3 December 2012

Zimbabwe: Insurers Castigate Side Marketing in Tobacco

INSURERS have castigated side marketing within the tobacco-growing sector saying that it is seriously affecting their relationship with tobacco farmers. Addressing delegates at the 2012 National Tobacco Workshop in Harare last week, SFG Insurance chief executive Mr Charles Madziva who was representing the Insurance Council of Zimbabwe said farmers were using side marketing to avoid paying their premiums.

He said that tobacco farmers currently owed insurance companies US$150 000.

"From every US$1 we are supposed to get in premiums we are only collecting US$0,56.

"Side marketing is one evil that we need to stand against because the future of the sector is at risk," he said.

He added that one of the ways that farmers were evading paying premiums was through the use of multiplicity of grower numbers per family unit in order to understate yields.

He added that they were also facing challenges in the late remittances of premiums collected from farmers by auction floors and contractors.

"This presents a dilemma in that when the farmer comes to us with a claim. In their view they will be covered because the money for the premiums will have been deducted from their proceeds.

"However the problem is that we will not have received the money and that creates a challenge for us," he said.

Mr Madziva also added that they were also facing undue pressure in terms of claims from some farmers who were even going to the extent of seeking political influence in order for their claims to be processed.

In order to deal with the issue of side marketing, Mr Madziva suggested the use of credit referencing to flush out bad debtors among tobacco farmers.

Speaking at the same occasion Mr Tusketee Sithole from ZB Bank said there was need to introduce mobile banking to attract tobacco farmers into the banking system.

He said that this was important because it allows farmers to treat farming as a business.

"At the moment when farmers get their money they tend to spend it on non-productive goods because they will have the cash in their hands but a bank account creates time for them to think about what they want to do with the money before spending it," he said.

This, he added was critical in promoting a savings culture in the economy to improve liquidity.

He also called for a speedy resolution of 99-year leases so that tobacco farmers can have collateral value of their farms.

Mr Sithole said that this was critical if banks are to play a central role in farming.

He noted that tobacco contractors were funding 65 percent of the tobacco crop in the country while the banking sector was playing a complementary role, by providing the balance of 35 percent.

Responding to the issue of side-marketing Tobacco Industry and Marketing Board chairpersom Mrs Monica Chinamasa said that they were actively engaging stakeholders on the matter with a view to coming up with a solution.

TIMB chief executive Dr Andrew Matibiri however said that their main problem was lack of fact on the issue.

"We have heard about side marketing and its being brought up at different foras but no-one has actually approached us with fact on side marketing.

"We need such information to assess the extent of the impact of side marketing in our industry," he said.

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