Online Reporter
Debra Matabvu, Senior Zimpapers Reporter
THE Government is poised to overhaul Zimbabwe’s foreign-dominated tobacco financing model — a system long criticised for disadvantaging small-scale farmers — and replace it with a localised framework aimed at ensuring greater value retention and fairer profits for local smallholder producers.
Smallholder tobacco farmers are set to benefit from a US$2 billion loan facility under the Productivity Booster Kit Programme, marking a significant step towards strengthening domestic financing and enhancing the tobacco value chain.
At present, tobacco production is predominantly financed through offshore funding, with 95 percent of farmers operating under contract arrangements and only five percent self-financing their operations.
Zimbabwe retains approximately 12,5 percent of the value of its tobacco, with the remainder used to repay loans and interest to offshore financiers.
Tobacco remains one of the country’s largest foreign currency earners, following gold and platinum. By the end of July 2025, farmers had sold over 350 million kilogrammes of tobacco, generating around US$1,167 billion. However, earnings could be significantly higher if intermediaries were removed from the equation.
During his address on Monday at the launch of the Productivity Booster Kit Programme in Mazowe, Mashonaland Central Province, President Mnangagwa announced that tobacco farmers would be included in the scheme, recognising their integral role in the agricultural sector.
“My Government plans to allocate US$1.98 billion over 10 years as a loan for the Productivity Booster Kit Programme. Additionally, five banks have committed to providing additional working capital. The Productivity Booster Kits will also be made available to smallholder tobacco farmers, to localise the procurement of farming equipment and other aspects of the tobacco value chain,” President Mnangagwa said.
Lands, Agriculture, Fisheries, Water and Rural Development Secretary, Professor Obert Jiri, said the move is a big step towards localised tobacco farming in Zimbabwe.
“80 percent of our tobacco is produced by small holder farmers and by extending booster kits to these farmers, we are able to produce more and better tobacco,” Professor Jiri said.
“They now have procurement of farming equipment, which also includes irrigation. Technically, this means we have localised tobacco farming, which has been mainly funded offshore and tobacco production has always been financed offshore. We are now moving towards the financing of tobacco production. So, it is a big step towards localised tobacco farming.”
Professor Jiri said the country must also move towards the value addition of the crop to ensure maximum benefits.
“The first stage is localising tobacco financing in the country, while the second stage is that of value addition. Farmers are only getting paid for the raw tobacco, which is around US$ 4, 99 a kg. However, once its value is added from the raw tobacco to cigarettes, it gains more value. So, our farmers are getting very little from the raw tobacco, they are selling.
“Since there is an increase in tobacco production, we must now focus on localised financing and value addition of the tobacco so that the country gets the value out of tobacco production.”
Although vibrant, the country’s tobacco sector is predominantly driven by six major foreign-owned tobacco contracting firms, often affiliated companies to global tobacco giants.
These firms secure loans, frequently facilitated by their overseas parent companies, to procure inputs for their contract farming programmes. About 90 percent of tobacco is financed by contractors.
However, a concerning pattern has emerged where inputs are reportedly sold to farmers at inflated prices. Farmers, who receive the inputs as part of their production loans, then become indebted for values far exceeding the actual market cost.
Investigations have revealed that large tobacco contractors begin profiting significantly at this stage, effectively recovering value they may not have genuinely invested in the first place. This has become a key basis for critics to argue the practice also raises concerns about potential transfer pricing.
The contract system becomes even more intricate. To meet the large volume demands of their global parent companies, some foreign-owned contractors often engage local Zimbabwean firms, known as “surrogate companies.” The surrogates are supplied with inputs or funds by the major contractors to support the farmers, who are technically contracted by these local firms.
In essence, the tobacco produced ultimately belongs to the foreign-owned companies. Local “surrogate” firms receive commissions for their role, which critics argue should “rightfully” go to the farmer. The “additional loss” for farmers comes on top of the already reduced value they experience from paying for the inflated prices of inputs, highlighting a significant challenge for the profitability and sustainability of tobacco farming for many smallholder producers in Zimbabwe.
