Maravi

(HERALD) ‘We’re not ripping off tobacco farmers’

‘We’re not ripping off tobacco farmers’
Saturday, 19 May 2012 00:00

There has been turmoil within the tobacco sector of late with auction floors accusing some tobacco processing companies of delving into areas they are not licensed for. Assistant Editor George Chisoko (GC) spoke to the Managing Director of Mashonaland Tobacco Company Ken Langley (KL) about accusations of setting up parallel auction floors and ripping off growers, levelled against his company.

GC: It has been alleged, following your company’s appearance before a Parliamentary Portfolio Committee this week that you are operating illegally because your company has not been licensed by the Tobacco Industry and Marketing Board?

KL: In terms of the TIMB regulations, we have an “A” Class Buyers’ licence that allows us to purchase tobacco on all four auction floors. We also have a Contractors’ Buyers’ licence for all the three contract floors, namely Harare, Rusape and Karoi, thus dispelling suggestions that we are operating illegally.

GC: Are the Rusape and Karoi auction floors or contract buying floors?
KL: These are purely contract buying floors for the purchase of tobacco from our contracted growers. Both floors are licensed by the TIMB as such.

GC: Why did you open contract buying stations in Karoi and Rusape?
KL: Karoi and Rusape floors have been established for the following reasons:

* We have about 1 700 smallholder growers contracted in Rusape and at least 1800 in Karoi

* These floors provide a more convenient market for growers by reducing logistical challenges and substantially reducing their transport costs

* These operations benefit the rural communities where our growers are based with employment and additional revenue in local businesses

* We benefit from reduced potential side marketing, thus limiting potential bad debt

* Efficiency considerations at the Harare facility coping with an increased number of contracted growers.

GC: There has been extensive coverage in the media that accuses MTC of buying tobacco from non-contracted farmers at your Rusape and Karoi buying stations. Were you actively recruiting these farmers?

KL: No, we have not been actively recruiting non-contracted growers to sell on our floors. However, we were approached by growers wanting to sell through us. Subject to clearance by the TIMB, growers have the option of where to sell their tobacco provided that they have no prior contractual commitments.

To date, 482 previously uncontracted farmers have, after due authorisation from TIMB, sold 170 tonnes of tobacco to MTC. This volume represents less than 0,2 percent of national crop deliveries to date.

GC: Have you received the volumes you anticipated at your Rusape and Karoi floors?
KL: We are currently at about 80 percent delivered of our anticipated smallholder contracted volume

GC: Why do you have your own contract floors when there is sufficient capacity at the four registered Harare Auction Houses?
KL: It is only a few years ago that the auction floors withdrew this service from the contractors because they wanted space themselves to cope with increased volumes. Contractors have now realised that they can provide this service more efficiently and cheaper themselves

GC: How true is it that as a contractor you pay more for tobacco sold on your contract floor than you do on the auction floors?
KL: MTC contracts tobacco to achieve socially responsible, sustainable and traceable production to meet the demands of the world marketplace and the global regulatory environment. Our contract programme is designed to produce tobacco that has been grown in an environmentally sustainable manner using good labour and agricultural practices and involving active reforestation.
This tobacco is of higher value to certain customers than same grade tobacco on auction floors due to its total quality profile. Tobacco purchased on the auction floors lacks traceability and such total product integrity, and as a consequence is less marketable to certain international customers.
MTC, however due to its broad customer base has continued to purchase on the auction floors. It is also worth noting that contracted tobacco has other advantages for the contractor, which include:

* better quality tobaccos due to the agronomic support and provision of correct inputs

* the ability to encourage the production of styles of tobacco most in demand by our customers

* the ability to monitor and minimise the incidence of non-tobacco related material in the product and of nested and mixed tobaccos

* reduced handling of tobacco before processing, resulting in less breakage and consequently a better quality and higher yielding product


GC: According to the auction floors your activities have resulted in a drastic decline in volumes on the auction floors. What is your response?
KL: In the past two years, two new auction floors have opened, but there has not been any noticeable increase in auction tobacco because the increase in the crop is largely being financed by contractors.

GC: Could you please expand on the issue of side-marketing and bad debt that you referred to?
KL: Side-marketing is the sale of tobacco by a contracted grower to a buyer other than the contractor who financed its production. When this occurs, the company fails to recover its investment.
Our financial investment this season to smallholder growers amounts to over US$6 million. In the past few years we have experienced high and unsustainable levels of bad debt, as a result of side-marketing and we have now improved our systems and controls to minimise the incidence of side-marketing and protect our investment.

GC: What are your intentions for next season with regard to the smallholder contract sector?
KL: We are committed to smallholder tobacco production in Zimbabwe and through continued utilisation of licenced decentralised floors, we plan in 2012 to support an increased number of smallholder grower base of over 8 500 growers, which will in turn produce an estimated 10 million kg of flue-cured tobacco.

GC: The auction floors seem to have ganged up against you by criticising your operations?
KL: We don’t take it as war with us but simply an expression of concerns where people lack the right information. We will continue to have good relations with all the auction floors as we are in the same industry and striving for the same cause — to increase tobacco production in Zimbabwe.

GC: Thanks Ken for your time
KL: You are most welcome, George.

Labels: TOBACCO

posted by MrK @ 4:53 PM