Zimbabwe tobacco habit kicks in, but can't lift dollar drought

07 August 2016 - 02:00 By RAY NDLOVU

Zimbabwe's dollar shortage is likely to continue for the next two years as the country battles its worst cash squeeze since the dollarisation of the economy in 2009. This is according to BMI Research, whose latest economic analysis on Zimbabwe said the dollar shortage would weigh on the growth of the economy."Since dollarising the economy in 2009, Zimbabwe has faced a growing shortage of hard cash, now estimated at around $2.5-billion [R34-billion]. We see little scope for this trend reversing over the next two years, as a poor outlook for key exporting sectors and weak investor sentiment fail to inject the liquidity businesses need to operate effectively," it said.It added that the tobacco sector, Zimbabwe's main earner of foreign currency, was facing a 15% decline in harvests over 2016 following a year of drought."With the poor weather continuing under La Niña weighing heavily on the agricultural outlook in the second half of 2016 and first half of 2017, we do not expect the industry's fortunes to change over the short-term outlook."The end of the tobacco marketing season on Friday and final mop-up sales on August 23 will be a poser for Reserve Bank of Zimbabwe governor John Mangudya, who has said he would have to find alternative sources of hard currency to keep the country running.story_article_left1Mangudya praised tobacco farmers, alongside mining companies and gold miners, for being the "real heroes" in helping to meet the country's acute demand for US dollars. The greenback accounts for 95% of transactions in the country, with the South African rand accounting for the remainder.The tobacco industry initially had set a target of 160million kilograms on the back of a drought, but output has reached 190million kilograms this year.Mangudya told captains of industry and business executives gathered in Bulawayo last month for a Confederation of Zimbabwe Industries meeting that the country was running as a result of their combined productivity."The tobacco season is now coming to an end until February. What it means is that I will need to bridge the gap of currency shortages after the tobacco season," he said.Nearly 66% of the manufacturing industry is lying idle, according to the confederation .Figures from the central bank for the May-July period show that gold producers made the biggest contribution to foreign currency inflows at $269-million, followed by other mining companies ($179-million) and tobacco growers ($139-million).Last year, the sector produced 198.95million kilograms of tobacco and earned the country $584-million. In 2014, the country produced 216million kilograms of the crop, slightly off the peak production figures of 236million kilograms produced in 2000.The major buyers of Zimbabwe's tobacco crop are China and South Africa.The Tobacco Industry and Marketing Board's communications manager, Isheunesu Moyo, said the association had registered 40,000 growers for the next season."Zimbabwean tobacco farmers have improved on their agronomic practices over the years. They are also investing in farming as a business. The 2015-2016 ... crop was heavily affected by the dry spell, " Moyo said.The country's land reform programme has given nearly 90,000 newly resettled black farmers a chance to take part in the industry, which formerly was dominated by the 4,500 white commercial farmers...

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