20 March 2017

Zimbabwe: RBZ Reassures Tobacco Farmers

The Reserve Bank of Zimbabwe (RBZ) yesterday said it had moved in to address bottlenecks that arose last week, that saw some tobacco farmers withdrawing $300 instead of $1 000 per initial sale as announced by a tripartite agreement among stakeholders.In an interview, central bank Governor Dr John Mangudya said they had attended to some "teething" problems that occurred at Tobacco Sales Floor in which some farmers were restricted to withdrawing only $300.

"There are a number of variables to that problem. Firstly, the time that banks closed was different from that of auction floors. Banks closed earlier than auction floors and some farmers would fail to access cash.

"We have synchronised both opening and closing times. Another aspect was that the number of people who would require cash on a given day, would be more than what a given bank would have anticipated. This would result in banks carrying less cash to the auction floors because the out-turn cannot be determined with certainty by banks," said Dr Mangudya.

He said banks would get figures of anticipated number of farmers on a given day from the Tobacco Industry and Marketing Board, which would be using historical figures on previous years.

The central bank assured tobacco farmers that it had mobilised enough financial resources to pay them, including allowing them to withdraw $1 000 per initial sale.

This resulted into a demonstration last Friday that disrupted business for more than an hour as police were called in to restore order as tobacco farmers protested at the decision to restrict cash withdrawal to $300.

Farmers also complained that financial institutions were taking long to credit their bank accounts when they sell their tobacco.

Last week, the RBZ, TIMB and the Zimbabwe Tobacco Association announced in a tripartite statement that farmers would be able to withdraw $1 000 for their initial sale, and $500 in subsequent sales.

Dr Mangudya said there was enough cash to pay farmers but several factors had contributed to the decision by some banks to restrict cash withdrawals last week.

Banks, he said, in some instances, would not determine with certainty the number of quantities of bales to be sold on a given day.

"There is another challenge. Even if banks or TIMB are seized with all that information, the anticipated price per kilogramme might be more than what would have been anticipated on a given day. So, it is not just one variable, but the good thing is that we are attending to these issues. These are just teething problems, which occur when marketing begins just like what has been happening to the electronic marketing system," said Dr Mangudya.

On why farmers' bank accounts were sometimes taking long to be credited, Dr Mangudya said bank accounts for merchants were in some cases not funded on time.

"Tobacco is paid for upfront. Sometimes, banks might take time to credit the merchant account because it is not yet funded. The merchant's account has to be debited for the farmer's bank account to be credited, but you will notice that banks' nostro accounts have to be funded.

"But these are teething problems that usually happens at the commencement of selling because that is when banks would be moving their money into the nostro accounts," said Dr Mangudya.

On why banks were paying farmers with bond notes instead of foreign currency, Dr Mangudya said the surrogate money was there to preserve the hard currency.

"If you give them foreign currency, how do you expect us to import fuel? Where do you think we are getting foreign exchange to fuel your car?" Dr Mangudya asked.


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