US$57m tobacco lost to side marketing

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Tobacco field: File Picture

BY MTHANDAZO NYONI
FIVE tobacco exporters last year lost US$57 million due to side marketing, the Tobacco Industry and Marketing Board (TIMB) has said, vowing to accelerate its drive to curb the vice.

Side-marketing is a form of contract default whereby contracted tobacco growers sell their tobacco to third parties in breach of a contractual agreement which states that tobacco shall only be sold to or bought by the contractor who provided inputs to the grower.

The practice can be perpetrated by either a farmer or illegal buyers who also include errant licenced contractors.

“This year, 2022, the Tobacco Industry and Marketing Board is on an accelerated drive to end tobacco side-marketing. This criminal practice is responsible for the loss of millions of dollars annually and has the potential to kill the tobacco industry,” the TIMB said in a latest article published on its website.

“TIMB cannot accurately ascertain how much is lost annually since side-marketing is an illegal activity whose statistics cannot be accurately ascertained. However, in 2021 alone five exporters lost US$57 million as a result of several factors and chief among them being side marketing,” it said.

Tobacco selling in Zimbabwe was traditionally done exclusively through auction whereby tobacco producers mobilised the necessary cropping resources on their own and took their crop to an auction floor of their choice and the highest bidding buyer secured the produce.

However, from the 2004 selling season this system was changed with the introduction of contract growing and marketing of tobacco.

A licensed tobacco buyer (contractor) provides inputs required for tobacco production to the farmer, with the contractor guaranteeing to buy all the tobacco contracted at prices (per grade) equal to or higher than those prevailing on the auction floors.

This way the farmer gains more.

“Despite guarantee of fair and prompt payment in the contract system, some tobacco growers and licensed contractors engage in the criminal practice of side marketing to their own disadvantage,” TIMB said.

“In the same vein, middlemen also illegally buy tobacco they did not sponsor at less prices so they too can get profits when they sell that tobacco at auction floors whilst some licenced contractors also buy tobacco from farmers not contracted to them.

“It, therefore, implies that losses through side marketing can also be attributed to some illegal acts by licensed contractors who are in the habit of purchasing tobacco which they did not sponsor. Each grower number is linked to a bank account. When side-marketing, the unlawful buyer who can even be a licensed contractor allocates a grower number commonly known as a company ‘grower number’ and payment is paid into the bank account linked to it.

“It is then the buyer’s discretion whether to pay a farmer immediately or reinvest in other ventures for a period then pay when they wish and in some cases default the payment,” the regulatory body said.

In case of such an illegal transaction, TIMB said it cannot arbitrate on pricing or pressure the contractor to pay when they delay because this will be tantamount to enforcing and promoting crime.

“With such knowledge, uncouth contractors take advantage and profiteers knowing such growers fear fines and prosecution. Contractors who are victims of side marketing engage debt collectors to confiscate that grower’s registered property to the tune of the contracted amount. Many growers are unaware of this eventuality hence they lose assets,” it said.

TIMB said when contracted tobacco was sold to the rightful contractor profits were realised by both parties. Such a contractor will be in a space to support more hectares of tobacco the following year, the farmer will receive inputs for the next farming season early and they can increase their hectarage, it said.

“This is key as we work towards producing 300 million kilogrammes of tobacco a year and a $5 billion tobacco industry by 2025,” it said.

TIMB introduced the inspectorate department in 2021 to specifically devise ways to prevent, detect, investigate and address all illegal activities including side marketing in the tobacco industry. This department has deployed inspectors in all tobacco farming regions in this regard, the organisation said.

Geographical information systems have also been introduced at local and national levels to mark cardinal points of every tobacco field, constantly monitor progress and collate with the crop assessment report to make sure all self-financed tobacco is sold at auction and contract tobacco is bought by the rightful contractor.

Tobacco is Zimbabwe’s second foreign currency earner after gold, with China and South Africa being the major buyers of the golden leaf.

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