THE 2017 tobacco marketing season is expected to close on August 11 after 103 days. The government’s output forecast for the current season was 215 million kilogrammes (kgs). However, indications are that the crop may range between 185 million kgs and 190 million kgs, earning the country about $550 million. The Financial Gazette’s Online Editor, Paul Nyakazeya, this week spoke to Ethical Holdings Tobacco chief executive officer, David Machingaidze (DM), about the season and prospects for 2018.
PN: From your observations, what are the output projections for the 2016/2017 season?
DM: The 2016/2017 could close at 185 million kg, since we are currently trending at 182 million kilogrammes, with sales closing on August 11. The initial projection was 200 million kg but the incessant rains greatly affected the weight of the green tobacco.
PN: What is your overview of the current selling season?
DM: In general, the pricing regime has been firm and fair, with average prices for contract and auction sales being $2,99 and $2,85 per kilogramme, respectively, with the national average being $2,96.
PN: Can we say that the smallholder farmers have benefitted from growing tobacco?
DM: In principle, the smallholder farmers have benefitted immensely from growing the crop due to a number of factors. There is a general improvement in the social and economic activities in areas that have a high concentration of growers. Most tobacco growers are embracing technology in cases where some significant households use solar energy and gas for cooking and in so doing preserving the environment from effects of deforestation. The farmers are generally moving away from draught power to mechanised farming to improve efficiency and embrace good agricultural practices in the husbandry of the tobacco crop.
PN: How has the cash crisis affected the tobacco grower?
DM: The cash crisis has affected the tobacco growers in a significant way because they are taking time to adjust to alternative payment systems in the conduct of their business. The main issue is that growers need more education and appreciation on the benefits of using plastic money as opposed to the traditional notes and coins, loosely referred to as cash. Some growers were spending days sleeping at the selling points so that they could get a sizeable amount of cash withdrawals to meet their demands.
PN: What can be done by government and the regulator to ensure that the tobacco farmers fully benefit from the production of tobacco?
DM: The government and regulator may create an enabling environment for the establishment of empowerment vehicles that will ensure that the tobacco companies plough back in the communities where they derive economic value for their companies. This will ensure that the companies also contribute to the infrastructure and social amenities in those areas of operation. Currently, we have a number of big players in the industry constructing schools, repairing some roads and just recently the launching of an employee participation in the profit sharing of the companies. The bigger picture is to have growers having an empowerment vehicle where they also partake in the proceeds from the value addition of the product they produce. The apex bank, RBZ, has led the way through the export incentive scheme which is paid monthly direct into the growers’ accounts and the challenge is on individual companies to structure their own models and appreciate growers accordingly.
PN: On average, how much are the farmers earning per bale?
DM: An average bale weighs 80 kilogrammes and at the current seasonal average price of $2,96 per kg, a farmer earns $237,60.
PN: Tobacco production is now mainly contract growing. Free tobacco is about 30 percent, why?
DM: Contract growing brings with it a number of advantages but mainly it has to do with a reliable, predictable market where tobacco prices are reflective of the quality of tobacco. (There’s) no glass ceiling on prices as compared to the “free tobacco” market. It has also to do with contract farmers having enough material and financial support for their production cycle. They have adequate agronomic support and more important a stable market where they experience a good service when they sell their tobacco because of the relationship that exists between grower and contractor.
PN: What went wrong with the e-marketing system? How was it going to benefit farmers?
DM: In principle, the concept behind e-marketing is noble as it brings fairness and removes collusion in the marketing of the crop as buyers bid through the system and in doing so the farmer gets the best possible price in a situation where there is competition amongst the buyers. The only hitch was the implementation where the operationalisation of the whole system is subject to connectivity issues and also the critical people who operated the gadgets — the buyers — probably needed more time to familiarise with the technology before the roll out. There is scope for improvement as the industry is always giving valuable feedback to the regulator on how best the system can be perfected.
PN: From the seed sales so far, what are the projections for the 2017/2018 season?
DM: Based on the seed sales, we project an increase in the national yield next season as we also take into account leftover stocks of seed that will be used by the growers for the next crop.
PN: The World Health Organisation ban on tobacco production, what is the sector in Zimbabwe doing?
DM: The tobacco sector is providing the material and moral support to make sure that the country is not left out when important decisions are made on the crop as it affects the economy and livelihoods of a large part of the population. The agenda is led by the National Economic Consultative Forum, who attend all the meetings within the framework of the Convention on Tobacco Control and more importantly all the CoPs (conference of parties) and they give timely feedback get valuable input from industry players so that we protect our economy.
PN: Are there alternative crops to replace tobacco?
DM: The other alternative cash crop is cotton, which is currently facing its own viability challenges where most cotton growers have migrated to tobacco. There are no alternative crops that give economic benefit and value to the level that tobacco brings. The importance of tobacco is demonstrated by the national sentiment at the end of the selling season, where the country fears a foreign currency “drought” as a result of the end of the marketing season.
PN: What is the projected future of Ethical Holdings Tobacco?
DM: We have a vision 2030 whereby we envisage Ethical Holdings Tobacco to be the preferred contractor by the tobacco smallholder growers. The brand will be the torch bearer on the management of tobacco out-grower schemes where our relationship with growers will be the pride of tobacco growers and our business relationships with stakeholders will be the envy of many industry players.