Banks operating at tobacco auction floors are not giving farmers a daily cash allocation of up to the $300 set as a maximum by the Reserve Bank of Zimbabwe.
Farmers saying the banks are giving them a once-off $300 payment, mostly in bond coins. Farmers consider that the limit set is also their entitlement.
Banks rely on the RBZ for bond notes, coins and US dollar banknotes as very little is deposited and if they do not get cash from the RBZ they cannot issue cash.
Reserve Bank of Zimbabwe governor Dr John Mangudya said recently that farmers were the geese that lay the golden eggs and therefore should reap the fruit of their labour.
Tobacco is the second largest foreign currency earner in the country and Dr Mangudya is on record that tobacco proceeds are enough to import fuel to keep the country running for a year.
Besides cash shortages, the farmers have also called on Government to intervene and save tobacco them from abuse by corrupt syndicates of merchants and touts (makoronyera) who are buying their crop for a pittance.
Although Dr Mangudya could not respond to questions sent on to him, several bank officials spoken to said bond notes came from RBZ allocations.
Dr Mangudya’s announced in February that tobacco merchants had mobilised $500 million to buy the golden leaf. This would be in bank accounts.
But farmers wanting cash are still spending days queueing for cash at auction floors and struggling to get withdrawals from nearby banks whose cash is very limited.
The RBZ early March set a daily cash payment ceiling of a maximum of $300 for tobacco growers this season with balances paid electronically in a move expected to improve settlement efficiency.
“In order to ensure a smooth payment system that is consistent with international best practice on daily cash withdrawal limits, growers shall be paid a maximum of $300 per day through banks stationed at the auction floors.
“This shall be disbursed at all banks stationed at the auction floors, upon presentation of the respective sales statement by the farmers. The balance shall be transferred into the grower’s bank account or mobile money wallet,” said RBZ governor Dr John Mangudya in a statement just prior to the opening the tobacco selling season last month.
Last year, farmers were allowed to withdraw as much as $1 000 cash per day, but banks were unable to meet the demand. RBZ said the money would be disbursed to all banking halls at auction floors.
Presently, farmers who spoke to The Herald Business said they are getting $300 in bond coins.
“We are being paid in bond coins and the banks are only giving us once off withdrawals on delivery. When you want to buy using bond coins, you have to buy bond notes first at a premium and the rate is higher when you use RTGs,” said one farmer who requested not to be named for fear of victimization.
Although the country’s gold producers are currently being given 70 percent of their money in foreign currency, there appears to be lack of prioritisation of tobacco farmers’ need for foreign currency.
The RBZ through its subsidiary, Fidelity Printers, buys the gold directly.
Formal businesses and individuals are paying a premium of 40-45 percent for the US dollar notes on the parallel market.
The RBZ has also been exposed as banks, merchants and some middlemen abuse the system while it is folding its hands.
A few merchants had indicated that they would pay for tobacco using RTGs ahead of the season, but it appears there is no US dollar banknotes to buy the export crop on the market, putting into sharp focus into Dr Mangudya’s sincerity.
A survey by The Herald Business team last Friday, revealed 90 percent of tobacco farmers have not held US dollar banknotes this season.
The competence and effectiveness of tobacco industry regulator, the Tobacco Industry Marketing Board (TIMB), has also been put into question as it takes no action while tobacco farmers, who are the backbone of the $1, 3 billion dollar industry, suffer at the hands of banks and unscrupulous merchants right under its nose.
TIMB last week professed ignorance to the plight of tobacco farmers who have fallen prey to syndicates comprising corrupt merchants who list growers under contract producers without their knowledge.
The farmers also urged Government to come up with a support price to protect them from low prices offered by buyers.
Victims confirmed to our sister publication Business Weekly that they had suffered delays in selling their crop as they had to deregister with the contract schemes first or forced to sell to the merchants despite having signed no contract with them or received inputs or support.
Investigations by our sister paper revealed contractors like David Machingaidze’s Ethical Leaf Tobacco and another player Agritrade Leaf Tobacco, were adding independent farmers without their knowledge and consent onto their list of contracted growers.
To that regard, Dr Mangudya slammed the merchants who were abusing a dispensation he introduced that allowed them to pay for tobacco using Real Time Gross Settlement funds instead of foreign currency, threatening to withdraw the facility to firms caught on the wrong side of the law.
“The indigenous merchants under the dispensation were allowed to purchase the tobacco using RTGS funds.
“But when they export the tobacco, 25 percent of the foreign currency comes to the RBZ. The tobacco merchants who were allowed to buy tobacco using the RTGS facility should not abuse the dispensation,” he told our sister publication.