Tobacco growers push for exchange rate disparity pay-out
TOBACCO growers are pushing authorities to consider exchange rate difference payment to cover the losses they incurred when they sold their crop at a fixed rate of US$1:$25.
BY FIDELITY MHLANGA
The forex auction system started to operate yesterday.
Since the commencement of the selling season in April, farmers were getting 50% of their earnings at a fixed rate of US$1:$25 at a time the parallel market rate is around US$1:$100.
Farmers now want government to give them the difference in a bid to recoup their investments.
Farmers get the other 50% in foreign currency through nostro accounts and the money is regarded as free funds.
Tobacco Association of Zimbabwe president George Seremwe said the move to have a market-determined exchange rate should see farmers getting paid exchange-rate differences.
“At least farmers will get the other 50% at a market rate. We hope the forex auction system will be sustainable for future tobacco growing. Also, we are encouraging government to give some form of incentives for those who delivered their tobacco early,” said Seremwe.
Seremwe said this could be the best way to reward the majority of small-scale farmers who have already delivered their crop at the floors.
“I am afraid most of our small-scale farmers have sold more than 50% of their tobacco. We are appealing to the government to consider them,” he said
Asked to elaborate as to which rate should be used to repay farmers Seremwe said, “That will be [the] point of discussion.”
The central bank suspended the operation of the interbank forex system and put a fixed rate in place in March before reintroducing the auction system which started operating yesterday. The forex auction will be done once a week.
As of day 36 of sale, 93 million kg valued US$216,6 million has been delivered at both auction and contract floors.
The overall average price at 2,33 per kg is 30% higher than last year same period.
During the same time last year, 83,4 million kg valued US$149,5 million had been delivered.
The highest price of US$6,60 per kg was offered at the contract floors whereas auction floor highest price remains stuck at US$4,99 per kg.
This year’s tobacco season commenced on April 29 after several deferments as authorities grappled with measures to contain the spread of the global COVID-19 pandemic.
Tobacco is one of the country’s top forex earners.
Tobacco Industry and Marketing Board has projected this season’s output at 225 million kg which is lower than an all-time high of 259 million kg last year.