Tobacco growers angry as low exchange rate sours auctions

Zimbabwe’s lucrative tobacco selling season opened quietly on Tuesday with only about 5,000 bales sold, the country’s tobacco grower’s association told IRIN. “We sold very little today,” Pat Davis, market information director for the Zimbabwe Tobacco Association (ZTA) said. “This compares poorly with last year, despite a good crop and rising international tobacco prices,” he added. The ZTA put the poor sales down to the fact that most tobacco farmers have held back their crop -an important foreign exchange earner - amid widespread calls for devaluation of the country’s currency. “Tobacco is sold for US dollars, exchanged at the rate of 55 to one, yet farmers have to buy everything in on the parallel market, currently running at 120 to one, growers are very angry,” Davis said. The parallel market exists in Zimbabwe due to a critical shortage of foreign currency. Tobacco farmers who wished to remain anonymous told IRIN that they believed that President Robert Mugabe’s government was refusing to devalue the Zimbabwe dollar for political reasons. “While we get only 55 Zims to the US dollar, the government is pocketing the other fifty percent, they’re using it to subsidise fuel prices to keep urban people happy,” one farmer said. The ZTA said that the government’s refusal to devalue the local currency was having a crippling affect on tobacco. “Irate farmers keep phoning me and telling me they can’t go on growing tobacco at a loss - they have bank loans to pay,” Davis said. Most trading floors were quiet at Harare’s three tobacco auction houses on Tuesday, where a kg of tobacco was fetching up to US $1.70. Auctions began with sales floors at less than one-quarter of their capacity, auctions officials said. Tobacco, which is now responsible for nearly a half of the country’s foreign currency, “is a far more valuable commodity than the Zimbabwe dollar,” said Pat Devenish, managing director of the Tobacco Sales Floor, in explaining the slow start. “Growers are adopting a wait-and-see attitude toward US dollar prices and the exchange rate,” he noted. But Agriculture Minister Joseph Made has virtually ruled out devaluation. “I think we have all heard from (Finance Minister) Simba Makoni that there will be no devaluation,” Made said on Monday. Economists say that the Zimbabwe dollar is unlikely to be devalued before next year’s presidential election, although it is having a negative impact on a country already ravaged by rampant inflation, lack of foreign exchange and a shrinking manufacturing sector. “This all comes at a very bad time for Zimbabwe, because we’ve had a great season and the world is clamouring to buy our premium tobacco leaf,” Davis said. This year’s crop is substantially smaller than last year’s because of the physical beatings many farmers and their workers suffered at the hands of the self-styled liberation war veterans who have occupied hundreds of farms for the last 14 months. Many squatters have been planting maize or grazing cattle in tobacco fields, or otherwise physically preventing farmers from planting their crops on the land they have occupied. The war vets say their land invasions were to push the government to step up the resettlement of white-owned lands with poor blacks in a bid to redress colonial-era inequalities. But they have been involved in political violence that the government has failed to stem, leaving about 40 people dead over the last year. “This crop was produced under what were some of the most severe, inhibiting circumstances ever in Zimbabwe,” said Kobus Joubert, president of the Zimbabwe Tobacco Association, in opening the auctions. The tobacco harvest is expected to total about 190 million kg, down from a record 237 million kg sold on the same auction floors last year. “A fair exchange rate without major fluctuation during the selling season will ensure that all tobacco growers receive fair returns,” Joubert said. Zimbabwe is the world’s second-biggest exporter of tobacco after Brazil, and is one of the top three producers of quality flue-cured virginia leaf along with the United States and Brazil. The leaf is used in American blend and English-style cigarettes.