Chapter 5: Future of tobacco Industry

Introduction

As it has been highlighted from this perspective that despite having economics benefits, tobacco
industry recently has been facing many challenges from health organization like the World health
Organization (WHO) due to its healthy problems that are caused through smoking, Asamblea
Mundial de la Salud (2003) environmental protectionist groups due to negative environmental
impacts by cultivations during tobacco curing, human rights activists group due to its social problems
through child labour and women mistreatments who, (2013) and Hefler M, Gartner CE (2020).
Further more, contextually within the Zimbabwe environment the introduction of policies such as
the 2019 monetary policy indeed prove to have some impacts in the future of the tobacco Industry
RBZ, (2019)

Methodology

In order to write a good perspective Cha[ter that would achieve its aim and give the readers the
clear understanding on the subject matter, the researcher followed a well systematic method of
collecting data. Data was gathered from the primary through Interviews of the Key Informants from
the Agriculture personeals, Farmers, Hdealth Personeals and Secondary data obtained from the
internet from the month of April 2020, published peer reviewed and other data sources were
collected from the search engines of, Google Scholar, ResearchGate, Web of Science, University
Websites and Organization official websites. The strings used to search data were, Tobacco industry,
Zimbabwe tobacco system, Tobacco and health. In order to get up to date data the time frame used
was from 2000-2020 only with location form the whole world to have an in-depth knowledge of the
data.

Global Perspective

The leading tobacco companies worldwide that have been making a lot of sales in billions USD in the
year 2019 in the tobacco industry are British American Tobacco, Phillip Morris International, Imperial
Brands, Japan Tobacco, Altria Group, ITC, Gudang Caram, KT&C etc. [19] (Figure 5.1). However,
having these positive economic benefits, the tobacco industry through its products like cigarettes
has also brought in a lot of negative impacts through healthy problems like cancer, corona heart
diseases, Asthma etc., environmental degradation through the use of chemicals fertilizer, pesticides
and cutting of the tress for fire cured tobacco, social problems through child labour in many tobacco
cultivating estates and women violence’s and injustices Hu TW, Lee AH (2016). Due to awareness
campaigns and restrictions by heath international organizations championed why WHO by
emphasizing the negatives impacts that tobacco industry has on human beings, the industry has
been facing a lot challenges which could have seen its collapse Asamblea Mundial de la Salud (2003)
but due to its nicotine addictions, the market elasticity of demand for tobacco has not been
responding to these calls especially from the consumers side, furthermore, they have been
inconsistences and varying in many economies on these calls to reduce the production and
consumption of tobacco with just a small reduction when tax measures were used as compared to
civic educations Čizmović M, Laković T, Popović M, Mugoša A, (2018)
Figure 5.1: Leading Tobacco Companies Worldwide in 2019 based on Net Sales (Billion USD).
Source: (Jan Conway 2021)

Gobal Markert Size

Figure 2: Global Tobacco Market

Source: GGR (2018)

Throughout these decades tobacco industry has been seen as one of the well-established industries
in the world which has been contributing positively to developments of many economies through
the economic value attached to the chain market like the creation of the employment to a lot of
people and the product itself when its sold and processed product, having an approximately of USD
694.47 Billion with Compound Annual Growth Rate (CAGR) of 2.8% by 2021 EHO, (2018) as
illustrated on Figure 5.2
The future of the Tobacco Industry in Zimbabwe

Effect of the new monetary policy on the tobacco farming in Zimbabwe

Even though tobacco is one of Zimbabwe’s most lucrative exports, tobacco farmers aren’t reaping the
rewards. New restrictions on foreign currency and cash payments have made it difficult for many of them
to make ends meet. Tobacco is one Zimbabwe’s top cash crops, but the country’s ongoing cash
shortage and recent currency change have left many farmers worried that they won’t earn what they
need to provide for their families and prepare for the next season.

Thematic analysis
How is the implemented new monetary policy affect you as a tobacco farmer

Zulu says he has spent more than four days in the warehouse trying to sell his crop to local
buyers, who then resell it on the international market. But thanks to a recent change in
monetary policy here, farmers can only receive part of their earnings in U.S. dollars. The rest
must be paid in Zimbabwean dollars (ZWL), which became Zimbabwe’s formal currency on
June 24.

“They just want to take our tobacco for free,” Zulu says in frustration.

According to a 2018 Reserve Bank of Zimbabwe policy, tobacco and cotton farmers are only
allowed to retain 20% of their proceeds in foreign currency. The rest must be paid in local
currency, which is valued at a fraction of the U.S. dollar.

Last year, Zulu made about $1,500 from his crop. He says that money allowed him to buy
cattle and equipment to expand his farming business. But this year, his harvest only brought
7,500 ZWL ($624).

