Harare - Zimbabwe which requires about $1.7 billion (R25.9bn) for this year’s agricultural season, has moved to stave off a looming cash shortage crisis after issuing an order that tobacco deliveries to auction floors only be paid for through banks.
South African traders are among the biggest buyers of tobacco produced in Zimbabwe fronted by China, Belgium and Indonesia. However, there has been a 45 percent marked decline in new tobacco farmers as current drought conditions, lower prices and difficulties to access inputs weigh down on prospects for the industry.
The 2016 Zimbabwe tobacco marketing season opens on March 30 but there are fears that a crunch that saw some banks run out of cash and others limit daily withdrawals to $1 000 could affect trade.
Zimbabwe usually gets a boost from the tobacco marketing season, which brings temporary respite to informal traders and manufacturers selling their goods to tobacco farmers who would have pocketed money from tobacco sales.
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The Reserve Bank of Zimbabwe and the Tobacco Industry and Marketing Board (TIMB) yesterday said that the tobacco farmers would not be paid in cash this year and instead proceeds would be deposited into bank accounts.
“The tobacco selling season will open on March 30 for the auction sales floors and on March 31 for contract sales floors. All proceeds from the sale of tobacco will be paid through bank accounts,” the central bank and TIMB said.
The tobacco farmers, most of them communal farmers who had taken up growing the cash crop and ditching others such as maize and wheat, “are required to open accounts with banks of their choice to facilitate” payments for deliveries.
“We have serious liquidity challenges in the economy and payments to tobacco farmers comes in at just below $1bn. If not addressed properly the tobacco auctioning season may cause a cash crisis for the economy and this is why the farmers need bank accounts,” said a treasury department official.
The TIMB said tobacco export earnings for Zimbabwe increased by 7.2 percent to about $182.9 million in the year to January. It said Zimbabwe had sold as much as 25.2 million kilograms of tobacco during the period compared with 23.3 million kilograms in the previous contrasting period.
Under the new arrangements, tobacco farmers opening bank accounts would enjoy “favourable conditions which include waiving of charges for maintaining bank accounts” and would only need their ”national identity and tobacco grower’s number” in order to open a bank account.
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The central bank intends to drum up financial inclusion and usage of plastic money through such initiatives. The opening of bank accounts will also help the farmers to speedily access financing.
Finance Minister Patrick Chinamasa said the country needed about $1.7bn for the 2016 agricultural season.
BUSINESS REPORT