The government of Zimbabwe has announced the 60% foreign currency retention for the Tobacco farmers as they are approaching the harvest season and the opening of 2021 tobacco auction floors.
The reserve banks this month has announced that farmers will retain 60 % of their earnings in foreign currency this year, while the remainder will be liquidated at the prevailing exchange rate.
This has come after come after farmer and other lobby groups demand 70% forex and 30% local currency.
Last year farmers earn 50% foreign currency retention which was did not went well with farmers as most of them failed to recapitalise due to increased price of inputs used tobacco production.
Although the government has settled at this rate, the farmers groups has requested to retain around 70% to 80% in foreign currency.
This request was necessitated with increased input prices and widened gap between the official exchange rate and the black-market rate.
Tobacco Farmers Union of Zimbabwe (ToFUZ) president MR Believe Tevera has welcomed the development saying this had been are relief and a step further since their union has been lobbying for the upward review of the foreign currency retention.
“The review by governor of foreign retention is welcome development at list they have listen to us, they have shown that they are a listening government. ’he said
“as a union we see that there is progress at list we are heading toward the right direction” he added
In a recent survey conduct by this journalist farmers are of the opinion that they are being ripped of the value of their money, especially when they liquidate their hard-earned foreign currency at the official exchange rate of 1:83. Input suppliers, on the other hand use the black-market rate of 1:130, leaving farmers disadvantaged.
From the current auction exchange rate farmers will loose of about 30% of their value, through the black-market rate whenever they make their purchases. That money is huge, in terms of the opportunity cost on the farmer.
Given the cost structure of the farmers, it is therefore strongly recommended from farmers union and lobby groups that the government should reconsider its position and increase the foreign currency retention of the tobacco farmers.
Most if not all service providers now require hard currency and therefore the great need for hard currency to the farmers.
The government should motivate the farmers, so that next season, they will go back into the farms.
Farmers need support, especially in the midst of the Covid-19 pandemic and lockdowns, they need a boost in their livelihood options and as such, an increase in the foreign currency retention will help in a great deal.