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Plans for a US$5bn tobacco industry



CABINET on Tuesday approved the Tobacco Value Chain Transformation Plan presented by Agriculture minister Anxious Masuka. It aims to transform the tobacco value chain into a US$5 billion industry by 2025 through localisation of tobacco financing, increased production and productivity, value addition and beneficiation, and exports of cigarettes.

Find below a re-run of our recent interview with the Tobacco Industry and Marketing Board (TIMB) boss. TIMB in April elevated its technical services executive Meanwell Gudu (MG) — a veteran in the tobacco industry having worked across the value chain of the US$1 billion industry — to the position of chief executive officer.

The NewsHawks news editor Owen Gagare (OG) caught up with Gudu who shared his vision for the tobacco industry. He said during his tenure he will encourage diversification, value addition and beneficiation while working towards the production of 300 million kilogrammes of the golden leaf by 2025. Crucially also, Gudu said he will ensure that the socio-economic conditions of farmers are improved. Below are excerpts:

OG: Congratulations on your appointment as CEO. May you share with us what your vision for TIMB is and how you intend to manoeuvre to attain your goal?

MG: For TIMB, I envision a collective sustainable production of tobacco as the future for tobacco in Zimbabwe.

This will entail efficient production of quality tobacco in conditions that limit the impact on the natural environment and that improve the socio-economic conditions of the people and communities involved in its production in line with the sustainable tobacco production (STP) standard produced by the global cigarette manufacturing companies.

The current marketing system should also leverage on information communication technology (ICT) to improve efficiencies. Growers should monitor sales in the comfort of their homes through ICTs. There is need for use of artificial intelligence (AI) in the classification of tobacco and its pricing.

Big data analytics can also be used for important decisions by many stakeholders. TIMB is sitting on a rich source of data which can even be used to create innovative products and services such as a futures market for tobacco leaf in Zimbabwe. In terms of transforming the tobacco value chain, there is need for diversification. Tobacco farmers should diversify with tobacco as an anchor crop. Diversification options include food crops, horticulture crops, cannabis and industrial hemp.

The industry should also take advantages of fiscal incentives announced by the minister responsible for Finance and invest in niche tobacco products, especially smokeless and heated tobaccos. The tobacco farmers could also invest into end tobacco use product processing, for example pipe tobacco or packaged fine tobacco for roll your own (RYO) cigarettes.

OG: You have been with TIMB for some time and were serving as technical services executive before your recent appointment. How will institutional and industry memory assist you as you forge a new path?

MG: It is widely acknowledged today that knowledge is the most strategically important resource. Therefore, institutional and industry memory will go a long way in helping me draw back on past experiences in mapping the way forward. Over the years, there have been successes and lesson learnt along the way which will shape decision making in building the successful future for the board in the tobacco industry.

OG: What are the key issues in the tobacco industry that you feel need to be handled as a matter of urgency?

MG: The sector operates in a dual system, that is auction and contract. The former is where tobacco growers are self-funded, they support their own tobacco production until they can sell on the market. However, the major challenge is the limitation on access to funding from the banks because of lack of bankable collateral by most farmers. This has pushed them to opt for contract farming, which in a way has seen a decline of tobacco sales on the auction floors.

Another challenge the sector is having to deal with is deforestation caused by growers cutting down indigenous trees for fuel wood for curing tobacco. Loss of viability of tobacco growers because of high-cost structure of producing tobacco.

OG: Tobacco farmers have been experiencing a number of challenges. One of them is access to cash after selling their produce. How do you plan to address this going forward?

MG: Soon after the opening of the 2021 tobacco marketing season, some contracting companies faced information technology (IT) system challenges because of many decentralised selling points.

The challenges affected processing of payments to farmers. That issue was discussed with the affected contracting companies and it was agreed that they revert to their old IT systems to ensure timeous payments to the tobacco growers. In the event of any IT system challenges, companies have been asked to communicate timeously with the growers so that they make their own decisions.

