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Harare, Zimbabwe – Bornface Batwero is sitting in the seat of the driver of his truck sitting outside the Tobacco Sale floor – the capital of Harare is the place for auctions, where farmers gather around Zimbabwe to sell their crops.
It’s mid-morning on Monday. Batwero told Al Jazeera he was waiting to receive payment for the consignment of tobacco he sold on Friday when he arrived from the Centenary, a rural area of Mashonaland province, 144 km (89 miles) northwest of Harare.
“I am currently awaiting my payment,” said the 37-year-old tobacco farmer. “I don’t know how much they’ll pay me.”
Uncertainty has become a feature of Zimbabwe’s largest agricultural export.
Tobacco Sales Floor, the division of an agribusiness group listed on the Zimbabwe Stock Exchange, Tobacco Sales Limited, is one of the leading auction houses in the country.
After COVID-19 dominated the nation last year, it introduced a new system for marketing Tobacco Sales Floors – like other auction floors – that does not require farmers to be physically present when they sell crops. Instead, a person represents a group of farmers at auction to limit physical contact to ensure they get good treatment.
Batwero is still waiting to receive his money. More than the inconvenience of waiting, he is worried that a significant portion of his payment will fall in value even before he sees it, eroding profits.
In fact, according to the new regulations for the sale of tobacco since the coronavirus pandemic, farmers receive $ 60% of their tobacco payments in the U.S. – the money they raise on the auction floor. Another 40 per cent is paid in Zimdollars, Zimbabwe’s local currency, which is equipped with cable in bank accounts.
Time is literally money
On the surface, paying 60 percent in foreign exchange is an improvement over last year, as tobacco farmers received only 50 percent of the payment in U.S. dollars.
The current discrepancy lies in the 40 per cent balance paid by Zimdollars and the longer waits to actually receive it.
When tobacco farmers sell their crops, Zimdollar’s payment is calculated at the official exchange rate, which follows the black market rate. Last Monday, for example, the official exchange rate was $ 85 Zimdolar. The black market rate was much more generous at $ 130 Zimdolar.
Moreover, this gap may suddenly increase day by day, meaning that farmers will have to wait for Zimdollar’s payments, as there will be a greater risk of black market rates being set against them, essentially eroding their real profits.
The result: this wait can cost them money, leaving many tobacco farmers very happy with the current organization.
Persuade Mubvumbi is a 33-year-old tobacco farmer from Bindura, about 66 km north of the Valley. He says he disagrees with the new payment regime because all the materials he needs for farming – including seeds and fertilizer equipment – have to be paid in U.S. dollars, not Zimdolar.
“I am not at all happy with the new payment system,” Mubvumbi told Al Jazeera outside the Tobacco Sales Floor, who was also waiting to pay for his harvests. “When I get the dollar equivalent of RTGS [Real Time Gross Settlement dollars, also known as Zimdollars] at the official rate, it means I’m losing value, “he said, turning it into a conversion calculator to show the unfortunate conversion.” The exchange really hurts us. “
Mubvumbi said his tobacco harvest in 2009 earned him $ 6,000 at auction – enough to grow crops to feed enough to buy cows and corn seeds, as well as a number of other things.
“We were able to build decent houses and get trucks and grow corn. Everything was good, ”he said.
That all changed in 2016, when Zimbabwe’s economy was dollarized and the central bank – in an effort to relaunch the local currency – introduced bond notes, with authorities saying the replacement was the same value as the US dollar, but that was greatly delayed by fueling the Zimdolar. speculative.
Last year, Mubvumi said it accepted a $ 2,000 price for its tobacco harvests at auctions, of which it received $ 1,000 in cash with the balance paid in Zimdollar, which was converted into an official exchange rate.
“When I converted to currency [Zimdollars] on the black market in the US dollars, I had only $ 400, ”he said, which is, in real terms, the real value of his agreed $ 2,000 price of only $ 1,400.
He is afraid he will get the same deal this year as well.
The Zimbabwe Tobacco Association argued in a recent report that tobacco farmers had to receive at least 70% of their sales payments in US dollars, given that 70% of the revenue they face is in US dollars. [File: Mike Hutchings/Reuters]Asking for a better deal
In a recent report, the Zimbabwe Tobacco Association, a trade group for farmers, questioned the viability of the current payment regime. According to the association, tobacco farmers should receive at least 70% of their sales payments in US dollars, given that 70% of the revenue they face is in US dollars. They also say that Zimdollar payments by 40 percent increase the economic pain they are suffering.
“We urge the authorities to study the level of retention in foreign currency before the start of the sales season,” the association said. “Improving the viability of growers is key to ensuring that the sector achieves direct growth and that the country improves its foreign exchange earnings.”
Tobacco is a clear spot in Zimbabwe’s long-standing agricultural sector, and this year sales are expected to increase by 8.7% to 200 million kilograms thanks to the best rainfall in three years, according to official forecasts.
Tobacco exports bring in enough foreign currency – about $ 782 million last year, according to the country’s central bank.
Tafadzwa Muringai, a 36-year-old farmer from Banquet, a town 94 km northwest of Harare, had an echo of the feelings of Batwero and Mubvumbi.
“When the economy was still dollarized, farmers who paid in U.S. dollars did very well. They have tractors and cars and the acre is better, “he told Al Jazeera, believing the authorities are taking advantage of the pandemic to treat farmers worse now.” When I go to the market, I think I’m happy. But I’m not. “
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