Banks, Pension Funds Shun Tobacco Sector
Local banks and pension funds are reluctant to fund tobacco farming amid calls for the central bank to increase the forex retention threshold from the current 60% and rescue the sector from collapse.
Tobacco Industry and Marketing Board (TIMB) chief executive officer, Andrew Matibiri told Business Times this week that the unwillingness by the lenders to fund the crop, which requires about US$600m a year, has left the merchants firmly in control.
The tobacco merchants have been accused of manipulating the tobacco pricing system. Said Matibiri:
The tobacco sector needs local funding but with banks not willing to fund the US$9m TIMB Input Scheme, one wonders if they can commit to funding US$600m yearly.
… Pension funds have the capacity to fund the sector but with them having not benefited immensely from other government programmes [Command Agriculture Scheme], they seem not interested to fund.
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It’s very sad for the sector as this leaves the farmer with the same old tobacco merchants for funding.
Matibiri pleaded with the Reserve Bank of Zimbabwe (RBZ) to review the foreign currency retention threshold from 60% to 70%. He said:
Farmers urgently need an upward review of the foreign currency retention threshold to clear debt, some farmers say they need 70% to break even hence an upward review will enable them to start getting profits.
Mangudya defended the activities of tobacco merchants, claiming that tobacco farmers are the most privileged exporters. He said:
I don’t see anything wrong with tobacco merchants getting their money back after sales as they will be deducting the money they would have invested in tobacco growers. They put forex and we give them 100% forex.
Tobacco farmers are the most privileged exporters as they get 60% of the net sales after all deductions have been made.
They should be happy as their gold counterparts are getting 60% forex retention from gross sales.