He received just 20% of that amount in U.S. dollars.

That will only pay for transport costs to and from the warehouse and wages for people on the
farm. The little that will be left will not be enough to plant for next season.

“This is the money that I depend on to take care of me and my family until we get to the next
harvest,” he says. “But this year has taken us more steps backward than going forward.”

But the currency complications don’t end there.

In addition to receiving most of their payment in local currency, farmers can now only be
paid by bank transfer into their accounts, rather than in cash.

The country’s cash shortage, which has been ongoing since 2016, makes it difficult or
impossible to withdraw any foreign currency from bank accounts. Farmers must make a
specific request to the bank to demonstrate need for U.S. dollars.

All tobacco farmers have been affected by the restrictions on foreign currency, but small-
scale growers have been hit the hardest.
Tobacco is a valuable export for Zimbabwe. In 2018, tobacco production reached a record
high, recording a 26% increase from the previous year, according to statistics provided by the
Tobacco Industry and Marketing Board (TIMB).

The CEO of TIMB, Andrew Matibiri, says that small-scale farmers account for 64% of all
tobacco sales in the country. Those tobacco farmers, however, are not reaping the benefits, he
says.

Chipo Museti, another small-scale tobacco farmer based in Rusape, about 173 kilometers
(108 miles) east of Harare, says she has been successfully farming tobacco for 11 years.

Last year, Museti’s harvest was lucrative. This year, with the 20% rule and the bank transfer
requirement, she earned nearly $2,000 less than last year.

“The money is not even sufficient to buy fertilizers which I need for the next season, let alone
to pay for my children’s school fees and their upkeep,” she says.

George Sinyoro has been a tobacco buyer since 1989. He says the restrictions on how farmers
are paid will have long-term consequences on the amount and quality of the crop that’s on the
market.

“Government policies have to change, they have to make sure that money is ready for the
farmer in USD. There should be more consultation between the government and the farmer.
We export the tobacco in USD and I think that it’s only fair to give farmers U.S. dollars as
well,” he says.

Zulu, the farmer from Chiendambuya, agrees. But he says he doubts that he will be able to
continue with tobacco farming in the coming season. He is considering abandoning the cash
crop for subsistence agriculture.

