TOBACCO merchants have asked the Reserve Bank of Zimbabwe (RBZ) for higher nostra allocations in a move aimed at reducing the overall cost of production.
Ethical Leaf Tobacco managing director Doesmatter Muvimbi told The Financial Gazette last week that the sector needed to learn harsh lessons from the country’s collapsed cotton industry and not “kill the goose that lays the golden egg”.
A nostra account is a bank account held in a foreign country by a domestic bank mainly to facilitate settlement of exchange and trade transactions.
“Tobacco brings in a lot of forex and we would be happy if a bigger chunk of this goes towards availing cheaper nostra to merchants.
“This way we would be able to import fertiliser raw materials at a cheaper price so that the eventual cost of production is reduced,” Muvimbi said during an executive dialogue on the tobacco industry hosted by The Financial Gazette.
Pointing out that the RBZ allocated little or no foreign currency for the importation of fertiliser, the tobacco merchant highlighted that compared to regional counterparts; fertiliser remained relatively expensive in Zimbabwe.
“If we look at the parity cost comparison with other SADC countries we are still high the regional average ranges between $15 and $20 for a bag, while our average is $30.
“As a country we should take harsh lessons from cotton sector, the moment we side-line the viability issues with the farmer the whole chain suffers eventual demise.
“So we would like the RBZ to look at this issue seriously so that we bring cheaper products to the farmer to ensure that the production will be more viable lo the farmer,” said Muvimbi.
He added that merchants were being forced to procure foreign exchange on the parallel market, which was also driving up the cost of production in the tobacco value chain.
Zimbabwe is the world’s sixth-largest tobacco producer, and the crop is the country’s most valuable agricultural export commodity, but farmers are failing to access money after selling their crop. Each time the tobacco marketing season opens, the country’s liquidity situation improves according to the central bank governor John Mangudya.
Tobacco industry players said it was curious that the RJ3Z recently moved in with more allocations of foreign currency to manufacturing firms under a $600 million nostra stabilisation facility availed by the AfreximBank to enable companies to procure critical raw materials and increase supply of goods.
The apex bank secured the $600 million nostra stabilisation fund from AfreximBank as part of measures to improve liquidity in the economy and boost domestic production.
Tobacco growers have, meanwhile, requested the central bank to pay them through foreign currency accounts (FCA) on the back of Zimbabwe’s hard currency shortages.
Seasoned tobacco farmer Bright Bvukumbwe last week said due to the country’s foreign exchange shortages and a thriving black market, the tobacco sector was now facing a serious viability threat.
“When we are paid into our accounts, the value of the money instantly deteriorates. At the end of the day it is just $2,88 per kilogramme on paper, but add cash premiums to that and it is significantly less.
“When the farmer wants to service equipment or conduct other functions, cash discounts apply, so at the end of the day you realise that it actually becomes more expensive to have the money deposited into a regular account.
“So to make matters easier for the tobacco farmer, there is need to allow tobacco farmers to have FCA accounts,” Bvukumbwe said.
As at August 27, 2017, the number of new tobacco growers who had registered to grow the crop in the 2017/18 cropping season had surged 199 percent to 21 331 compared to 7 131 recorded prior comparable period.