Delays in payments were also initially caused by delays in processing inter-bank money transfers by the national payment clearance system. This has since improved after the intervention of The Reserve Bank of Zimbabwe.

As TIMB, we always ensure that all stakeholders involved in the marketing of tobacco do so in an orderly manner hence continuous monitoring of the tobacco marketing process.
OG: Most farmers have found themselves in heavy debt after being contracted to grow the crop, but thereafter found that the cost of inputs advanced to them is beyond their reach. In some cases, this has left farmers with nothing in terms of income. Are you aware of this and what are you doing to protect farmers?

MG: As TIMB, we have come up with guidelines that every registered contractor should meet, that is for funding for small-scale farmers the minimum to be paid out for half a hectare is US$500, for one hectare US$1 000 and for large-scale farmers the minimum support package for one hectare is US$4 000. At the onset of receiving inputs, the farmer and the contractor enter into a mutual agreement based on inputs availed; this is meant to protect the farmer in the long run.

OG: Farmers have also fallen victim to insurance scams. Has there been any discussion around ensuring that insurance companies deliver services to farmers in times of need?

MG: Tobacco growers are not mandated to insure their crop with any insurance company. However, we have certain contracting companies that make it mandatory for tobacco growers to insure their crop against natural disasters, for example, hail or fire during the curing of tobacco.

An agreement between the farmer and the insurance company is signed at the beginning. Premiums are then deducted through a stop order system when the marketing of tobacco commences. As TIMB, we are calling upon any growers who feel they are being short-changed by any insurance company to come forward and we will investigate. If the deduction is not on the contract signed initially, then the insurance company will have to reimburse the farmer.

OG: Tobacco side marketing is quite common. How do you plan to curb this?

MG: Side marketing is a crime which under Section 36 (1) and Section 44 (1) of the Tobacco Industry and Marketing Act Chapter 18:20 attracts a level five fine or six months imprisonment or both. A contractor who also violates Section 5 (1) of the Statutory Instrument 61 of 2004 if convicted will be liable to such fine or to imprisonment for such period as the court deems fit or to both such fine and such imprisonment.

We have a list of names which we have published in the media of those who have been convicted and fined. With this exercise, we are encouraging members of the public to shun side marketing at all costs to avoid fuelling an illegal activity which has the potential to kill the tobacco industry.

OG: The tobacco selling season is well underway. Does TIMB see industry targets being met?

MG: By the year 2025, TIMB, working with stakeholders in the industry, including other government departments, seeks to increase annual production to 300 million kilogrammes. To achieve this, we envision a collective sustainable production of tobacco as the future for tobacco in Zimbabwe. With the way the 2021 season has been progressing, we are hopeful we will attain that target.

OG: What is the long-term plan to ensure that the tobacco industry remains one of the top forex earners for the country?

MG: There is need to champion sustainable tobacco production by ensuring that 100% of tobacco produced is being cured using the renewable energy by 2025. That way, we can ensure the tobacco industry remains one of the top forex earners for the country.

OG: Going forward, what is your outlook for TIMB?

MG: This is the second selling season under the “new normal” imposed by the Covid-19 pandemic which has also brought with it positive changes, especially the acceleration of decentralised tobacco sales in line with government policy of devolution.

In the 2021 selling season the board has authorised decentralised contract sales to be conducted at the central location of Karoi, Mvurwi, Bindura, Marondera and Rusape. Globally, the demand for cigarettes is declining due to enforcement of anti-smoking regulations from lobbyists and introduction of reduced risk electronic nicotine delivery systems.

Therefore, there is need to facilitate agricultural diversification into alternative crops. There is also need to invest in collaborative research and development efforts to develop new and improved tobacco varieties that can serve non-smoking users.

OG: Your parting words to tobacco industry stakeholders will be most welcome.

MG: Our everyday motto in the industry should be sustainability, viability and 100% compliance to regulations all the times.