News Column

China Demand Silver Lining for Tobacco Farmers

May 31, 2014

IN his farm storage, Julio Jairos keeps a dusted and broken-down tractor, partly because as a former mechanic he has a keen interest in machines, but more because it was how he made the shift in life by starting serious farming.

"In 2009, I drove this old tractor to Tianze Tobacco Company and asked its managers to help," Jairos said. "I said 'I have the land and want to grow tobacco for you, but I don't have the money to buy a tractor. Would you help me?'"

Jairos, who had little farming know-how, said he was caught by surprise when the managers agreed, offering him loans to buy a tractor and farm inputs.

Bound by a contract, he was expected to sell the tobacco he grew to Tianze to write off the debt. If anything was left, that would be entirely his profit. This model of contract farming continues till this date.

Today, Jairos produces about 60 tons of tobacco from 24 hectares of land and is able to sell them for averagely 4 U.S. dollars per kilogram, raising US$240,000 in revenue.

Clearing his loan of US$182, 000, Jairos comfortably pockets more than US$50,000 dollars a year.

"They (Tianze staff) help me build up the farm bit by bit every year. If they had left me, I couldn't do anything and I wouldn't have survived," Jairos told Xinhua on his Caroline Farm in Mashonaland East province.

The company Jairos refers to is a wholly-owned subsidiary of China Tobacco, China's state-owned monopoly that produces the world's largest number of cigarettes with roughly 2.4 trillion sticks of cigarettes sold annually in recent years. Most of the cigarettes were sold in the domestic market.

Tobacco leaves are sourced from both home and abroad, sustaining the livelihood of small farmers from as far as Zimbabwe who otherwise may have to struggle to find any cash crop that is as profitable to grow.

Zhang Heng, managing director of Tianze, said the company was founded in 2005 to join the already crowded market of Big Tobacco in Zimbabwe, dominated by British American Tobacco and several local white commercial farmers-owned companies.

But over the years, Tianze managed to secure its leading marketplace on the back of China's unabated demand for tobacco.

With smoking considered a deviant form of life at home, Zimbabwe sells 90 percent of its tobacco abroad. According to the Tobacco Industry and Marketing Board, about 36 percent of the country's 166 million kg tobacco output was exported to China last year.

"Almost all the major cigarette brands in China now contain some Zimbabwean tobacco," Zhang said. "As our businesses grow, we also see many of our contract farmers expand their hectarage from 6 hectares to 20 hectares or above 100 hectares."

Overall, tobacco production in Zimbabwe is projected to reach 170 million kg in 2014 with planted farmland for tobacco growing to 90,000 hectares this year.

More than 91,000 farmers registered to grow tobacco, an increase of 28.7 percent from a year earlier, according to Finance Minister Patrick Chinamasa.

Huge China demand ... Demand from China is boosting local tobacco production

Land reform

Like hundreds of thousands of black farmers in this country, Jairos acquired his plot during the fast-track land reform exercise which started in 2000. Under the programme, more than 220,000 hectares of prime farmland were seized from some 3,500 white settler farmers and allocated to indigenous Zimbabweans.

Critics from the West condemned the reallocation process as a serious violation of human rights and warned that Zimbabwe, once dubbed as bread-basket of Africa, could see its agriculture sector collapse with experienced white farmers being chased away.

But the government, led by revolutionary icon President Robert Mugabe, defended the move, saying there is justice for indigenous Zimbabweans to take back its land from white "colonizers."

Tobacco had been grown in Zimbabwe long before the country's independence in 1980. But with little farming knowledge and few assets, indigenous Zimbabweans with their new-found farmland could neither borrow money from banks nor buckle down to grow tobacco from ground zero.

"Tobacco-growing is technical in each and every stage. It really takes a professional farmer to grow tobacco," said Tatenda Mubatapasi, Tianze's production manager who majored in tobacco science in college.

"You miss one step, there is no remedy, and it is going to affect the prices. And it needs big investment - from irrigation to curing barns," Mubatapasi added.

