12 May 2017

Zimbabwe: Cash Crisis Pushes Tobacco Growers Into a Tight Corner

Photo: The Herald
(File photo).

ON a scorching spring afternoon at the tobacco auction floors in Harare, farmers mill around, as has become the norm, and endure frustratingly long queues. The cycle begins with queues from the point of delivering their produce for grading to collection of cash at the banking halls.

And nothing suggested there would be a departure from this routine on day 245 of trading at this year's tobacco marketing season. But as the day ended, several farmers were hospitalised while others nursed their injuries around the Tobacco Sales Floor (TSF) auction floors in the Willowvale industrial area in the capital.

A horde of disgruntled farmers along with vendors around the TSF premises, teams up to protest against the unavailability of cash at banks. The protests are just but one of the manifestations of the liquidity crunch and cash crisis that is threatening the economy, fuelling social problems and unrest.

Farmers and vendors sing agitated songs, chanted slogans as they marched around the TSF premises, destroying property worth thousands of dollars in the process.

A few minutes after the protests, men in worksuits could be seen repairing the main gate at TSF as quickly as they could in order to keep the perimeter secure, especially in the aftermath of a potentially disastrous riot.

A lot of farmers, coming from the rural and farming areas of Zimbabwe, where such riots are unheard of and the sight of teargas remains something only seen on television, were thunderstruck and struggled to grapple with the developments.

"I didn't know people could damage such a huge steel structure in such a short time," said one of the farmers who witnessed the protest while he rested in the shade near the damaged main gate

"I ran for my life in the midst of confusion. I could barely see anything due to the smoke (from the teargas) so I simply followed the crowd," added the farmer who only identified himself as Lovemore.

Security personnel at the premises blamed vendors who sell food, grocery and clothing items and electrical gadgets on sheds around the auction floor for starting the protests.

"My friend, do you honestly think a farmer who came from Gokwe will start a demonstration? It doesn't make sense at all because farmers just want to sell their crop, get paid and find their way back home to their families. It is these vendors who haven't been selling as much as they used to because people don't have cash so they are struggling. The vendors also take the opportunity to loot from fellow vendors and other small shops around," said a security guard who requested not to be named.

The fence marking the perimeter of the banking hall had been destroyed, forcing the banks to close.

"We are told they will open after the fence is fixed for security reasons and this could take days. I came here with my family from Mvurwi and I am now running out of cash," said Mavis Garwe.

"We were queuing to get cash when this chaos started, all I want is my cash because I can't go home empty-handed. I need to buy food and pay for transport and labour for my crop," she said.

Another farmer, Luckson Murwira, said he had been sleeping in a queue for almost a week.

"I came here last Saturday that is when I made my first sale and I thought I would get US$1 000 for the first sale as the Reserve Bank of Zimbabwe said, but I only got US$200 which I no longer have because I had to pay some people and send some money back home in Centenary. This is tough for us and some farmers are already giving these makeshift canteen operators their identity documents as security so that they can eat food on credit," said Murwira.

Some dealers in Harare have taken advantage of the desperate cash-hungry farmers, buying tobacco from them at low prices and later reselling the golden leaf at the tobacco floors at much higher prices.

"It's better to sell my bale for US$150 and I get my cash to go back than to sell at US$300 and fail to get cash at the bank. I am from Centenary, where do I swipe and how do I pay everyone I owe?" Murwira said.

Unscrupulous dealers who have access to cash have been making a killing at the expense of the farmers who not only need to fend for their families, but retool and stock inputs for next season.

Economist John Robertson said the cash crisis is destroying business activity with informal business being the most affected.

Between US$20 million and US$40 million is being lost monthly by employers through payment of wages and salaries to workers who are not productive as they will be queuing at banks for cash, according to a report by Industrial Psychology Consultants. This increases the cost of doing business.

A black market for cash is also now flourishing with producers or retailers who depend on imports forced to pay a premium to access the United States dollar. The extra cost of money is passed on to the consumer.

Robertson said tobacco farmers are no different from all other producers who need to be paid on time and in cash at times to facilitate smooth production.

"Everybody is experiencing serious problems getting paid, but unlike others who just need to go shopping, tobacco farmers need cash to pay for labour and prepare for the upcoming season. Seedbeds for the coming season will be prepared starting June and these guys have no money to buy inputs," Robertson said.

"If they are not paid this is a threat to the coming season and tobacco is the second largest foreign currency earner."

To end the cash crisis, Zimbabwe must attract investors who have the foreign currency which is desperately needed.

"We need to change toxic policies like indigenisation and make sure land is bankable," Robertson said. "We have made a lot of good promises in Lime which we have not kept. We must keep our promises."

He said infrastructure also needs to be improved to make the economy attractive.

"We need many different layers of improvements and we need them all right now."

Economist Vince Musewe said tobacco farmers are critical to the economy as they generate a significant chunk of the available foreign currency hence the need for special arrangements to ensure they are paid and keep producing.

"They should get all their money in cash because they produce it anyway and most of it is spent locally and it improves liquidity," Musewe said. "It is not right for them to be queuing for weeks just to get paid."

To fix the cash crisis, Musewe said, far-reaching structural reforms are needed to attract investment, but this seems unlikely.

"We have to increase foreign currency and this won't happen right now," he said.

In the short-term, government can plug foreign currency leakages and encourage people to bank.

"These are more immediate solutions, we have to stop hoarding of cash because the RBZ can print a lot of bond notes but it won't solve the cash crisis if people are not banking," he added.

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