(HERALD) Side-Marketing Threatens Contract Farming's Future

Side-Marketing Threatens Contract Farming's Future
Sharon Tawuya
20 July 2009

Harare — THE future of the contract farming system in the tobacco industry is under threat from farmers who are breaching their contracts through side-marketing, with the situation likely to impact negatively on the next season.

Side-marketing is when a farmer decides to sell their produce outside the contractual agreement after being supplied with inputs to grow the crop.

According to statistics from the Tobacco Industry and Marketing Board, 90 percent of the crop grown last year was under contract farming, but it was now being sold through the auction system.

TIMB had estimated that 5 million kilogrammes of tobacco would go under the hammer but that has been surpassed, confirming suspicion that farmers were side-marketing their crop.

About 13,9 million kg of the golden leaf has been sold through the auction system so far.

TIMB had set a target of 42 million kg of tobacco to be sold this year through both the auction and contract systems but 39,2 million kg had been sold as at July 14 this year.

Contractors might lose more than US$10 million through non-payment of debts by farmers who choose to dishonour their contracts.

Farmers risk not being supplied with inputs, as contractors would have to think twice before allocating their capital the next season.

A contractor, Mr Ken Butchart, director of the Zimbabwe Tobacco Growing Company, said they might lose more than US$10 million through non-payment of debts by farmers.

Mr Butchart said contractors would take remedies to recover their debts from farmers who were side-marketing their tobacco.

"We will take legal action to recover our funds from those farmers," he said.

He said a small section of farmers were side-marketing hence it was unnecessary for them to punish the whole industry by not assisting farmers next season.

"Those who are side-marketing need to be aware of the consequences as they risk not being supported the next season," he said.

"We are working with TIMB to rectify and control side-marketing as well as taking legal action," Mr Butchart said, adding that contractors had a long-standing relationship with the board and would not be compromised by a small section of farmers.

Butchart also said farmers were well informed of the contracts; thus they could not plead lack of knowledge about their contractual obligations.

TIMB chief executive Dr Andrew Matibiri said side-marketing was a cause for major concern to the industry.

"Farmers were supplied with inputs that were expensive but now they feel cheated," he said, concurring that they were working in conjunction with contractors to map the way forward.

Dr Matibiri said they would use their database to deal with farmers who were side-marketing their produce.

"TIMB will identify those farmers who were supported by contractors but did not satisfy their contractual obligations."

"We will then blacklist them from accessing funding from contractors, let alone the banking sector," he said.

He said they would also stop issuing new tobacco grower numbers at the moment to avoid side-marketing.

"When we resume the process, proper vetting of prospective growers would be done," he added.

Dr Matibiri urged farmers to know the value of their contracts before rushing into signing agreements.

He said they were getting complaints from growers who were claiming that some contractors who had supplied them with equipment were shifting goal posts in terms of payment deadlines.

An official with auction firm Tobacco Sales Floors said there was high possibility that a lot of tobacco was being side-marketed.

"The predicted volume of tobacco that was supposed to go under the hammer has been surpassed, so there could be leakage," said TSF managing director Mr Philemon Mangena.

He professed ignorance of facilitating the sale of contracted tobacco.

"We only sell tobacco that would have been booked so we cannot tell whether or not the crop would have been contracted," he said.

Some of the growers admitted that they were breaching contracts to get short-term financial gain.

"Contractors are ripping us off as their demands will leave us with no cash to pay workers and other expenses," said Mr Sydney Chidamba of Arda Farm in Mvurwi.

Mr Chidamba said some contractors who had supplied them with farm machinery were not giving them flexible time thus they decide to side-market their produce to avoid repaying debts.

He underscored the need for the Government to support farmers so that they reduce direct exposure with contractors.

"Farming without Government intervention is really difficult," he said.

Mr Chidamba urged farmers to communicate their concerns to contractors rather than resort to side-marketing as they risked losing financial support.

Most of the tobacco that is brought to auction floors comes from small-scale farmers who are always in a hurry to get cash while large-scale farmers usually sell their produce through the contract system. New Ziana