eBusiness Weekly
Africa Moyo
TOBACCO concern, Bullion Leaf Zimbabwe, plans to plough $20 million into tobacco contract farming and buying, as it seeks to consolidate its footprint in the mega bucks sector.
The tobacco sector is one of the fastest growing industries in the country, as evidenced by increasing number of registered growers every year. Correspondingly, output has been growing, with 253 million kg being achieved last year and in the process, shattering the 239 million kg record set in 2000.
Bullion Leaf Zimbabwe managing director Persistence Gwanyanya, told Business Weekly on Wednesday that they are already working with financiers for the upcoming season.
“Our intention is to invest not less than $20 million in the project and we are working with our financial partners to finalise the financial package for this 2019/2020 farming season,” said Gwanyanya.
“Having realised the challenges to procure inputs mainly due to forex shortages, Bullion Leaf has expanded its scope of business to include procurement of agriculture inputs and the company is going to ride on its trade finance structures to procure these inputs. We have worked well with our financiers and endeavour to strengthen our relationship with them because they are also bringing the market, which gives us competitive edge in the tobacco business.”
Last year, Bullion Leaf bought 400 000kg of tobacco from the auction floors.
Contract farming key to output rise
The coming of Bullion Leaf on the scene has been welcomed by experts, particularly at a time when the country is in dire need for more foreign currency.
Zimbabwe is grappling with acute foreign currency shortages resulting in intermittent shortages of products that require forex such as fuel. But Gwanyanya believes if Government deepens contract farming for various crops such as tobacco, wheat and soya bean, output will rise and more foreign currency would be generated.
Although wheat and soya bean are not the biggest consumers of foreign currency in the country, there is wide spread thinking that Zimbabwe can take steps to arrest forex leakages by growing the crops on their own.
Gwanyanya said it was crucial for tobacco, wheat and soya bean to get more support mainly through contract farming, if output was to increase and shore up forex reserves.
“There is need for contract farming initiatives to be widened for increased production of agriculture produce, which is key in providing raw materials in the manufacturing sector,” said Gwanyanya.
“Contract farming is good for both the producers of raw materials and their off takers because the former is guaranteed of funding for the inputs as well as the market for their produce, whilst the latter is assured of supply of the raw materials.
“In the face of increased de-risking by banks ostensibly due to high grower finance risk, contract farming is the way to go. Through this system, issues such as low productivity and therefore uncompetitive price for final product can be addressed through investment in farm mechanisation such as irrigation equipment.”
Tobacco output has been commendably increasing in the last few years benefiting from contract farming. In 2008, tobacco output slumped to 48 million kg before rising to 271 million kg in 2014 and 253 million kg last year.
The country generated $730 million from tobacco exports last, which helped in stabilising the foreign currency gaps. But low production of wheat and soya bean, key ingredients in bread and cooking oil making, respectively, have resulted in considerable foreign currency leakages as the country seeks to ensure availability of the popular products. Imports of cooking oil raw material require about $20 million per month, when the country can grow the crop and save money. About US$85 million is spent on wheat imports per annum.
Gwanyanya said in the face of “increased foreign currency challenges, it’s in the best interest of bread and cooking oil manufacturers to support local production of the required raw materials”.
“However, Government should also support these contract farming initiatives through its temporary protectionism,” said Mr Gwanyanya.
Millers, cooking oil makers deepen contract farming.Last week, Oil Expressers Association of Zimbabwe chairman Busisa Moyo said cooking oil makers are now seeing value in contracting the growing of soya bean.
Cooking oil makers such as Pure Oil Industries, Surface Wilmar, United Refineries Limited (URL) and Willowton, are all into soya bean contract farming, but there is still scope for the to increase capacity. Similarly, grain millers are set to increase contract growing of wheat from this year going forward.
Grain Millers Association of Zimbabwe (GMAZ) national chairman Tafadzwa Musarara said members are meeting at the end of next month for an annual general meeting and “wheat contract farming is going to be on top of the agenda”.
Meanwhile, Bullion Leaf Zimbabwe intends to operate a “contract floor” for tobacco this year, where it would contract about 1 000 farmers under sales contract.
