After the party, the reconstruction. Any jubilation at political change in Zimbabwe is tempered by the damage inflicted by two decades of decline. As President Emmerson Mnangagwa’s administration surveys the wreckage done to the economy, a clear list of priorities emerges: rebuilding infrastructure, restoring vital services and bringing investment back into agriculture, mining and tourism.
One area, however, remains bright: tobacco. For the past decade, tobacco sales by small farmers have allowed a new narrative to emerge around land reform. About 100,000 new black farming families grow tobacco, and, after a huge slump, export volumes have returned to where they were at the turn of the century.
To a great extent, this is the result of Chinese investment. With an estimated 300 million smokers in its population, demand for tobacco products in China is high. When Zimbabwe’s ‘fast-track’ land reform started in 2001 – seen by some as a long-due redistribution of stolen property and by others as a brutal seizure of land handed over to political allies – it disrupted tobacco exports. To ensure a steady flow of tobacco and cigarettes, state-owned China National Tobacco Corporation opened a Tian Ze subsidiary in Zimbabwe in 2005 to buy and export tobacco products to China.
“Thanks to our soil and our climate, tobacco in Zimbabwe is some of the world’s finest,” says Andrew Matibiri, chief executive of Zimbabwe’s Tobacco Industry and Marketing Board (TIMB). “And its quality and flavour is particularly sought-after by the Chinese.”
Certainly, 2005 was a trying time for Zimbabwe. The indigenisation policies that took land from the white minority and gave it to the black majority led to the imposition of international sanctions, and many international investors pulled out. To a certain extent, China had the market to itself.
“China came in to buy – that was it,” says Matibiri. “And that was a great thing for the sector because it was able to develop outside of politics.” The average price of tobacco has skyrocketed – from around $2.19/kg in 2005 to around $6.80/kg today for some of the highest-grade tobacco, according to Matibiri.
The introduction of contract farming, around the same time Chinese investment flooded the sector, completely transformed the industry. Tian Ze was the first tobacco company to use contracts in tobacco farming. “China and Tian Ze slipped into the existing framework and were able to shape the entire industry,” says Yumi Sakata, a research associate at the University of Zimbabwe’s Centre for Applied Social Sciences. Through contracts, farmers are not only provided with inputs – such as fertiliser, tools and other necessary equipment – but are also given a pre-arranged price for the final product, one that is often higher than what they could earn on the auction floor.
As Toendepi Shonhe, a post-doctoral research fellow at the Centre for African Studies at Cape Town University, says: “Contract farming increased competition between tobacco companies because farmers could shop around for a better deal. Tian Ze’s competitors were forced to change their models.”
Sakata adds: “The tobacco industry went from strength to strength, and others took notice. China opened up the door to other investors from Japan, the United Arab Emirates, and others – many of which have started contract farming in Zimbabwe.”
47m: China remains the number one export destination of Zimbabwe’s tobacco as of November 2017
For Ronnie Atenzi Danga, managing director of Leanrise Agriculture and president of the Agro Dealers Association of Zimbabwe, contract farming has benefited many small-scale farmers in the sector. “Previously, small-scale farmers were overlooked in favour of large-scale producers. But as the market grew, buyers looked to small-, medium- and large-scale farmers to fulfil growing needs. As a result, small-scale farmers were able to get a fairer price for their products,” he says.
Tian Ze also introduced programmes of interest-free loans, technical help and education as well as subsidies for inputs. “At the end of the day, better investment in tobacco farmers will create a better quality product for Chinese buyers,” says Olivia Macheri, a tobacco buyer for Tian Ze. The company has installed centre pivot irrigation systems and tobacco drying infrastructure alongside more classical extension work like advice and seed stock.
Chinese not racist
Some farmers prefer doing business with Chinese investors. “When Chinese investment came in, they made it a level playing field,” says one small-scale tobacco farmer based just outside of Harare. “Chinese investors don’t care about the colour of your skin – only on the quality of your product. I think black farmers are doing much better since the Chinese entered the market because they don’t take race into account.”
The current economic and financial context has created some difficulties in the industry. For instance, the cash shortage means that setting prices is a challenge, says Cephas Rukweza, the chief executive of Agritrade Leaf Tobacco, based in Harare: “For example, payments for tobacco on the auction floor can be made electronically – using EcoCash, OneMoney and a variety of other mobile-money payment systems. But if buyers can pay in cash, they will usually get a discount. And the price changes again if someone is buying in bond notes or in US dollars. Now we are in a situation where there are so many prices for the same product,” says Rukweza. “Smaller-scale farmers – who arguably rely much more heavily on cash – are losing out,” he adds.
In the long-term, contracts could be problematic for the industry. “Currently, the proportion of trades carried out on the auction floor are falling dramatically as contracts become much more popular. And if auction trading ceases to exist, prices could collapse and farmers will struggle,” the University of Zimbabwe’s Sakata says.
In 2016 The Africa Report spoke to several tobacco farmers who said they were getting out of the industry: despite a tough drought and crop failure, Tian Ze demanded back loans when farmers could not deliver the crop (TAR 82-83, July-Aug 2016). Other concerns include fears that small farmers will be exploited by increasing prices for inputs. As their success becomes visible, new networks of fertiliser and seed sellers, as well as farmgate buyers, are emerging to take their cut of the profit.
And there may be other more existential challenges ahead. Although China falls way behind international standards in terms of anti-smoking laws, several have been introduced in the country.
Most recently, at the end of 2017, China introduced a nationwide smoking ban in public places that may affect demand for tobacco and cigarettes. Critics, however, are sceptical that smokers will heed new legislation and, for now at least, Chinese demand for tobacco remains high.
“It’s a lifestyle choice,” says the TIMB’s Matibiri. “And despite anti-smoking lobbies nationally and internationally, I believe that China will remain hugely invested in our tobacco.” But with the fast growth of vaping – for which pharmaceutical-grade nicotine is synthesised from a strong strain of tobacco, requiring nowhere near the quantities that go into cigarettes – the days of bumper tobacco profits may be going up in smoke.
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