SA bank breathes new life into tobacco industry

South Africa's ABSA Bank has signed a US $25 million loan deal with the Zimbabwe Allied Banking Group (ZABG) in a bid to revive Zimbabwe's ailing tobacco industry. Production has declined dramatically since 1999 and a new low is anticipated in 2005, with less than 100 million kg expected on auction floors when the marketing season opens this week. In the 2003/04 season the country produced 64 million kg but most of the crop was withheld or marketed late because of differences over selling prices between farmers and some of the buyers. The figure is much lower than the 1999 output of 237 million kg, and even lower than the 160 million kg predicted for this year by the Reserve Bank of Zimbabwe (RBZ). Minister of Agriculture and Rural Resettlement Joseph Made said the money would be used to acquire critical inputs for both small- and large-scale tobacco farmers. "We need to ensure transparency and fair distribution of the money - production has to be increased because farmers and organisations still have to pay back the loans they will get. To us, the deal is a sign of investor confidence in the potential capability of the reorganised farming sector in the country," Made told IRIN. He said farmers would repay the loans through their farmer organisations, which would in turn pay the ZABG. Although Made declined to disclose the repayment period, he said the RBZ had guaranteed repayment of the loans. The money was expected to provide inputs for cultivating up to 30,000 ha of tobacco, he added, and government would do everything to ensure that preparations for the next season started as early as possible. The funding deal was announced as the Tobacco Industry Marketing Board of Zimbabwe (TIMB) released its crop assessment report for the 2004/05 farming season, which noted that the shortage and high cost of inputs had been major impediments to production. "There were serious constraints in accessing ideal seedlings, and shortages of other inputs like fertilisers and crop protection chemicals. Labour shortages in the reaping period and the shortage of coal for the cure process also affected production," the TIMB assessment report noted. Problems with the supply of inputs had led to a significant decrease in the area under irrigated tobacco crop compared to previous years. Historically Zimbabwe has been the world's second largest exporter, but began to fall through the ranks four years ago as a result of the government's controversial land reform programme.