Maravi

(HERALD) Revamp tobacco industry

Revamp tobacco industry

ZIMBABWE’S tobacco industry was developed over several decades to cater for no more than a couple of thousand large scale growers, each able to perform on farm the full production cycle from seed planting to final grading and between them to finance basic and applied research.

The commercial banking sector created a system of financing this small group of large producers, with qualified technical bankers physically visiting every farmer who required loans and monitoring individual farmers throughout the growing and curing cycle.

Merchant bankers created an equally elaborate system that financed the purchase of the crop at the auction floors and gave merchants the flexibility to buy their annual requirements in a few weeks but make their sales throughout the year.

The systems set up by farmers, merchants and bankers worked exceptionally well and in turn, through dramatic expansion of export earnings, helped develop the country fairly swiftly. The financial systems were expanded to develop and finance other sectors of the economy to the benefit of the whole nation.

With land reform at the end of the 1990s and spreading into the early 2000s, this highly developed and finely tuned machine could not cope. Its main foundation, an industry based on fewer than 2 000 large-scale producers, was removed.

Instead of a small group of large producers, we moved very rapidly towards tens to thousands of small producers. But the industry changed a lot more slowly, too slowly.

That is not to say that there was no change. Over a few years many changes were made. New technologies were introduced that allowed the production of seedlings, one of the trickiest parts of the production process, to be centralised. The tobacco merchants and their financial backers moved steadily towards contract growing, to replace the auction system.

But we still have many problems. Production financing is still a nightmare for most farmers; grading can be a serious problem as recent reports show; and even central marketing imposes intolerable costs on the more distant small growers.

Research has suffered seriously, and the effects of that will become apparent in time, as we need to develop new varieties and can no longer do so.

Yet it is not impossible to accelerate the rebuilding of the industry.

Brazil, the world’s largest exporter, switched from large-estate to small-scale production during land reform with far fewer problems largely because the required changes were worked out in advance.

Zimbabwe can do the same.

Already, we have learned that a small-scale producer cannot do everything on farm and that many farmers will require external providers for inputs and skills. Perhaps the most successful switch we have seen is the change from on-farm seedbeds to centralised production of seedlings. That shows the way forward in other areas.

Grading is fairly simple, in our opinion, to sort out. We would like to see "grading companies" set up near the auction floors. There is plenty of industrial land south of Harare for these. Here a farmer could take poorly graded or ungraded tobacco and have this professionally graded and repacked by skilled graders for a modest fee.

This would not only make unsaleable tobacco saleable, but also allow the average farmer to enhance earnings. In other words, the fee will be covered by the higher price the crop will fetch.

Even curing could be centralised to a degree. Barn complexes, some of them renovated barns from the old days of large-scale production, would be established under the control of an expert who would ensure maximum quality. Again there would be fees but many farmers might well find the higher prices obtainable would cover these fees, with a bit extra profit.

Contract farming, not just in financing but combining many of these production skills at the two ends of the process, is probably the way forward for many smaller farmers, allowing them to concentrate on what they do best, growing the actual leaf. A small-scale producer, adequately backed, will almost always produce better quality than a large farmer simply because of the attention he or she can give the crop.

There are other solutions, such as the formation of input-output co-operatives that would perform similar functions and give a group of small producers the muscle to negotiate proper finance and share a small group of highly skilled technical staff for curing and grading.

Contract farming, either to individuals or co-operatives, would also allow some decentralisation of marketing, with crops delivered to points far from Harare for consolidation and trucking to Harare. At the same time the old research levies on tobacco need to be revamped, as must be the research council, so that the high-level research that did so much to create the industry in the first place can be restored.

Methods of recreating the industry can almost certainly be found, once it is understood that an industry based on tens of thousands of smaller producers has replaced an industry based on a couple of thousand large producers.

Labels: TOBACCO

posted by MrK @ 8:37 PM