This tobacco con is sad

It is now clear that corruption at the auction floors is costing small-scale farmers money. What are we going to do about it?

Last week’s edition of this paper carried a front page story predicting a “bleak future” for the tobacco auction floors. This sad and alarming development was attributed to two key issues: a flourishing contract system on the one hand, and low prices amid claims of chaos and corruption at the auction system on the other.

The Tobacco Industry and Marketing Board, which regulates and moderates operations, did not appear to be in control.

If anything, its ground personnel were accused of involvement in the shady deals to rip off stressed, harassed and desperate small-scale farmers who still sustain the operations of the auction floors. It’s really sad.

Figures at hand show that so far this season more than 116 million kg of tobacco have been sold at an average price of $3,21 per kg. The average price at the auction floors was $2,62 while the contract average was $3,32.

The strange thing is that the same people grade the tobacco at the auction floors and under the contract system. The buyers are also the same. Different prices are offered for tobacco of the same quality. Then there is a unilateral ceiling price of $4,99 at the auction floors while contractors can pay more. The self-financing small-scale farmer is the loser. Add to this a salmagundi of middlemen, all linked to the tobacco industry personnel, who approach these desperate small-scale farmers offering ridiculously low prices because their crop is supposedly low grade, or ask for a bribe of $10 per bale for their tobacco crop to miraculously fetch a higher price. They connive to manipulate the prices at will. This is a fine way of sticking a knife blade in the spine of the land reform. It is nothing short of operation overkill. This is a farmer who is self-financing all round.

He must also pay the transporter, a merciless hustler, and still save and plan for the next cropping season.
He must fatten the pockets of transporters and floor operators while he takes back to the farm next to nothing for his toil. It is the future of this cornered farmer more than that of the auction floors which worries and pains me the most. Meanwhile, it appears like swing and song for the contract farmer across the fence. Contract farming was reportedly introduced, in good faith I hope, by Government in 2004 after Agribank was placed under sanctions.

Processors were to fund tobacco farming to sustain their operations, instead of importing. It turns out that this was like inviting an elephant into a tiny room. And there are 18 of these elephants versus three auction floors. The Sunday Mail story states that 70 percent of the 104 737 growers this season opted for the contract farming system.

This is a huge swing.
What is the secret, the allure of the contract farming system which now threatens to not only destroy the future of the long-established auction system but also to undermine the impact of the land reform programme as an empowering tool for its black beneficiaries?

It is this: Zimbabwe has been going through a bad patch in the 14 years since the launch of the land reform programme.

Many people who got free land have had challenges raising capital for various inputs from draught power and fuel to seed, fertiliser and equipment. Most of the farmers still don’t have proper tobacco curing facilities such as barns.

Given the environmental destruction which comes with the curing of tobacco, the random and wanton cutting down of trees, very soon it might be mandatory for all farmers to use coal.

This is an expensive alternative in terms of quantities, and it needs to be transported. The contract system comes in to alleviate this conundrum.

The contracting company provides seed, fertiliser, pesticides and the marketing of the crop. It might also pay for labour. Professor Ian Scoones, who has conducted a lot of research on Zimbabwe’s much-maligned land reform, states in a recent article on his blog: “There is clearly massive demand for this intermediary function (financing), where those with cash and capital can invest in farming without taking the burden of actually owning or holding land or producing.”

The contractor is often the processing companies, but Prof Scoones states in Zimbabwe’s case that “former white farmers are heavily involved”, along with some black urban elites.

This calls for close scrutiny on the nature of the contracts signed by these poor souls. There is gross cerebral mismatch between the owners of capital and those given custody of the land from which they are supposed to make financial gains.

There will be claims of high risk, political instability.
As a species we Africans are not known for initialing legal contracts but only for signing them, most of them badly prejudicial to ourselves and our nations. Thus while the contract system might have the veneer of paying more for a kg of tobacco, it is important to find out what percentage the farmer actually takes home.

What happens in the event that the crop is destroyed under unforeseen circumstances and the contractor has invested hugely? Is there a form of protection for the farmer?

This throws up a serious risk of perennial entrapment. Is the farmer getting enough to enable him to save so that he eventually weans himself off the contract system or he is reduced to some glorified farm manager while the former white farmer or contracting company takes over but as a dormant partner? This brings in the need for Government to carry out a genuine land audit, not as a vindictive operation to punish gratuitously but as a way of finding out who owns what, what means do they have to work the land and what are they able to do, what skills do they have and what form of training do they require for them to do better?

There may be people who need to have their farm sizes reduced and others who require more on the basis of performance. These issues can’t be ignored. Government might need to set aside a budget to train some farmers in rudimentary planning, basic bookkeeping. It is a necessary sacrifice. Tobacco is one of the biggest foreign currency earners for Zimbabwe. It is important that those who produce it are not robbed of the fruit of their labour. And the bigger risk for the farmer: the contract farming system might be attractive in the short term as a strategy to destroy the auction.

Once the big firms are left alone and are in total control, the bubble will simply burst with devastating consequences.
That is how cartels and monopolies operate; farmer beware. You need the open auction system in the long term.

736 total views, no views today