INFLUENTIAL tobacco cartels have been placed under the Reserve Bank of Zimbabwe (RBZ)’s radar following reports that they have been colluding to manipulate prices.
The practice has benefited tobacco contractors, who fund farmers to produce the crop, along with their merchants, mostly in Asia and other global regions.
But it has prejudiced the government through loss of revenues from taxes, and the country’s tobacco farmers, according to information obtained this week.
Zimbabwe is the largest tobacco producer in Africa, and is ranked sixth globally.
Tobacco is one of the biggest foreign currency earners for the country, alongside gold and diaspora remittances.
RBZ sources said this week tobacco cartels comprised one of the biggest tobacco players. They said the firm has been buying tobacco locally at subdued prices and then selling it to its sister companies in South Africa, at extremely high prices.
The tobacco is then sold at massive profits to countries like China, which has a high demand for tobacco.
Sources said the scams involved senior officials at regulator Tobacco Industry and Marketing Board (TIMB), which this week turned down a request for comment.
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An investigation by this newspaper revealed that some merchants were buying tobacco at around US$2 per kg, before selling to sister foreign companies at either US$3 or US$4 per kg.
The tobacco is then exported to Asia at US$10 per kg.
China is now the biggest importer of Zimbabwean tobacco.
The Asian giant buys about 62 million kilogrammes of packed tobacco worth US$500 million every year, accounting for close to half of the country’s tobacco exports by value.
“This cartel comprises household western and Asian tobacco players who are utilising related companies in their host countries to buy their tobacco before selling at high prices to other destinations,” a source said.
“The RBZ has since been made aware of this scandal and has put all tobacco merchants under the radar. Some tobacco merchants are also being investigated for possible money laundering and externalisation.”
RBZ governor John Mangudya said the central bank was ready to assist TIMB in fighting externalisation.
“The matter has not yet been brought to the bank’s attention,” Mangudya said this week. “The bank stands ready to work with TIMB on this important matter as allegations of externalisation are taken very seriously by exchange control.”
The TIMB declined a request for comment.
But Zimbabwe Tobacco Growers Association president George Seremwe said the sector had been invaded by contractors.
“This is a sad development for the farmer,” Seremwe said. “Since last year, farmers have been battling surrogate contractors who were giving them a raw deal. Surrogate contractors collude on prices with their principal contractors. Farmers have been the biggest losers.
“We are pushing for local funding of tobacco farming because farmers and government have not been getting a fair deal.”
Big firms began to contract farmers to produce the crop and sell it to them.
The contractors supply farmers with inputs, including seed and fertiliser.
They also provide agronomists to advise farmers on agricultural techniques and make sure that tobacco workers are paid on time.
