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War over tobacco out-grower schemes

MULTINATIONALS and Chinese firms should leave tobacco out-grower schemes to indigenous players if government’s empowerment drive is to be meaningful, the Zimbabwe Economic Empowerment Council (Zeec) has said.

REPORT BY OUR STAFF

An out-grower scheme refers to an agreement between a buyer and farmers, which establishes the conditions for the production and marketing of an agricultural product. The farmer agrees to provide set quantities of a specific agricultural product, meeting the quality standards and delivery schedule set by the purchaser, while the buyer in turn commits to purchase the product.

Zeec and Tobacco Association of Zimbabwe president Temba Mliswa said Chinese companies were rapidly taking over the country’s tobacco sector through contract farming and making profits across the board.

“An overview of most contracted farmers in the tobacco growing areas will show that the majority of them are in arrears and can hardly break even. The [Chinese] firms have put substantial mark ups on inputs supplied, an administration fee, an extra top up charge on fertilisers, while tractors brought in from China are charged too,” he said.

Mliswa said the Memorandum of Understanding signed between the Chinese and the Agriculture, Mechanisation and Irrigation Development Ministry effectively pushed out the indigenous sector’s involvement in the out-grower scheme as the Chinese can easily secure capital amounts to be availed to growers.

He said the out-grower scheme was basically a response to the liquidity crunch that prevailed soon after the land reform programme as there were no banks available to support the agriculture sector at the time.

“The minister [Saviour Kasukuwere] has the whole empowerment concept with regard to the tobacco sector wrong. He is not consulting all relevant players and stakeholders in the tobacco industry. Let not empowerment be about allowing people to reap where they have not sown,” said Mliswa, adding that empowerment should benefit local companies already involved in the out-grower scheme.

Statistics from the Tobacco Industry Marketing Board showed that the average price for contract tobacco was US$3,70 on Tuesday compared to US$3,91 during the same period last year.

On Tuesday at least 58% of the tobacco sold came from contracted farmers with the remainder coming from auctions.

Mliswa said prices being offered for contract tobacco are being determined by a cartel made up of a few players.

“Why would the Chinese bemoan the quality of tobacco yet the tobacco is checked and supervised by field officers who monitor the process from planting and reaping, right up to harvest? Moreover, contract farmers are subjected to interest rates of 11% to 12,5% of the money availed to them by the Chinese,” he said.

Late last year, Chinese tobacco contract farming and purchasing firm Tian Ze Tobacco Company bemoaned what it termed  “poor quality” of last year’s cured leaf.

The company urged local farmers to invest in the process between the field and the auction floors in order to derive more from their produce.

However, some discontented farmers have approached banks attempting to gain independence from contract farming arrangements but have generally received little support from financial institutions.

Tian Ze Tobacco Company deputy managing director Cai Bing criticised contracted farmers who were involved in side marketing and said this would negatively affect funding.

Advantages of contract tobacco farming include access to inputs and production services, access to credit and assured markets.

Zimbabwe’s 2009 to 2011 economic growth was partly led by tobacco, produced increasingly by smallholder farmers in new contract farming arrangements, and supported by high international prices.

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