Exchange Rate Issue Hinders Opening Of Zimbabwe Tobacco Auction
This year's projected 80 million kilo tobacco crop represents a 45% gain from last year - but is just a third of the record crop of 236
Tobacco auction floors opened Tuesday in Harare, but few deals were struck because producers were waiting for Zimbabwean officials to state the exchange rate at which their hard-currency export revenues would be converted to Zimbabwe dollars. Auctioning was scheduled to begin at 7:30 a.m. but was delayed for seven hours as senior government officials including Agriculture Minister Rugare Gumbo, Acting Finance Minister Patrick Chinamasa and Reserve Bank Governor Gideon Gono dickered with tobacco farmers who demanded a more favorable rate be set. Gono urged tobacco farmers to go ahead with their sales with the assurance that the government would convert their foreign exchange earnings at a rate that would allow them to turn a profit so as to be able to reinvest in the next planting season. The auction floor opened at 3 p.m. and the first bale was sold at $2.95 a kilogram. At that rate the anticipated crop of 80 million kilograms of leaf tobacco would bring some US$236 million in desperately needed foreign exchange into the country. Tobacco traditionally has been Zimbabwe's leading source of foreign exchange earnings. An attempted opening of auction floors last month failed when growers disputed prices and suitable packaging material was not available. Farmers also demanded a special exchange rate, rejecting the official rate of Z$250 to one U.S. dollar. On the parallel currency market rate the U.S. currency has been fetching more than Z$20,000. Though this year's anticipated crop represents a 45% gain from last year's 55 million tobacco output, it is but a third of the record crop of 236 million kilograms.