Zimbabwe is expecting a 21% increase in tobacco production this year, but a new government policy is dampening the optimism among farmers, who now face reduced earnings for their labour.
The 2024 tobacco selling season officially 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 announced at the opening.
“We are certainly headed for a bumper, bumper harvest if the rains continue for the next two weeks,” Masuka said.
However, a recent policy shift by the Reserve Bank of Zimbabwe (RBZ) has tempered farmers’ optimism. The tobacco industry is already dominated by foreign merchants who purchase 95% of the crop, leaving local farmers with marginal profits.
In February, the RBZ reduced 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 Zimbabwe Gold (ZiG). However, according to the Zimbabwe Tobacco Association (ZTA), nearly all production costs—including 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%,” the ZTA stated. “Your 30% in local currency will be insufficient to help recover your production costs and keep you viable in coming seasons.”
The ZTA reports that there are 127,311 registered tobacco growers this year, an 11% increase from last year. “This growth has largely come about from growers’ confidence and improved returns for each US dollar invested,” the association said. However, the RBZ’s new foreign exchange policy threatens to erode this confidence.
Many farmers had already budgeted their costs for the season based on last year’s 75% retention rate, according to the ZTA.
“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.”
While Zimbabwe’s tobacco industry is set for a strong output, the new forex policy raises concerns about the financial sustainability of farmers, who may struggle to remain viable in the coming seasons.