“I will grow maize and groundnuts which I know I can feed my family,” Zulu says. “They
cannot eat tobacco.”
Senior Agriculture Reporter
The 2021 tobacco marketing season officially closed on July 14. Senior Agriculture
Reporter Elita Chikwati (EC) spoke to Tobacco Industry and Marketing Board (TIMB)
chief executive Mr Meanwell Gudu (MG) on the season and the future of the tobacco
industry.
********
EC: What has been your experience as the new chief executive officer of the TIMB?
MG: It has been a busy season, but we have managed to pull through. With my
predecessor doing well to grow the industry, my focus now is on improving the viability of
growers, ensuring 100 percent compliance to regulations and ensure sustainable
tobacco production and good agricultural labour practices.
I endeavour to achieve this with support from the industry.
EC: How can you describe the 2021 tobacco marketing season? Any successes and
challenges?
MG: The season has progressed well with the average price being firmer by 12 percent
as compared to that paid last year. Generally, the quality of the crop and yields realised
for this season have been quite good.
We attribute this to the above normal rainfall, which was received throughout the
country.
Challenges: One of the major challenges is the issue of sustainability which has become
more prominent in the tobacco industry. Deforestation caused by growers cutting down
indigenous trees for curing tobacco has also affected the industry. There is need to plant
more fast-growing tree species to supply fire wood for curing tobacco to ensure that 100
percent of the crop is cured from renewable sources of energy by 2025.
There is also need for more research and development of curing systems that can burn
coal more efficiently and at the same time reducing the carbon foot-print of coal on the
environment e.g. the use of catalytic convertors to reduce carbon emissions from
burning coal. The other challenge facing the industry is the reduction of viability of
tobacco growers because of high-cost structure of producing tobacco.
The re-tooling rates are generally not pegged on foreign currency auction rates leading
to high cost of production.
EC: Do you think you will be able to beat the 200 million kg output target for the2021
season?
MG: We are still hopeful to surpass the 200 million kg target, however, we are seeing a
decline in deliveries from small scale farmers. The remainder of the crop is expected to
come from commercial farmers who usually bring in their tobacco towards the end of the
marketing season.
EC: What are some of the requirements for contractors to be registered?
MG: Contractors have an obligation to support at least a minimum package of inputs set
at US$1 000 per hectare and US$4 000 for both small scale and large scale growers
respectively. All contractors submit signed stop orders/acknowledgement of debt forms
to TIMB as proof that the farmer received the inputs and these should be in-line with the
minimum standards/basket approved by TIMB.
All contractors must prepare and sign legally binding contracts with each of the
contracted tobacco growers. Either signed hard copies or electronic copies should be
submitted to TIMB. Each grower to have a new contract every year.
The minimum standards for licensing include commitments to human and labour rights,
safe farm practices, elimination of child labour, sustainable curing fuel, corporate social
responsibility programmes and governance practices. TIMB audits all contractors to
ensure that they adhere to the agreed standards.
EC: How come some contractors had challenges paying farmers?
MG: Soon after the opening of the 2021 tobacco marketing season, some contracting
companies faced system challenges which adversely affected processing of payments to
farmers. That issue was discussed with the affected contracting companies and it was
agreed that they revert to their old system to ensure timeous payment to the tobacco
growers.
TIMB endeavours to ensure all stakeholders involved in the marketing of tobacco do so
in an orderly manner to their satisfaction hence continuous monitoring on delayed
payment to farmers was carried out throughout the season and correct action taken
when need arose.
EC: TIMB was given a mandate by the Ministry of Lands, Agriculture, Fisheries, Water
and Rural Resettlement to transform the tobacco value to chain to a US$5 billion
industry. What strategies have you put in place to ensure you deliver on the mandate?
MG: Following a validation workshop on June 9, on the Tobacco Value Chain
Transformation Plan by key stakeholders in the industry, it was noted that the
incorporation of the recommendations and issues arising from the thematic areas into
the final document, Strategic Policy Planning and Business Development, be completed
mid-June 2021. Then followed by a presentation of the final Plan to Cabinet Committee
for further comments and approval by mid-July 2021 then finally the launch of the Plan
by August 2021.
TIMB is also in the process of restructuring to ensure that when the Strategy is adopted,
we also have the capacity to roll out our plans to meet the set targets by year end 2025.
Government has announced that the tobacco sector will be supported by a US$60
million facility to capacitate local tobacco industry in line with localisation of tobacco
funding.
EC: Zimbabwe exports unprocessed tobacco. How much money is the country losing by
exporting unprocessed tobacco?
MG: The global tobacco market was valued at US$849,09 billion in 2019 and grew to
US$878,35 billion in 2020 and is projected to reach US$1,08 trillion by 2027.
Zimbabwe's dilemma is that while it is the fifth largest producer of flue cured tobacco in
the world, the country earns a fraction of the global tobacco market value.
Zimbabwe still earns a paltry 0,17 percent of global tobacco value when it produces 7
percent of world production instead of earning 7 percent of US$878,35 billion (global
tobacco value) which translate to US$61,48 billion.
EC: What are you doing to promote value addition of the crop locally?
MG: Value addition of tobacco presents an opportunity since less than 2 percent of total
tobacco produced is manufactured into cigarettes. The Zimbabwe tobacco industry has
a potential value of US$15 billion from cigarettes export, yet currently, US$ 0,9 billion is
realised from leaf exports. There are seven cigarette manufacturing companies
operating in Zimbabwe.
In 2019, a total of 3,1 billion cigarettes were manufactured in Zimbabwe, and over 1,8
billion sticks were exported. The shortage of foreign currency needed for recapitalisation
is a huge drawback to the expansion of tobacco production and processing. Most of the
equipment used is outdated and requires a lot of upgrading to efficiently work at
minimum running cost. There is need to create an enabling environment for value
addition through the establishment of an Export Fund for exporters and offering export
incentives and favourable foreign currency retention thresholds.
Opportunities exist in investing in production of reduced risk products within smokeless
tobacco and heated tobacco (nicotine liquids). Total global Niche tobacco value is
predicted to grow from the current US$52 billion in 2020 to US$81 billion in 2024.
Tobacco farmers could invest into end tobacco use product processing e.g. pipe tobacco
(shisha) or packaged fine tobacco for roll your own cigarettes.
EC: Contract farming has threatened the existence of auction floors. What should be
done to ensure the auction system survives?
MG: Tobacco growers who sell through the auction floors are self-funded, they support
their own tobacco production until they sell on the market. With the limitations on access
to funding from the banks because of lack of collateral most farmers are now opting for
contract farming.
That is why tobacco sales on auction floors have declined. However, there are plans to
keep the auction system running. In order to achieve that, there are plans to ensure
farmers have access to more funds at their disposal, with the Government offering that
support through the recently launched Agriculture Finance Corporation (AFC) and TIMB
also rolling out the Tobacco Input Credit Scheme (TICS) to capacitate the farmers.
EC: How did the industry cope with Covid-19?
MG: The 2021 season ran during the Covid-19 period which has become the new
normal, this meant that the regulations put in place at the onset of the marketing season
had to be monitored to ensure everyone complies. All stakeholders participating in the
marketing of tobacco are still being encouraged to get vaccinated in order to protect
themselves and those around them.
EC: What is the future of flue cured tobacco in Zimbabwe?
MG: We envision a collective sustainable production of tobacco as the future for tobacco
in Zimbabwe. This will entail efficient production of quality tobacco in conditions that limit
the impact on the natural environment and that will improve the socio-economic
conditions of the people and communities involved in its production in line with the
Sustainable Tobacco Production (STP) standard produced by the global cigarette
manufacturing companies.
Zimbabwe tobacco Industry future with respect to the Health Campaigns ( Anti Smoke
Campaigns)
Tobacco farmers in Zimbabwe, Africa's largest tobacco producer, are pinning their
economic hopes on the addictive plant. Despite anti-smoking campaigns ahead of the
World Health Organization's No Tobacco Day on May 31, farmers say the crop is one
of their biggest sources of income.

