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In a nutshell

| May 31, 2011

Securing supplies

After visiting a commercial tobacco farm and several leaf merchants, the story that emerges is as follows:

Zimbabwe tobacco production used to be dominated by a small number of large-scale tobacco farmers. The majority of these commercial growers were white descendants of British colonists.

At independence in 1980, the Zimbabwean government announced it would purchase white-owned farms and redistribute them to landless black peasants, who account for the vast majority of Zimbabweans. The program was to be carried out on a willing-buyer-willing-seller basis, but for a variety of reasons, land redistribution didn’t happen as quickly as envisioned.

People got impatient, and when President Robert Mugabe started losing popularity by the late 1990s, he changed tack. The willing-buyer-willing-seller principle was abandoned, and commercial farmers started being evicted from their land, sometimes violently and often without compensation.

But instead of benefiting the landless masses, many properties ended up in the hands of the party bosses, police commissioners and army generals—people selected for their political connections rather than their farming skills.

As a result, Zimbabwe’s once-thriving agricultural sector—and, with it, the entire economy—came to a grinding halt. (Tobacco at one point accounted for some 30 percent of Zimbabwe’s foreign currency earnings.)

The new growers who are farming face a set of formidable challenges, including the fact that they have received no titles to their land. This means their properties cannot be used as collateral for obtaining bank loans, which is especially problematic for a crop like tobacco, which requires substantial upfront investment.

In order to secure their leaf supplies, tobacco merchants have started contracting directly with growers, providing them with capital, inputs and other necessities. In essence, they have become financial institutions, a function with a considerably different risk profile than that of their core business—buying and selling leaf tobacco—and one that many remain uncomfortable with.

Many people I’ve spoken with believe that lack of property rights and the related inability to access capital are the biggest limiting factors to further expansion of Zimbabwe’s leaf tobacco industry.

Category: Blogs, Zimbabwe Revisted

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