ZIMBABWE’S 2019 tobacco marketing season commenced yesterday with the Reserve Bank of Zimbabwe (RBZ) reneging on its earlier commitment to pay farmers 50% of their sale proceeds in foreign currency.
The golden leaf is the country’s second largest foreign currency-earning commodity after gold, with exports generating in excess of US$1 billion annually.
According to a circular released by the RBZ late on Tuesday, farmers will now effectively be paid 100% in real time gross settlement dollar.
“Merchant is going to get 100% RTGS$ to enable purchase of tobacco. The farmer will get 100% RTGS$ sales proceeds after deducting all other costs. The farmer will have to, if they require the foreign currency, buy back the 50% foreign currency component using sale date exchange rates and the foreign currency will be credited in their local FCA (foreign currency) account with their bank,” RBZ said in a communique seen by NewsDay.
The industry regulator, Tobacco Industry Marketing Board (TIMB), shall be required to submit schedules of growers, three days after sale date indicating the grower’s choice of payment.
“Growers should note that all payments into the RTGS accounts are converted using the prevailing interbank rate. If a farmer prefers foreign currency, it shall then be credited to their respective commercial bank accounts,” the central bank said.
“TIMB must educate growers such that their banks have authority to automatically debit their respective RTGS$ accounts with the RTGS$ amount required to buy back the foreign currency entitlement.
“Small-scale growers shall be entitled to withdraw USD cash equivalent to US$0,10 per kg of tobacco sold, up to a maximum U$D50, once their local FCA has been credited with the foreign currency.”
However, TIMB chairperson Monica Chinamasa insisted yesterday at the official opening of the floors that payment into the nostro FCA accounts would be done by the apex bank within 48 hours of the sale, with the balance of 50% of the net sale proceeds being credited into the grower’s RTGS bank account.
“The payment into the nostro FCA accounts will be done by the RBZ within 48 hours of the sale. The balance of 50% of the net sale proceeds shall be credited into the grower’s RTGS bank account,” she said.
According to official sources, about 70% of the sales on Wednesday were reversed as a result of the confusion around the currency of payment.
The first bale fetched RTGS$4,50 per kg, while the lowest was priced at ZWR$0,20 per kg, much to the disappointment of farmers.
The RTGS$ was trading at 1:2,7 to the greenback on Tuesday.
“The price is not good at all, I want to withdraw my sale,” Chiweshe farmer James Farisai said. “I was expecting that they pay at least over $2 and above. The price cannot cater for all the costs I incurred to produce the crop.”
Contract sales are set to begin today, but it is still not clear whether farmers will agree to payments in ZWR$.
Farmers’ associations feel the current payment set-up was not conducive for farmers and were pushing to meet the central bank governor John Mangudya to solve the impasse last night.
This impasse comes after growers raised concern over the fact that some merchants were not clearly separating USD loans from ZWR$ loans, thereby prejudicing farmers.
“Merchants and the industry were concerned that the new process flow of calculating the 50% FCA entitlement after deduction of all three costs was at variance with Exchange Control Circular Number 3, which says the tobacco farmer shall be paid 50% in foreign currency after the deduction of USD inputs,” the RBZ circular read.
The central bank said it shall amend Circular Number 3, which says the tobacco farmer shall be paid 50% in foreign currency after the deduction of USD inputs, to conform to the need to deduct statutory deductions, prescribed costs and USD input loans before calculation of the 50% split.
TIMB licensed three auction floors as well as 33 and 31 A class and contract buyers respectively, for the 2019 marketing season.