RBZ maintains 50% USD retention for tobacco farmers

 RBZ maintains 50% USD retention for tobacco farmers
Published: 12 March 2020
The Reserve Bank of Zimbabwe and the Tobacco Industry Marketing Board have announced payment modalities to tobacco farmers although failing to meet all of the demands, which had been put forward by the industry.

Representatives of various farmer associations were demanding that growers get 100% of USD sales proceeds, after USD loan repayments which are to be paid into grower's nostro accounts and that there is no limit on the liquidation periods.

This comes as many tobacco growers were exposed to reduced profitability, exchange rate risk after they failed to access the 50% USD retention or ZWL cash last year as had been prescribed by the Reserve Bank of Zimbabwe. Instead most of the farmers were paid all of their proceeds in RGTS transfers at the interbank rate. As a result of this and the drought, there was a 14% drop in tobacco growers in the current season.

The farmers also wanted the RBZ removed as intermediary.

But the RBZ and TIMB just announced that tobacco farmers will get 50% of their proceeds in foreign currency. In a statement the two organisations said the money would be paid into foreign currency accounts (FCAs) and advised the farmers to open accounts.

"The 50% foreign currency portion shall be paid directly into the grower's foreign currency bank accounts and the 50 percent local currency portion directly into the growers' local currency bank accounts or e-wallets on the day of the sale," read a statement co-signed by John Mangudya and Andrew Matibiri.

The central bank and the TIMB said the foreign currency shall be classified as free funds.

"To facilitate adequate preparations and importation of inputs for the next growing season the foreign currency entitlements for growers shall be treated as free funds and maybe retained in their FCAs for an indefinite period. For the avoidance of any doubt, holders of such funds are permitted to conduct their inter-FCA transfers or effect foreign payments without any restrictions and the FCA balances will not be subject to any liquidation requirements," they said.

"Tobacco growers who require cash to settle immediate essential requirements such as transport expenses and other incidentals shall have access to cash, at a rate of ZW$1.50 per kg of green leaf tobacco sold, up to a maximum of ZW$2000.00. The maximum cash withdrawals may be reviewed as the selling season progresses," RBZ and TIMB added.  

Tobacco growers who have contracted loans in foreign currency shall pay the loans in foreign currency and as such upon sale of the tobacco, the foreign loans shall be payable and deducted from the proceeds of the sale of the tobacco and thereafter 50 percent of the sale proceeds shall be paid in foreign currency and the other 50 percent shall be converted at the applicable exchange rate on the day of sale and paid in local currency.

Tobacco growers will be required to adhere to the stipulated booking requirements for selling of tobacco at the auctions or contract floors and tobacco growers without booking tickets for the day's sale shall not be permitted to offload their bales at the auction or contract floors.

Zimbabwe is the largest grower of tobacco in Africa and the sixth largest in the world. Three types of tobacco are traditionally grown in the country; Virginia (flue cured), burley and oriental (air cured) tobacco. The marketing of green leaf tobacco will be conducted either through contract farming sales or the auction system.  

Data from the industry regulator shows that 7 472 new farmers   registered to grow the crop compared to 41 021 in 2018/19 cropping season. Registration is now closed. The majority of the growers are communal farmers who still believe tobacco is the only viable cash crop, in spite of its production being a challenging investment.

Of the 100 426 hectares area planted, 15 905 hectares is under irrigated tobacco while 84 521 hectares under dry land tobacco. In the previous period, area planted stood at 106 558.
In 2018/2019, tobacco farmers delivered 252 million kg, an all-time record although there were incidences of re-selling. Farmers are expected to produce between 200 and 220 million kg of the crop this year, a decrease from last year following erratic rainfall experienced in some areas.
- finx
Tags: RBZ,


Latest News

Latest Published Reports

Latest jobs