following season or even extend hectarage while the contractor will also be able to sponsor the production of more tobacco.

Of course TIMB may easily argue that they are doing something to arrest the situation, for instance, the introduction of the inspectorate department in 2021 to specifically devise ways of preventing, detecting, investigating and addressing all illegal activities including side marketing in the tobacco industry.

They have also deployed inspectors in all tobacco farming regions towards the cracking the matter while Geographical Information Systems (GIS) have been introduced at local and national level to mark cardinal points of every tobacco field.

This is meant to help constantly monitor progress and collate with the crop assessment report to make sure all self-financed tobacco is via auction while contract tobacco is bought by the rightful contractor.

The big question is whether this is being done diligently or it is happening sporadically.

If TIMB is doing this effectively, then chances are they could have at least busted one or two cases way back.

Such a success story would have added traction to the country’s march towards producing 300 million kilogrammes of tobacco a year and subsequently, a US$5 billion tobacco industry by 2025.

TIMB’s role is to eliminate the perceived farmer deprivation and enhance transparent and fair tobacco sales at contract and auction sales including analysing, recommending, improving and facilitating equitable transparent and profitable sharing of expenses and profits throughout the tobacco value chain.

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