Zimbabwe tobacco auction floors opened on Tuesday with the government begging farmers to sell their crop

By Hendricks Chizhanje

HARARE – Acting Finance Minister Patrick Chinamasa promised a new exchange rate to tobacco farmers while central bank chief Gideon Gono promised more as Zimbabwe’s government desperately begged reluctant growers to deliver tobacco to auction floors that opened on Tuesday. 

Tobacco, which generated about US$400 million in foreign exchange at the peak of production in the late 1990s, is Zimbabwe’s single biggest export earner for hard cash starved Harare. 

But commencement of tobacco sales was this year delayed by a month as farmers held on to their crop to protest an overvalued exchange rate that they said would leave most of them in financial ruin. Auctioning finally kicked off around 3pm on Tuesday. 

However, it had to take the spirited efforts of Chinamasa and Gono to convince farmers to let up with their tobacco crop. 

Addressing about 1 000 farmers at the Tobacco Sales Floor just outside Harare city centre, Chinamasa pledged that the government would announce a new exchange rate favourable to farmers in four days, failure of which farmers could “decapitate the heads” of Chinamasa and his colleagues in the government. 

“The government values tobacco farming and its growers . . . we want an act of faith,” Chinamasa pleaded with the farmers. “We don’t want tobacco growers to be broke. In the following days we will announce and tell you how much we will pay. We will reward you handsomely. If we fail to meet our promise, decapitate our heads,” he said. 

Chinamasa did not indicate whether the finance ministry was planning reviewing the exchange rate entirely or it would have a special rate for farmers as happened in the past.  

The Zimbabwe dollar officially changes at a fixed rate of 250 to one American dollar but one would need almost 100 times as many Zimbabwe dollars for one greenback on the illegal parallel market for foreign currency and where the bulk of hard cash is traded. 

Tobacco farmers and other exporters say the skewed exchange rate is driving them out of business but the government fearing prices would shoot beyond the reach of many if the local dollar is devalued had until now resisted reviewing the exchange rate. 

Gono, the governor of the Reserve Bank of Zimbabwe (RBZ), told the farmers the central bank was printing more money for the government to pay them. 

He said: “We are not going to do things that will drive our farmers off the land. As Governor I am still printing the money to pay you because it is too much.” 

Economic experts however say Gono’s habit of printing worthless paper money to bail out the government is one of the key reasons driving money supply growth and inflation. 

The RBZ boss promised to let tobacco farmers retain 20 percent of their hard cash earnings up from the 15 percent they were previously allowed to retain to cover future production costs. 

An estimated 80 million kilogrammes of tobacco are expected to be delivered to the auction floors compared to 55 million kilogrammes sold in 22006. 

More than 200 million kilogrammes of tobacco were produced in the 1999/2000 season before the government seized farms from white farmers who produced the bulk of the crop under a controversial land redistribution programme that has knocked down agriculture and also led to severe food shortages.  

Opening prices ranged between US$1.39 to US$1.69 per kg as 400 bales of tobacco were delivered on Tuesday. 

The opening of sales will come as a relief to President Robert Mugabe’s hard cash-strapped administration, which needs foreign currency to pay for food, fuel, electricity and other critical imports. - ZimOnline