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Edgar Vhera Agriculture Specialist Writer
IT’S another record in the bag for the Second Republic! This time around the country has grossed in excess of US$1 billion in tobacco products exports. And a month of trade is still available before the year ends, the Tobacco Industry and Marketing Board (TIMB) has indicated in its week 45 report.
TIMB’s report showed that the average price of the crop has risen 17 percent from US$4,51 in 2019 to US$5,26 currently as a result of value-addition.
This comes on the backdrop of the crafting of new policies by the Second Republic, which set the industry on course to breaking the all-time tobacco production record of 296 000 tonnes of the crop recorded in 2023 that eclipsed the 259 000 tonnes scored in 2019.
On the one hand, the country’s export earnings from value-added tobacco products also got a huge boost following the recent investment of over US$20 million in a processing plant in Beatrice by a local tobacco company, Voedsel Group. The move resonates with Government’s policy on promoting value addition and saw cigarette exports rising from three percent in 2018 to 10 percent this year. This is according to statistics from the Zimbabwe National Statistics Agency (ZimStats).
The 14-tonne-per-hour tobacco processing plant is expected to be commissioned in December or January next year. The new cigarette manufacturing plant and cut rag processing factory is aimed at increasing the processing capacity by 50 percent in the first half of next year. Cut rag is tobacco processed and finely cut for use in cigarette manufacture.
The country exported cigarettes worth US$28 million in 2018 against total tobacco exports of US$893 million, a three percent rise. This year from January to September the portion of cigarettes within the tobacco product exports rose to 10 percent after it reached US$74 million from a total of US$723 million.
Exports of unprocessed tobacco products have since dropped from 96 percent in 2018 to 88 percent this year.
Zimbabwe exports partly or whole stemmed/stripped tobacco or not stemmed/stripped tobacco as raw tobacco. It also exports tobacco refuse, cigars, cheroots and cigarillos containing tobacco, cigarettes and manufactured tobacco.
Cigarettes are representing value-added tobacco.
ZimStats statistics also reveal that the value of tobacco exports rose 109 percent from US$478 million in 2010 to US$998 last year.
The increased production of flue-cured tobacco witnessed from 2010 to date, after a slump in yields to 100 000 tonnes per annum between 2003 and 2009, portrays the success of the land reform programme due to sheer determination and gain in experience by the newly resettled farmers.
Economic importance of tobacco
The tobacco value chain contributes significantly to agriculture gross domestic product (GDP) and export revenues thereby aiding national economic growth. Tobacco production supports up to 160 000 households and accounts for more than 50 percent of agricultural exports and between 14 and 20 percent of the agriculture GDP.
It also contributes between five and 10 percent of the national GDP.
Zimbabwe is ranked sixth after China, India, Brazil, the United States of America and Indonesia on the list of top tobacco producing countries based on 2022 tobacco production figures, though it still remains number one in Africa.
According to TradeMap, Zimbabwe was ranked number 15 in terms of world tobacco and manufactured tobacco substitute exports for 2022, having exported US$998 million worth of tobacco with China, United Arab Emirates, Poland, Germany and Italy taking the first five slots in decreasing order.
Statistics availed by TIMB show that the Far East market was the largest consumer of our tobacco products accounting for over 40 percent of our export volume, with Africa and the European Union (EU) on second and third position at 20 and 16 percent respectively.
This year, the Far East market accounted for 64 percent of the earnings followed by the EU and Africa at 14 and 12 percent respectively.
The Far East market had the largest average price of US$7,19 with the EU and Africa coming second and third with US$4,37 and US$3,43 per kilogramme correspondingly.
What policies have led to increased tobacco production?
National Development Strategy 1 (NDS1 2021-25)
The National Development Strategy 1 (NDS1 2021-25) crafted in November 2020 outlined the strategies, policies, legal and institutional reforms and programmes plus projects that will be implemented over the five-year period, 2021-2025 towards achieving accelerated, high, inclusive, broad based and sustainable economic growth as well as socio-economic transformation and development.
Flue-cured tobacco production in the first four year of the crafting of the NDS1 has surpassed targets.
Tobacco Value Chain Transformation Plan (TVCTP)
Tobacco production could not extend its high 2019 figure of 259 million kilogramme in 2020 due to the advent of Covid-19 that restricted international movement of people and goods while drought also played its part, as the bulk of the crop is produced on dry land by small-scale farmers.
