‘No price wars’ in the tobacco industry

THE country’s tobacco industry has grown in leaps and bounds since 2009 when the country adopted the multicurrency system and the emergence of new small-scale growers.

NewsDay Business Reporter Victoria Mtomba spoke to Tobacco Industry and Marketing Board (TIMB) chairperson Andrew Matibiri (AM) to find out about the state of the sector, among other issues. Below are excerpts of the interview:

ND: What has changed in tobacco selling and marketing since the country introduced the multi-currency system in 2009?
AM: The introduction of the use of multi-currencies meant that tobacco farmers were receiving the full value of their produce. The change in itself did not affect the tobacco industry to any degree as prices were denominated in United States dollars since 1992.

ND: What has been the cause of price wars in the tobacco sector?
AM: There are no price wars that the TIMB is aware of in the tobacco marketing systems. If there are there, there are welcome provided they result in our farmers obtaining the highest possible returns for their efforts.

ND: We understand tobacco has been selling at an average price of $3,20 since 2009, while being sold to other markets such as South Africa, China, Zambia, United Kingdom and Belgium at a higher prices of $7 or more. What is the cause of such a disparity between the local selling price and export markets?

AM: The average price paid to growers for their tobacco has increased over the years. Prior to 2006 tobacco averaged less than $2 per kg and now is averaging $3,71 per kg. Similarly export prices have increased from $5,06 per kg in 2011 to $5,94 per kg in 2012.

The disparity between prices paid to growers and export prices is due to the fact that merchants have to spend between $1,50 and $2 per kg in processing, fumigation and storage before the tobacco is exported. For instance for 2012, China, which accounts for about 40% of our tobacco, imported Zimbabwean tobacco at a price of $7,30 per kg. It must be noted that China bought top grade tobacco only.

Nonetheless, this average export price can be compared to the average price of $3,65 paid to growers.

ND: How is Zimbabwe’s tobacco rated regionally and internationally in terms of quality?
AM: Zimbabwean tobacco is regarded as having one of the best smoking and flavour qualities. This is why it is sought-after by major tobacco markets.
ND: What percentage is used for cigarette production and agro-chemicals?

AM: Only less than 2% of our tobacco is used within Zimbabwe for manufacturing cigarettes. Globally, although I am not sure of the current figures, probably about 98% is used for making cigarettes. There are commercial industries that manufacture products such as insecticides and pseudo-medical products from tobacco as well.

ND: Compared to the past years how has the quality of tobacco changed to date?
AM: Our statistical records and their analysis show that the quality of our tobacco has improved tremendously over the last 10 years or so. This can be attributed to the diligent research into production being done at the Tobacco Research Board and the adoption of new techniques by the farmers themselves, with assistance from extension departments and tobacco contracting companies.

ND: We understand there is an impending ban on tobacco internationally. What is Zimbabwe doing to prepare for the ban?
AM: There is no impending ban on tobacco production.

There are well-funded lobbyists who are trying to achieve this through instruments such as the Framework Convention on Tobacco Control of the World Health Organisation. In addition, although resources may be limited at the moment, there are efforts being made to find alternative crops and ventures.

ND: How are you educating farmers on the impending ban?
AM: The TIMB has, and will continue to support growers’ organisations and other like-
minded organisations on the issue.

ND: Do you think there is a market for burley tobacco in the country?
AM: If the production was high and if production costs were lowered there would be interest in our burley tobacco. Remember we once produced 16,8 million kg in 1993.

ND: In your own view what has lead to the increase of tobacco farmers in the country?
AM: Farmers’ knowledge on how to produce the crop, availability of cropping resources and crop handling facilities, relative ease of marketing and ready export markets.

ND:  What do you think government can do to prepare for the ban?
AM: The government is already involved through its agencies, like TIMB and the Tobacco Research Board. In addition, although resources may be limited at the moment, there are efforts being made to find alternative crops and ventures.


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