After quitting journalism at a government-controlled company four years ago, 39-

year-old Itai Mazire went into farming. This year, he expects to sell at least 9,000
kilograms of tobacco from his eight-hectare plot, about 150 kilometers east of
Harare.

Mazire says delayed selling seasons, due to the coronavirus pandemic, forced him to
dip into his savings to pay workers. But Mazire says his harvest this year was the
biggest ever and he expects sales to more than double that of 2020.

“This season is a success for us Zimbabwe tobacco farmers, in particular," he said.

"The rains were with us and we did our job. It’s a perfect story. We are curing our
tobacco and every farmer will be smiling all the way to the bank. He gets his money,
the economy improve[s], our foreign currency reserves will improve through
tobacco.”

Workers at a tobacco auction floor in Marondera about 100km east of east of Harare, Zimbabwe,
Apr. 10, 2021. (Columbus Mavhunga/VOA)

After gold, tobacco is Zimbabwe’s biggest foreign currency earner. The cash-strapped
government expects earnings this year to jump from last year’s $452 million U.S.
dollars to $800 million.

Agriculture Minister Anxious Masuka says that’s not enough.

“The tobacco’s potential is immense," he said. "It is in this regard that the
government, together with stakeholders in the industry, is at an advanced stage of
developing a three-pronged strategy. First, to increase annual production to 300
million kilograms largely from small holder farmers by 2025."

Campaigners say Zimbabwe should instead work to replace tobacco, which is known
to cause cancer, with other crops that are less damaging to health.

Sharon Nyatsanza of South Africa-based National Council Against Smoking (Apr. 12, 2021) says
Zimbabwe should work to replace tobacco with other crops that are less damaging to health.
(Columbus Mavhunga/SKYPE)

Sharon Nyatsanza, from the South Africa-based National Council Against Smoking,
says people who use tobacco are more vulnerable to the coronavirus, the cause of the
COVID-19 disease.

“Emerging signs show that people who are exposed to tobacco are at higher risk of
developing worse COVID-19 outcomes. But beyond COVID-19 pandemic is a threat
to humanity and it kills millions each and every year. It is very, very key for
Zimbabwe to start to take significant strides to move away from tobacco farming and
to invest more and to promote more alternative livelihoods for tobacco farmers,” she
said.

The World Health Organization says tobacco kills more than eight million people
each year globally.

For farmers like Mazire, the crop remains one of the best options to make a living in
Zimbabwe’s long-struggling economy. Mazire says he plans to use more hectares for
the 2021/2022 growing season, which begins mid-year.

There is evidence that tobacco through smoking cigarettes has caused death to more than 6 million
people in the whole world and its furthermore estimated that more deaths are to be registered by
2030 where by making the WHO declaring it as an epidemic and calling upon all governments to
implement necessary measures to reduce the consumptions of tobacco [24,44], most of the healthy
problems associated with the cigarettes smoking are lung cancers, reproductive health problems,
Coronary heart diseases, nasal irritation ,Asthma etc. [16].

Furthermore, Current studies have found and reported that people with underlying heathy
conditions like of hearts disease, diabetes, lung diseases are more prone to COVID-19 than those
that are not [2,45,46]. This clearly indicates that they is high risks associated with people that smoke
and consume tobacco which may bring to them these underlaying healthy conditions that may be
easily make them vulnerable to contact the Virus [9,44,47]. Therefore, the aftermath of the COVID-
19 will have a negative impact on the tobacco industry as health organizations like WHO, other Non-
Governmental Organization (NGO) and even government authorities will be pressing more and more
pressure in the reduction of the production and consumption of the tobacco related products in the
world which at the end will have a negative impact to the tobacco industry, as many people may also
be voluntarily stopping to smoke due to fear which the COVID-19 has brought to the whole world.
However, we cannot rule out the fact of the addictions and elasticity that the tobacco industry is
attached to which will also in the other way help the industry to keep struggling regardless of the
pressure which will be put on it.