Forex scheme set to benefit tobacco growers

Zimbabwe’s tobacco farmers will next week start to benefit from a 20 percent foreign currency retention scheme which is expected to allocate them US $80 million from this year’s tobacco crop, the state-run ‘Herald’ newspaper reported on Monday. Tobacco remains a major foreign currency earner for the cash-strapped government. Now, of the forex that is earned through sales, 20 percent will be reserved for growers to help them buy inputs such as diesel, fertiliser and seed. Some 12,000 smallholder and large-scale farmers will receive the funds. The ministry of finance and the Reserve Bank of Zimbabwe approved the 20 percent retention scheme to ensure that the farmers can afford inputs needed for growing tobacco. “It’s an attempt to revitalise and broaden the industry,” Stanley Mutepfa of the Zimbabwe Tobacco Industry and Marketing Board told IRIN. The government has been making concerted efforts to include smallholder farmers in the lucrative tobacco growing sector as part of efforts aimed at improving productivity. A Tobacco Growers’ Trust (TGT) has been formed to coordinate the farmers’ inputs and foreign currency requirements and is negotiating with manufacturers and suppliers to get discounts for farmers. Chairman of the trust, Wilfanos Mashingaidze, said the trust would allocate the foreign currency to farmers based on their specific needs. The funds would be used for tobacco inputs only, and not as capital injection for farming, Mutepfa added. “Although tobacco prices have been above average this year some growers have been reluctant to sell. This is because they are trying for higher prices later, because, they say, the current exchange rate makes cultivating tobacco a waste of time,” he said. Professor Tony Hawkins, an economist at the University of Zimbabwe, told IRIN that although the scheme may help small scale tobacco producers, but a recent government move to retain a higher percentage of foreign exchange from the vital manufacturing sector was strangling the economy. “Industry was allowed to retain 75 percent of foreign exchange earnings to sustain themselves, that’s now been cut to 60 percent,” Hawkins said. The government now takes 40 percent to pay for fuel, electricity and its own expenses. This in the long term would be very detrimental to the industrial sector, Hawkins said.