Melisa Chatikobo
Tobacco Industry Marketing Board (TIMB) says tobacco side marketing is negatively affecting the financing of the sector and they are hoping that the new law will finally deal with the scourge.
This comes after the government recently gazetted Statutory Instrument (SI) 77 of 2022 which introduced a jail term not exceeding six months for anyone found to be selling tobacco.
Speaking to the Daily News yesterday, TIMB chief executive officer Meanwell Gudu said side marketing cripples the growth of the golden leaf as most funding is from the contracting system.
“It is the tobacco merchants who lose out through side marketing; a lot of money is lost. For instance, five of our biggest contractors last year lost almost US$57 million and that is crippling to the economy.
“Side marketing undermines the investment into the tobacco sector, it is disorderly marketing so our investors will not bring in money and invest in our industry, if they are not so sure whether they are going to recover their money. It is really a cancer that can destroy the financing model in the tobacco sector,” he said
Gudu added that they are hoping the new SI will deal with the illegal market.
“Side marketing is caused by two things; the first one is under production. If a farmer has under-produced because of poor agronomic practices or has been affected by the season, the farmer may want to maximise the profits for his own benefit at the expense of the creditor.
“A farmer will realise that if they deliver all their tobacco to the contractor because of underproduction, he or she will end up with nothing in pocket therefore they side sell.
“Other reason is that some farmers do not want to pay back the loans, they will avoid paying back the loans.
“The SI is quite prohibitive in terms of the penalty, we believe it is going to curb side marketing as there is custodial sentencing for six months and there are fines, those who are found guilty will compensate the contractor times three the value of the side marketed tobacco,” Gudu added.
He also said that this season the prices are better and this will lessen the temptation for farmers to indulge in the illegal market where they get payments 100 percent in foreign currency.
“The auction floor prices are very high this time; the side marketing cannot be driven by the 75 percent foreign currency retention. I do not foresee any farmer side marketing. The average price for tobacco is good.
“Tobacco is different from other commodities, there is no other way you can sell it the way you like. You have to put it through the auction floor or to a contractor and the average prices are known so if you buy it at a higher price than the average price on the formal market you will not be able to recoup your illegal investment.
“Most people who buy tobacco out of the licensed floors would want to deliver it and sell it to the licensed facility so it’s almost like a black market facility, a black market for the prices,” he said.
So far, the crop has raked in US$75,1 million dollars in 14 days in the ongoing selling season.