TIMB reviews dual pricing model on concerns over discrepancies

TIMB reviews dual pricing model on concerns over discrepancies

By Bernard Mpofu, HARARE, March 30 (The Source) – Zimbabwe’s tobacco industry regulator has given players up to end of day today to submit presentations on how to reduce the wide discrepancy between contract prices and auction prices as concerns mount over the current pricing model of the golden leaf.

The Tobacco Industry Marketing Board introduced the dual marketing system as a stop gap measure to boost output when production dropped in the aftermath the oft-chaotic land reform measures which government undertook to redress colonial imbalances at the turn of the millennium.

The current system has in recent years led to protests by small-scale farmers over the huge price gap between the tobacco sold through the auction system and that for contract farmers.

“The tobacco industry has of late been attracting negative publicity mainly over the pricing of tobacco. TIMB would like the industry to be proactive in responding to this negative publicity,” TIMB chief executive Andrew Matibiri wrote in a letter dated March 27 seen by The Source.

“Resultantly, TIMB is soliciting for industry’s views to be reflected in this response. We therefore request every company to make a submission on the above to be received before end of day on Monday 30th March 2015. The responses will be collated as an industry position on prices and other pertinent matters affecting the industry.”

Last year, contract farmers were paid up to $6,15 per kg for similar quality crop that fetched $4,99 at the auction floors.

Pricing of tobacco for contract farmers is currently based on a grade-price index using the Tobacco Industry and Marketing Board classification system which prices should cover production costs and include a profit margin for the grower.

In the event that the agreed price is lower than the price paid for the same crop at the auction floors, the grower shall be paid the higher price prevailing at the auction floors at the time.

This year Zimbabwe projects lower output at around 195 million kg from 216 million kg last year, which earned $684 million.