Tobacco contract scheme under spotlight

This comes amid growing fears that multinational companies are ripping them off.

By Melody Chikono TOBACCO stakeholders have been asked to revisit the sustainability of the industry’s contracting model in Zimbabwe amid indications that contracted tobacco farmers were getting as little as US$0,45 per kilogramme for their crop.

This comes amid growing fears that multinational companies are ripping them off.

In its 2022 tobacco selling season analysis, Tobacco Farm Talk (TFT) Club said the current model of production was highly unsustainable and needed urgent review.

During the period under review, 11 million kg of self-financed tobacco gave farmers US$36 million, while 160 million kg of contracted tobacco gave farmers only US$72 million, which is only twice what self-financed farmers got yet tonnage delivered by the contracted farmers was 14 times higher than the self-financed crop.

Furthermore, the report noted that free growers were getting US$3,23 per every kg sold against US$0,45 per kg for contracted growers.

“Overall, our average price is only US$0,68 per kg after deducting inputs and loan repayments. In other words, from the US$521 million being paid for our tobacco, only US$108 million is going to farmers, the rest is going back offshore to pay input loans,” read part of the report.

“There is need for responsible authorities to investigate if the contracting model is bringing any meaningful benefits to farmers and the country.”

“It appears as if the country has opened itself to plunder by multinational companies who are coming to advance farmers a few inputs and take back everything to their countries, leaving behind impoverished farmers and deserts throughout the country as a result of cutting down trees to cure the tobacco,” the report added.

According to TFT, to date, only 6% of tobacco has been sold through auction, with the rest going through contract farming.

“However, if 94% of farmers are indeed contracted, interesting facts can be deduced from these figures. Of the US$521 million paid for tobacco delivered this season, only US$36 million went directly into the pocket of farmers as earnings for the 11 million kg sold through auction. Of the US$485 million that was paid for the contracted crop, it is estimated that over 85% of it went towards the repayment of loans advanced for inputs,” the report observed.

A total of 172 million kg have been sold so far, earning farmers a total of US$521 million, which is higher than what was earned last year over the same period.

The average price was US$3,02 per kg, higher than the US$2,76 average price recorded over the comparative 2021 period.

But Tobacco Industry and Marketing Board spokesperson Chelesani Moyo said as long as there was need for funding, the contract system would always be an option.

“The sector operates in a dual system that is auction and contract. The former is where tobacco growers are self-funded, they support their own tobacco production until they can sell on the market,” she said.

“However, the major challenge is the limitations on access to funding from the banks because of lack of bankable collateral by most farmers. This has pushed them to opt for contract farming.”

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