A top economist has warned Finance Minister, Mthuli Ncube against demoralising tobacco farmers through payment in the local RTGS currency as opposed to the more stable US dollar.
Godfrey Kanyenze was speaking to NewZimbabwe.com recently following an unpopular decision by government to pay tobacco farmers part of their dues in the much resented local currency.
Kanyenze urged the treasury boss to take the concerns of tobacco farmers seriously as this could have negative effects on the production of the lucrative crop in future.
“We have a problem emanating from the fact that government created a quasi-currency in the form of the RTGS$ which is now being used to pay the tobacco farmers,” Kanyenze said.
“Remember some of the tobacco farmers protested vigorously raising concerns that they had not grown their tobacco in order to be paid in the local currency.
“What they are simply saying is that they do not want a currency whose value is uncertain. So ultimately, they want to be paid in a decent currency.”
Kanyenze said “the manner in which the farmers are being handled can create a disincentive which discourages farmers from producing the golden leaf” and this could result in foreign currency shortages in the country.
The outspoken economist said tobacco farmers were major contributors of foreign currency in the country and their efforts must be rewarded.
In a recent trading update, the Tobacco Industry and Marketing Board (TIMB) said sales had declined by 66 percent from about US$151.1 million dollars recorded during the same period last year.
The volumes dropped by 45.6 percent from 53.9 million kg during the comparable period last year.
The average price for auction and contract sales stood at US$1.75 dollars per kg which is 37.6 percent lower than the US$2.80 dollars for the same period last year.
According to TIMB, tobacco prices have remained subdued as merchants are not happy with the arrangement the Reserve Bank of Zimbabwe (RBZ) has put in place regarding the recovery of loans advanced to farmers.
The RBZ directed tobacco farmers to pay 70 percent of the loan amounts they sourced from merchants in United States dollars, while the balance would be settled in RTGS dollars after the farmers’ complaints to the authorities.
Even the TIMB chairperson, Monica Chinamasa has on numerous occasions called on Ncube to sit down with the merchants and agree on what is good or fair for both sides.