Calls for review of Zimbabwe’s tobacco distribution model

There are growing fears that earnings from tobacco, which remains Zimbabwe’s second single largest foreign currency earner after gold, might be falling because most of the contracts are sponsored by offshore funds. As a result, most of the proceeds remain offshore in the hands of funders, notes a New Zimbabwe report. The central bank says the country earns an average of US$800m from tobacco annually, but the resale value is in the billions as it circulates in global value chains. Stakeholders say the country must revert to the domestic funding of the crop to ensure the viability of farmers and the auction marketing system. Foreign tobacco merchants claim they bear costs and risks, including borrowing funds. ‘It's good on paper (the contract farming system) but there are many costs involved which are passed on to farmers and this renders them less viable ... yet on the global market they (contactors) benefit a lot,’ said Reserve Bank of Zimbabwe governor John Mangudya. He added that the model was unwieldy and needs to be reviewed ‘so that we can have kind of an equitable mix of contract and auction’.