Harare, Zimbabwe – Bornface Batwero languidly sits in the driver’s seat of his truck in front of the tobacco sales floor, an auction site in the capital Harare, where farmers gather from all over Zimbabwe to sell their crops.
Monday is mid-morning. Batwero told Al Jazeera that he was still waiting to receive payment for a consignment of tobacco he had sold on Friday when he arrived from Centenary, a rural area in Mashonaland province, about 144 km (89 miles) northwest. of Harare.
“I’m waiting for my payment later today,” the 37-year-old tobacco producer said. “I don’t know how much they will pay me.”
Uncertainty has become one of Zimbabwe’s main agricultural exports.
Tobacco Sales Floor, a division of an agro-industrial group listed on the Zimbabwe Stock Exchange, Tobacco Sales Limited, is one of the country’s leading auction houses.
After COVID-19 swept the nation last year, the Tobacco Sales Floor, like other auction plants, instituted a new marketing system that does not require farmers to be physically present when they sell their crops. Instead, one person represents a group of farmers at auction, in order to limit physical contact, to make sure they get a good deal.
Batwero is still waiting to collect his money. But, more than the hassle of waiting, he worries that a significant portion of his payment will go down in value even until he sees it, eroding his profits.
This is because, according to the new tobacco sales regulations established since the coronavirus pandemic occurred, farmers receive 60% of their tobacco payments in U.S. dollars, cash in hand that they charge to the auction plant. The other 40 percent is paid in Zimdollars, Zimbabwe’s local currency, which connects to your bank accounts.
When time is literally money
On the surface, the 60% payment in foreign exchange is an improvement over last year, when tobacco producers only received 50% of their payment in US dollars.
The current discontent is based on the 40% balance paid to Zimdollars and the longer waiting periods to actually receive it.
When tobacco growers sell their crops, Zimdollar’s payment is calculated at the official exchange rate, which continues to follow the black market rate. On a recent Monday, for example, the official exchange rate was 85 Zimdollars to $ 1. The black market rate was much less generous at 130 Zimdollars at $ 1.
In addition, this gap may widen sharply from day to day, which means that the longer farmers have to wait for Zimdollar payments, the greater the risk that the black market rate will turn them on, essentially eroding them. its real benefits.
The result: this waiting time can literally cost them, leaving many tobacco farmers deeply unhappy with the current deal.
Persuade Mubvumbi is a 33-year-old tobacco farmer from Bindura, about 66 km (41 miles) north of Harare. He says he disagrees with the new payment scheme, because all the materials he needs to grow (from seeds and fertilizers to equipment) are priced in US dollars, not Zimdollars.
“I am not at all satisfied with the new payment system,” Mubvumbi told Al Jazeera outside the tobacco sales plant, where he also expected to receive payment for his crops. “When I have US dollar equivalents on RTGS [Real Time Gross Settlement dollars, also known as Zimdollars] at the official rate, it means I lose value, “he said, turning a calculator into a calculator to show the unfortunate conversion.” The exchange rate really hurts us. “
Mubvumbi said that in 2009, his tobacco harvest earned him $ 6,000 at auction, enough to buy cows and corn seeds to grow crops to feed them, as well as other items.
“We were able to build decent houses, buy trucks and grow corn. Everything was good, ”he said.
Everything changed in 2016, when Zimbabwe’s economy became dollarized and the central bank – in an effort to relaunch a local currency – introduced bond notes, a surrogate currency that authorities said had the same value as the US dollar, but that backfired spectacularly a speculative frenzy that continues to boil the Zimdollar to this day.
Last year, Mubvumi said he accepted a price of $ 2,000 for his tobacco harvests at an auction, of which 1,000 he received in cash with the balance he paid Zimdollars converted at the official exchange rate.
“When I converted the currency [Zimdollars] on the black market in U.S. dollars, it only had $ 400, ”he said, that is, in real terms, its agreed price of $ 2,000 was really worth only $ 1,400 in real terms.
He has to get the same deal this year as well.
Demanding a better deal
In a recent report, the Zimbabwe Tobacco Association, a trade group for farmers, questioned the viability of the current payment scheme. The Association argues that tobacco growers should receive at least 70 percent of their sales payments in U.S. dollars, as 70 percent of the initial entry costs they face are in northern dollars. -americans. They also argue that Zimdollar’s 40 percent payment further worsens the financial pain they are suffering.
“We ask the authorities to review the level of foreign exchange withholding before the sales season begins,” the association said. “Improving the viability of producers is key to ensuring that objective growth in the sector is achieved and that the country achieves improvements in foreign exchange inflows.”
Tobacco is a bright spot in Zimbabwe’s agricultural sector, which is expected to rise 8.7 per cent this year to 200 million kilograms thanks to the best rains in three years, according to official forecasts.
Tobacco exports bring in foreign currency that it desperately needed: about $ 782 million last year, according to the country’s central bank.
Tafadzwa Muringai, a 36-year-old farmer from Banket, a town 94 km northwest of Harare, echoed Batwero and Mubvumbi’s feelings.
“Farmers who were paid in US dollars when the economy was still dollarized did very well for themselves. They have tractors and cars and the hectare is better, “he told Al Jazeera, adding that he believes authorities are taking advantage of the pandemic to treat farmers worse now.” When I go to the market, I’m supposed to be satisfied. But I am not ”.