5 September 2014

Zimbabwe: 'Processed Tobacco Would Have Earned Zim U.S.$65 Billion'

Zimbabwe could have earned $65 billion instead of $650 million that it realised from tobacco sales in the 2014 marketing season had it processed the crop into finished products, an industry expert has said.The country produced over 200 million kilogrammes of tobacco most of which was exported to China, Belgium, United Arab Emirates, Russia and South Africa in raw form.

Savanna Tobacco executive chairman Adam Molai said the country would have generated a minimum of $6,5 billion had the golden leaf been value added.

"We are at the whims of global fluctuations and market prices but ultimately once we go to the final beneficiated product, the price is constant and at times increases," he said at an agro-forum.

"The current output this year would have generated $6.5 billion for us. The value addition premium is $5.8 billion"

Mr Molai said the country earned on average $3,50 per kg of raw tobacco sold but could have grossed $7,30 per kg had the leaf been threshed or processed into cut rag.

Had it been further processed into cigarettes, Zimbabwe would have earned between at $30-60 per kg.

The country currently has seven firms involved in tobacco value addition, with Mr Molai's Savanna Tobacco and British American Tobacco being the major players.

The firms, which are processing a small fraction of the total output, produce over four billion cigarette sticks annually.

Mr Molai said Zimbabwe must create an environment which encourages investment in value addition and allows investors to recoup their investment.

"What worries me is we have Dubai producing 68 billion sticks of cigarettes per annum, they do not produce one kilogramme of tobacco but what do they have, they have an enabling environment," he said. "What makes it even worse is that 18 percent of the cut rag tobacco going into Dubai is produced by a Zimbabwean national in Dubai because they are running away from the conditions in their own market."

He said government must come up with policies that give direction and targets to stakeholders on value addition, targeting not only in the tobacco sector but in other sectors such as mining.

"We must create investment incentives from when you start the business to when you recoup your investment that is the only way people can invest."

Value addition had the potential to help government mobilise funding to meet its obligations such as the external debt estimated at $10 billion.


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