The Zimbabwean government's efforts to reduce the country's unsustainable import bill and promote local production have received support from industry players. Calls are growing for a strategic shift in the financing model for Zimbabwe's tobacco industry, with some advocating for a move from offshore funding to local financing. This would ensure that Zimbabwe retains a greater share of the value generated by tobacco exports. Currently, Zimbabwe only retains around 12 percent of the net earnings from exports due to reliance on offshore funding [aa991707].
The Tobacco Industry and Marketing Board (TIMB) reported that tobacco exports in the first two months of 2024 were about US$370 million, compared to US$122 million in the same period last year. This significant increase in exports highlights the potential revenue that could be retained within Zimbabwe if a suitable local financing model is adopted. Overhauling the tobacco financing model would allow Zimbabwe to retain a larger share of the revenue generated by tobacco exports [aa991707].
However, there are challenges in implementing a local financing model for the tobacco industry. Local banks have been reluctant to offer credit to tobacco farmers due to their lack of collateral, which highlights the need for sustainable financing mechanisms to support the sector. The current contract farming system has also raised concerns about transparency and inflated costs of inputs. The TIMB has emphasized the need for local funding to ensure Zimbabwe fully benefits from tobacco exports [aa991707].
The government's pledge of US$60 million to boost local tobacco financing has yet to materialize. The delay in fulfilling this pledge has caused some uncertainty in the industry. It is crucial for the government to expedite the remodelling of tobacco financing and provide the necessary support to the sector. By doing so, Zimbabwe can retain more revenue from tobacco exports and strengthen its economy [aa991707].