Zimbabwe expects a 21% increase in tobacco output this year, but the positive outlook has been dampened by a new policy that leaves farmers with less money for their labour.
The 2024 tobacco selling season opened on Wednesday at the Tobacco Sales Floor, with prices ranging from US$1.60 to a high of US$4.65 per kilogram. Farmers expanded tobacco plantings to 125,000 hectares this season, up from 113,000 hectares last year. As a result, output is projected to rise from 230.9 million kg in 2023 to 280 million kg, Agriculture Minister Anxious Masuka said at the opening.
“We are certainly headed for a bumper, bumper harvest if the rains continue for the next two weeks,” Masuka said.
But a new government policy shift has tempered the optimism for farmers, who already get marginal profits in an industry dominated by foreign merchants who buy 95% of the crop.
In February, the Reserve Bank of Zimbabwe cut the foreign currency retention threshold from 75% to 70%. This means that when a tobacco farmer sells their crop, they are paid 70% in USD and 30% in ZiG. Yet, according to the Zimbabwe Tobacco Association, almost all the farmer’s costs — such as fertilisers, chemicals, fuel, equipment, and labour—are in USD.
“Your USD production costs range from 85% to 100%, yet you will only be retaining 70%,” says the ZTA. “Your 30% in local currency will be insufficient to help recover your production costs and keep you viable in coming seasons.”
The ZTA says there are 127,311 registered growers this year, 11% more than last year. “This growth has largely come about from growers’ confidence and improved returns for each US dollar invested,” says USD. This confidence may be eroded by RBZ’s move on forex, the association fears.
Some growers had used last year’s retention threshold of 75% in their costing for the new season, ZTA says.
“Growers who have already committed to production costs based on the previous retention rate now face additional pressure on their operating capital and recouping expenses.”
