Golden Sibanda Senior Business Reporter
TRADITIONAL tobacco merchants have to date mobilised $824 million from offshore sources in line with the Exchange Control Tobacco Finance Order of 2004, the Reserve Bank has said.
The central bank will now move to accommodate tobacco merchants who have failed to secure offshore funding through a special dispensation granted by the exchange control authorities.
This would be done on a submission and approval basis to enable the tobacco merchants to access local credit finance to purchase the golden leaf during the current tobacco marketing season.
RBZ Governor Dr John Mangudya said in a statement yesterday that in terms of exchange control rules, merchants were required to secure credit for the purchase of green leaf tobacco.
“Tobacco finance accommodation for merchants who fail to access offshore finance shall be limited to a maximum $1 million per tobacco merchant, and shall be treated on a case by case basis,” he said.
The RBZ noted that about 25 tobacco merchants were registered with Tobacco Industry and Marketing Board, of whom 12 large-scale merchants had managed to secure offshore credit.
The RBZ Governor said research conducted by the central bank had established that small- scale tobacco merchants, that were mainly new market entrants and also wholly owned by Zimbabwean residents, have difficulties in securing offshore lines of credit.
“In light of the need to promote equity in the interest of enhancing competition at the tobacco auction floors, the Reserve Bank has seen it necessary to accommodate deserving tobacco merchants, by allowing them to buy green leaf using funds sourced from the local market,” he said.
The governor said tobacco finance accommodation for local tobacco merchants would result in participation of more tobacco buyers on the auction floors, and more competitive prices.
To be considered for accommodation through the special dispensation granted by exchange control authorities, deserving tobacco merchants shall be required to apply to RBZ through their banks.
Dr Mangudya said the applications must be supported by proof that the respective tobacco merchants failed to secure offshore lines of credit.
The individual application shall also be
supported by confirmed orders showing indication or desire by foreign buyers to do business with it.
The Bankers’ Association of Zimbabwe late last year said that about 60 percent of funding from banks to agriculture for the 2014/15 farming season would go towards financing of the tobacco crop.
The financial institutions provided about $620 million for agriculture in the 2013/14 farming season with about 55 percent ($343 million) of that amount going to support tobacco production.