ECONOMY-ZIMBABWE: Tussle Over Coal Prices Threatens Crucial Tobacco Sales

By IPS Correspondents Reprint | | Print |

Stanley Karombo

HARARE, Mar 18 2004 (IPS) - Hopes that Zimbabwe’s enfeebled economy will benefit from tobacco sales have been thrown into doubt because of a shortage of coal, needed to cure the tobacco. With the sector already reeling under the controversial land reform programme, this could have severe implications for the import of food and other essential items.

Tobacco has traditionally been the mainstay of foreign exchange earnings in Zimbabwe. According to government statistics for 2003, the crop accounted for 30 percent of these earnings – and 10 percent of gross domestic product. Tobacco sales yielded a profit of 318 million U.S. dollars last year (according to the official exchange rate between the Zimbabwe and U.S. dollars).

However, Lovegot Tendengu – Executive Director of the Farmers’ Development Trust (FDT) – told IPS that millions of kilogrammes of tobacco were at risk this year because coal merchants were charging exorbitant prices.

He added that this was proving particularly burdensome for “new farmers” who had benefited from land reform – but who could be forced to use paraffin or wood to cure their tobacco. “We are reluctant to use timber as this would send a wrong message to the environmentalists,” Tendengu said.

His sentiments were echoed by officials from the Zimbabwe Tobacco Association and Zimbabwe Farmers Union. Shortages of coal were also experienced last year, forcing some farmers to look to firewood.

The price increases come despite a decision by the Wankie Colliery Company – Zimbabwe’s only coal producer – to cut the prices of dry and washed coal by 15 percent.

Coal merchants are putting the blame for higher costs on the National Railways of Zimbabwe (NRZ).

A merchant based in Harare, Peter Ndoro, said “We have been engaged in a series of talks with the NRZ…They said they would only reduce the transport charges by five percent, and as a result of that we are forced to put a huge mark-up. Remember, we are in business.”

About 70 merchants around the country are pushing for a reduction in transport costs, although the NRZ is said to have a shortage of wagons. At present, the sellers are charging almost 18 dollars for a tonne of coal – while farmers are demanding a price of 12 dollars.

A spokesman for the Tobacco Association, Rodney Ambrose, said his organisation was encouraging its members to buy coal direct from the Wankie Colliery, rather than deal with coal merchants. About 2.2 kilogrammes of coal are needed to cure a kilogramme of tobacco.

Eighty million kilogrammes of flue-cured tobacco went through three auction floors in 2003, a far cry from the 240 million kilogrammes recorded before the land occupations and compulsory farm acquisitions, which began in 2000. Analysts predict that the tobacco crop could plummet below 60 million kilogrammes this year.

The Group Economist for the Trust Bank corporation, David Mupamhadzi, said tobacco output was expected to decline because of the reduced hectarage under cultivation by large-scale commercial farmers. The soaring cost of fertilizer, seed and other agricultural requirements have also taken their toll on the sector.

Tobacco sales are expected to earn Zimbabwe 250 million dollars in 2004, compared to 425 million dollars in 2002. The decline in production has led to the country being overtaken by Malawi as the biggest producer of the leaf in Africa.

There are also fears that the global anti-smoking crusade might cut into profits.

The tobacco selling season was scheduled to get underway this week on farms. Auction floors will open at the beginning of April.