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February 07, 2011

Zimbabwe forecasts rise in tobacco output

by Dumisani Ndlela

Zimbabwe’s tobacco output is expected to surge further during the 2011 season after notching significant gains in the last season, a tobacco concern has revealed.

Zimbabwe Stock Exchange-listed TSL Limited said, “Tobacco production for 2011 is currently expected to be in excess of 150 million kilogrammes,” TSL said in its commentary accompanying results for the year to October 31, 2010 released last week. Production in the 2010 season reached 123,5 million kg, double the previous season's.

Official figures from the Tobacco Industry and Marketing Board indicate that over 40 000 small-scale black farmers produced 70 percent of the tobacco crop in the last season. The remainder was from large-scale commercial farmers, of whom just over 120 are white farmers. About 400 white farmers remain on Zimbabwe’s commercial farms.

Zimbabwe’s tobacco output had plunged from a peak of 236 million kg achieved in 2000 before President Robert Mugabe’s government embarked on a controversial land redistribution programme that forced out white farmers from their commercial farms to resettle landless blacks.

Output hit a low of 48 million kg in the 2007/08 season at the height of a devastating economic and political crisis that was to worsen in 2008 after a bloody election that was to later force bickering political leaders into a political truce that resulted in the formation of a fractious inclusive government.

Fortunes in the tobacco sector have been particularly buoyed by adoption of a hard currency regime in the country.

Previously, tobacco growers had suffered from delayed payments against the background of an accelerated erosion of value on the domestic currency which was under severe assault from runaway inflation. Inflation had peaked to a high of 500 billion percent in December 2008, but stabilised in 2009 after formation of the inclusive government between President Mugabe’s ZANU-PF, Prime Minister Morgan Tsvangirai’s MDC-T and Deputy Prime Minister Arthur Muta-mbara’s other MDC formation.

TSL was founded in 1957 as an auction house for tobacco, but began to diversify into logistics and agronomy in the late 1960s. It is, however, still a dominant player in the tobacco market through its tobacco auctioning unit, the Tobacco Sales Floor.

Last year, the Tobacco Sales Floor increased its market share of the auction tobacco from 40 percent in 2009 to 53,5 percent of the 123,5 million kg that went through the market. The company expects its market share to increase to at least 60 percent during the forthcoming season, due to open in a few weeks. Last year’s season opened in February.

Cut Rag Processors, an associate firm dealing in processed tobacco, had retained its market during the year to October 31, 2010 despite competition in the cigarette manufacturing business. TSL’s share of profit from the associate had increased by 51 percent over the previous year. Plans to expand the company’s local market were drastically reduced as a result of lower profit margins on local sales.

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