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March, 2008

Essentra

Zimbabwe:
A New Start Next Door

by Cindy-Lou Dale

In a state of battle fatigued despair Zimbabwean farmers fled to neighboring Zambia for a new future.

Just by throwing out the country’s commercial tobacco farmers - the backbone of Zimbabwe’s economy, accounting for approximately half of Zimbabwe’s foreign currency earnings - and seizing their land, President Robert Mugabe systematically destroyed a country that was once southern Africa’s second-largest economy after South Africa and the world’s second largest tobacco export industry. Now Zimbabwe lies in ruins. As hundreds of farms were taken over, sometimes by local people, often by senior government officials, production and export of grain and tobacco collapsed.

Less than a decade ago there were around 12,000 tobacco growers in Zimbabwe, cultivating approximately 100,000 hectares. The majority were smallholder burley growers - estimated at 7,000, with 3,800 flue-cured and 1,200 oriental growers - all supporting more than 700,000 people who were dependent on tobacco for their livelihood. But within a few short years, all but a few left. “Some of the world’s best-quality tobacco suddenly disappeared,” Antonio Abrunhosa, Chief Executive Officer of the International Tobacco Growers Association, based in Portugal told the press.

The future for the former African tobacco giant looks bleak as Zimbabwe is now shouldering a four-digit rate of inflation, an economy tethering on the verge of collapse, unemployment at 85%, and the UN’s World Food Program announcing that the cupboard is bare.

Mugabe’s crash-and-burn land reform program started in earnest in 2000, driving white Zimbabwean farmers into exile in neighboring countries. Yet, in the midst of personal despair, several hundred of these displaced farmers managed to turn another African country’s economy around by applying their knowledge of technical farming skills to the land, creating employment and sharing their know-how with the local smaller farmers. They have in effect done what bns of dollars in foreign aid could not.

A Boon for Zambia
Ironically Zimbabwe’s neighbors are now profiting from Mugabe’s failed Communist tactics. Zambia, for example, has become an agricultural success almost overnight as the exodus of tobacco farmers provided an economic renaissance.

The Zambian government has welcomed the new farmers with a land policy which provides arable land to local and foreign farmers - part of a strategy to broaden the country’s economic base.

“They have come to live here as our equals,” Agriculture Minister Mundia Sikatana announced to the press. “Our new farmers have come to jump-start agriculture and have boosted tobacco production in a very short time.”

The Zambian government considers its immigrant farmers as investors who could improve Zambia’s economic security and are confident more Zimbabwean farmers will move across the border when they realize the Zambian government does not have the same land-ownership issues that have beset their neighbor.

Zambian officials are largely pleased with the presence of their new farmers as apart from creating opportunities for the locals, they were generating huge amounts of foreign exchange. “The entry of Zimbabwean farmers into Zambia is a blessing to agriculture,” says Chance Kabaghe, the Chairman of Zambia Seed. “They bring with them the latest technology and knowledge.”

The Lands Minister, Judith Kangoma-Kapijimpanga, told Reuters: “There is no doubt tobacco and agriculture is the future of Zambia, and land will be given to anyone interested in growing cash crops.”

Virginia-based Universal, the world’s biggest tobacco-leaf merchant, and North Carolina’s Standard Commercial have backed the new farmers, by contracting them to grow tobacco at guaranteed prices, thus assisting them in securing bank loans. It was the Standard Chartered Bank of Zambia who granted loans to the first relocated Zimbabwean farmers, seeking Zambian soil on which to establish farms.

The bank’s Executive Director of Finance, Brighton Ngoma, says his institution had set up an agricultural unit to help boost the sector. The money being lent out was sourced from the European Investment Bank and from Standard Chartered itself.

Under a 10-year project pioneered by Barclays Bank (Zambia), a unit of London-based Barclays, and Africa Leaf Tobacco (Zambia), a subsidiary of Universal Leaf Tobacco, money is available to farmers to assist them in growing their businesses - passing on their farming skills and knowledge to the local farmers is part of the deal, a scheme which is expected to spur on production.

Lusaka (Zambia)-based Peter MacSporran, a former Zimbabwean tobacco farmer and past President of the Zimbabwean Commercial Farmers Union turned independent consultant, advises that new Zambian farmers would firstly need an investment license to purchase a farm, which translates into bringing $250,000 to the table.

“But as it costs in excess of $6,500 per hectare to grow tobacco, realistically we’re talking around the $750,000 mark - probably nearer $1 mn, when taking into account that the land needs clearing, outbuildings, and furnaces need construction, and irrigation systems need to be installed. This is the kind of investment you’re looking at if you expect to yield in excess of 3,000 kilograms of tobacco per hectare.”

MacSporran, who lived in Scotland till 1972 and then moved to Zimbabwe (then Rhodesia) was forced to flee his Zimbabwe farm and together with dozens of other farmers crossed the border to neighboring Zambia where they helped transform the country into a tobacco exporter.

Ten years ago, in 1998, Zambia’s tobacco output was around 7.2 mn kilograms; five years later it was 26 mn kilograms, by which time, according to the Zambia Investment Centre, 100 Zimbabwean farmers had set themselves up in Zambia with investments exceeding $107 mn. Recently Jewette Masinja of the Tobacco Association of Zambia optimistically forecasted Zambia’s 2007 tobacco yield to be worth over $65 mn (50 mn kilograms, including burley).

However, this tobacco farming Utopia has encountered its first major problem. The Zambian economy has boomed in the last year, and while local inflation has been controlled, Zambian farmers’ profit margins are plummeting as their input costs have more than doubled, mostly due to fuel, transport, fertilizer costs and the revaluing of the South African Rand - where Zambian farmers buy the bulk of their raw materials. This has resulted in tobacco farms, with the infrastructure in place for larger crops, diversifying into irrigated crops. Some farmers claim it is more profitable to grow wheat under irrigation than tobacco.

Says MacSporran, “Tobacco manufacturers must look to the needs of the primary producer who require a bigger bite of the pie; the tobacco industry have ignored the production trends and market fundamentals even although many recent examples are available - look at barley and wheat. If the trends continue there will be little or no tobacco in central Africa, the one region in the world that can produce excellent replacement high quality flavored tobacco similar to that that was previous produced in the southern states of the USA. When this comes about the tobacco leaf will once again regain its golden luster but, like its metallic name sake, will be much harder to find. Those with the courage and the resources to remain in the industry will surely reap a bountiful harvest in the future.”

Despite these concerns, the Zambian government is confident that tobacco will continue to be a lucrative economic driver for the country.

While Zambia has been the first to benefit from their new citizens, other countries are keen to follow. The Nigerian government is offering 1,000 hectares of fertile land, together with loans of as much as $1 mn to farmers who relocate from Zimbabwe.

With his opposition crushed, the media and the judiciary under siege, the economy destroyed and poverty rampant, Zimbabwe has entered 2008 as a nation crippled by idiocy. The contrast with Zambia’s new fortunes is striking.

This goes beyond the numbers though. When considering Mugabe’s failed communist experiment, it is clear that the future of Africa will be determined by men like MacSporran and other brave farmers - and dependent on their skills and their teachings of it - no amount of foreign aid could have achieved what they have.

Zambia is one of Sub-Saharan Africa’s most highly urbanized countries and among the world’s poorest nations ranked by the World Bank, with per capita gross national income of $770. About 73% of Zambia’s people live in poverty, and life expectancy at birth is 33.4 years.

About one-half of the country’s 11.9 mn people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are under-populated.


Tobacco International - March, 2008

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