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Tobacco auction faces collapse

BY FIDELITY MHLANGA TOBACCO sales at the auction floors are declining each year, with latest data showing they only constituted 5% of total delivered crop, raising concern over the future of the country’s oldest marketing model. According to figures from the Tobacco Industry Marketing Board (TIMB), the country’s auction floors that include Tobacco Sales Floor, Boka Tobacco Floor and Premier Tobacco Floor have altogether received 5% of total crop delivered as of day 57 of opening of sale. In Zimbabwe, tobacco is sold via auction and contract floors. Statistics from TIMB shows that auction floors received only seven million kilogrammes of the golden leaf valued at US$19,4 million, way below 140 million kg valued US$339,5 million sold via contract floors. This year, there were 31 contract floors registered to buy tobacco. Established in 1936 through the Tobacco Marketing and Levy Act, the auction floor system was, for years, the only platform where tobacco was sold in Zimbabwe. The contract system made its debut in Zimbabwe in 2004 and has been gaining ground ahead of the auction floors. In 2004, when contract floors came into play, auction floors enjoyed huge market share of 76,8%. In 2005, it contributed 60% and in 2006, it crushed to 45% before tumbling further to 40,5% in 2007. In 2008, it was 37,5%, 2009 (50%), 2010 (47,5%), 2011 (43,9%), 2012 (36,1%), 2013 (32,5%), 2014 (23,6%), 2015 (23,6%) and 2016 (17,2%). In 2017, it plummeted further to 16,5%, before dipping to 14,3% in 2018 and last year. Through the auction system farmers solely depend on themselves in mobilising the inputs and resources to produce the crop. After producing, they have autonomy to put their crop on auction where different buyers and merchants bid, with the highest bidder carrying the day. The contract sales were introduced in 2014 to ensure continued and reliable production of the export crop. Farmers get funding to grow the crop through the contract system and money will be deducted through the stop order system. Tobacco Association of Zimbabwe president George Seremwe said there was need for government intervention to support farmers to be self-reliant and save tobacco auction floors from collapse. “It is not healthy to depend on the contractors alone. We need government intervention by either paying backpays or incentives for the growing of the crop,” he said. Banks are reluctant to give farmers loans using 99-year farm leases as collateral, arguing that the leases are not bankable. TIMB has been hiking auction floors charges and undertook an input scheme to support small-scale farmers as a stop-gap measure to keep auction floors in business. Tobacco production was at its highest this year at 258 million kg and analysts attributed this to the growth of the contract farming system. This meant that only a few farmers sold their crop through the auction system.

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