Cognisant of the drop in production, the Government came up with the Tobacco Value Chain Transformation Plan (TVCTP) in 2020, which seeks to achieve a US$5 billion tobacco industry by 2025.
The TVCTP targets to achieve the following six objectives: sustainable intensification of tobacco production to 300 million kilogrammes; enhancing transparency and fair tobacco marketing; reforming, restructuring and rebuilding institutions in order to raise and optimise the net export benefits for tobacco from the current 12,5 percent to 70 percent by 2025; increasing tobacco value addition and beneficiation from the current two to 30 percent by 2025 as well as to facilitate the production of alternative crops to tobacco to diversify and increase their contribution to farmer revenue and enhance traceability in the face of climate change and anti-tobacco campaigns.
The implementation of the TVCTP by various players has led to an increase in tobacco production.
Monetary policy
In the October 2018 monetary policy statement, the Reserve Bank of Zimbabwe (RBZ) allowed tobacco farmers to retain 20 percent of their earned foreign currency in their nostro accounts as a way of counteracting the increased quoting of goods and services in foreign currency.
The RBZ increased the foreign currency retention for tobacco growers to 30 percent in the 2019 monetary policy statement.
The 2022 monetary policy statement refined the export retention threshold to increase participation by small-scale growers and boost tobacco production in the country.
Accordingly, the retention threshold was increased to 75 percent for tobacco growers for the 2022 tobacco marketing season with the funds treated as free funds.
For the 2023 tobacco marketing season the RBZ increased the foreign currency payment to farmers from 75 to 85 percent with the remaining balance of 15 percent paid at the interbank rate.
For the 2023/24 tobacco marketing season, the RBZ has standardised the surrender and retention portion to 75/25 and localised tobacco production financing by removing restrictions on the use of locally sourced funds to support the production of tobacco in the country.
In this year’s mid-term monetary policy statement, RBZ governor Dr John Mangudya said locally sourced funds could now be used in funding tobacco production.
“In terms of Section 4 of the Exchange Control (Tobacco Finance) Order, Statutory Instrument 61 of 2004, tobacco merchants are required to source offshore financing to produce and buyback green leaf tobacco. Tobacco merchants who fail to secure offshore financing are required to apply to the RBZ for authority to raise funds on the local market. With immediate effect, there will be no restrictions on the use of locally sourced funds to support the production of tobacco in the country,” said Dr Mangudya.
Tobacco success stories
An A2 farmer at Lochnager Farm in Muzarabani, Mr Masimba Charles Choto embraced advice from all tobacco value chain players from research, extension, input stockists, contractors and others after deciding to grow tobacco.
Mr Choto graduated from producing tobacco seedlings using the conventional method to the improved float tray production system in 2019.
Before using the float tray system, Mr Choto used to raise seedlings on an area large enough to cover 50 hectares.
Over the years, he achieved a maximum yield of 3, 6 tonnes per hectare, which he plans to improve to four tonnes.
“I installed a US$360 000 seven-kilometre underground irrigation pipe to draw water from a dam seven kilometres from my farm. I also built three efficient tobacco curing Chongololo barns worth over US$200 000 to cure my crop,” he said.
The use of the Chongololo system has enabled him to save US$45 000 per year.
He bought three brand new tractors and four cars — a Mazda T35 truck, Toyota Land Cruiser and Toyota Hilux. At peak period he employs up to 135 workers.
Other A2 farmers who have transformed their lives through tobacco production include Dr James Chipunza of Mubvakacha Farm in Headlands who has planted 100 hectares of irrigated tobacco this year using proceeds from the last tobacco crop.
Another A2 farmer from Farm 9, Chitomborwizi in Mashonaland West province, Mr Penikati Magwada has increased area under tobacco to 60 hectares up from last year’s 50, thanks to last season’s good returns.
Even former farm workers have joined the bandwagon of success stories from the Government’s land reform programme after forging partnerships with new farm owners.
A former farm worker at Glenluce Farm in Ward 15 of Chegutu district in Mashonaland West province, Mr Phillip Muchenga said that though he has no land of his own, he has managed to buy a car, build a house and purchase four head of cattle from the plots he rents from A1 plot holders.
Another former farm worker at Garvillan Farm in the same ward, Mr Lovemore Festo said he was producing tobacco on two hectares and produced 35 and 41 bales in the 2021/22 and 2022/23 seasons respectively.
“I have managed to buy cattle, furniture, a fridge and wardrobe after selling the crop,” he cheerfully said.
Online Reporter