"Banks won't lend if you don't have collateral and the interest rate can go up to 21 percent, both of which are luxury indigenous farmers cannot afford."

Zimbabwe started piloting contract farming in 2004.

Deputy Foreign Minister Christopher Mutsvangwa, who was then Zimbabwe's ambassador to China, said tobacco production then dipped to a low of 30 million kg and the government worked hard to introduce contract farming to attract Chinese investment.

Under contract farming, tobacco companies lend to farmers and guide them through the tobacco growing and curing process and in return become the prioritized buyers of tobacco produced by the farmers they assisted.

"If people want to talk about the success of the land reform, the starting point is what we have done with tobacco, which has emerged as the major agricultural export for Zimbabwe. And we did it with China," Mutsvangwa said.

Contract farming soon spread to cover cotton, maize, and other crops but none can be as successful as tobacco, the sector that accounts for 10.7 percent of Zimbabwe's gross domestic product of around 13 billion U.S. dollars.

Government officials say within a few years the country's tobacco production will return to the record of 237 million kg a year achieved before the fast-track land reform went into full swing in 2001.

The only difference is the bumpy harvest will be driven by the majority of indigenous farmers instead of the settler white farmers.

Millionaires Mubatapasi said because of the ties between settler white farmers and the whites-owned or Western tobacco companies, Tianze started out by focusing on partnering the indigenous farmers and, at present, more than half of the big indigenous farmers in Marondera are contracted by Tianze. Some have become millionaires.

Stanley Masaiti, 57, worked on a whites-owned farm in Marondera as a young boy. He was promoted to the position of farm manager before the "fast-track" land reform exercise.

His boss knew that losing the farm was imminent and struck a deal with the authorities to peacefully transfer the ownership of the 120-hectare Muembwe Farm to Masaiti.

Masaiti did contract farming with another tobacco company before joining Tianze in 2008-2009. The loan Tianze gave to Masaiti was massive and it paid off.

"I don't have to worry about the money going into the fields - irrigation, power, and etc., -- that I can focus on raising productivity and improving tobacco quality," Masaiti said, adding that his best quality tobacco leaf can fetch an average selling price of 5.42 U.S. dollars per kg, or almost twice the market price.

Masaiti now employs 108 full time workers and another 100 part-timers. Net profit from tobacco growing on the farm goes beyond US$500,000 a year.

Mubatapasi said Masaiti's farm produces probably the best quality tobacco leaf the country can find, a remarkable achievement considering that he has only runs the farm for a less than a decade and faces with stiff competition from white farmers who have been in the business for decades.

"As tobacco companies, we fight for good growers. If you are a good grower, the contract is there," Mubatapasi said. "It is like a scholarship, we are constantly looking for the best growers and assist them."

Masaiti said what he discovered is that there is no short-cut in tobacco farming. The so-called telephone farming in which the farm owner stays in the city and manages the farm by making phone calls is not going to work.

"Any short-cut is certain to backfire," Masaiti said. "The moment you go back to the farm, things have turned upside down."

Analysts say agrarian reform is a slow process and that it takes about a generation for new farmers to be fully productive.

Contract farming in Zimbabwe has proven to be effective in both providing up-front financial assistance and dissemination of knowledge, fast-tracking the process and enabling the new farmers to succeed earlier than they would have thought.

Starting from scratch, Jairos is now able to share a few tobacco farming tips with newcomers.

"Tobacco farming is all about timing. That is what I have discovered," Jarios said. "If you don't do the right things at the right time, you are not going to get the best tobacco."

Jarios said after improving the irrigation system last year he is now trying to persuade Tianze to chip in for overhauling the curing barns.

"I want to raise my yield from 2.5 tons per hectare to 3.5 tons and the barns are the key," Jarios said.

"If you don't do well, you won't get a loan. That is why I always chase my workers saying 'let's work very hard to make a success.'"


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Source: AllAfrica


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