Dollar shortage causes payment delays for tobacco farmers in Tanzania

Dar es Salaam. The shortage of US dollars in the country is adversely affecting tobacco farmers amidst increased production, with some of them saying they have not yet received their payments.

The Tanzania Tobacco Board (TTB) Director General, Stanley Mnozya, admitted the delay was caused by the scarcity of dollars.

Read: Bank of Tanzania takes measures to tackle dollar volatility

Mr Mnozya added that difficulties in payments were also aggravated by higher-than-expected production, which exceeds market demand. TTB says in its latest report issued on July 03 market report indicates that a total of 103,766,020.00 kilogrammes of Virginia flue-cured tobacco (VFC) worth $240,803,007.78 were purchased from farmers, equivalent to an average of $2.32 per kilogramme.

In addition, a total of 83,590.00 kilogrammes of dark fire-cured tobacco (DFC) worth $143,894.60 were purchased from farmers, equivalent to an average of $1.72 per kilogramme.

This purchase is for the week ending on July 3, 2023. “Farmers are claiming $51 million. We are making all efforts to ensure that they are paid all their monies by July 31 so that they can prepare for the new farming season,” said Mr Mnozya, while insisting that the shortage of US currency has been the main challenge.

As the crisis worsened, the minister for Agriculture Hussein Bashe, convened a meeting that brought together farmers, tobacco buyers, and banks and gave reassurance that payments would be finalised by the end of July. Mr Bashe further said the payments would be made in US dollars.

Mr Mnozya said the minister’s directive will be implemented.

He clarified that farmers do not sell their tobacco directly outside the country, but they sell it to local buyers who process it for export. It is after exporting the produce that the country earns foreign currency.

Against such a background, however, one of the buyers, Alliance One Tobacco Tanzania Limited (AOTTL), said in a statement yesterday that despite the odds, it has managed to pay a total of $71.9 million (about Sh179.8 billion) to more than 12,000 contracted tobacco growers in the country this season.

The statement quoted AOTTL managing director Ephraim Mapoore as saying that the company has also paid a total of $1.72 million (about Sh4.3 billion) as crop cess directly to various districts in which it operates.

“While the governing laws require all tobacco buyers to pay for purchased tobacco within 14 days, the company strives to lessen the payment period in order to cushion its contracted growers from the burden of interest payments associated with the loans acquired from commercial banks,” Mr Mapoore said in part in the statement.

“We are proud to report that this year the company provided payments to our contracted farmers in just four days,” Mr Mapoore added.

Speaking during a recent visit to the cooperatives’ pavilion at the Nane Nane grounds in Tabora, Hassan Wakasuvi, a representative of the farmers and CCM regional chairperson in Tabora, confirmed the AOTTL’s payment timeline.

He said: “Let me declare my interest; my Amcos [Agricultural Marketing Cooperative Society] is contracted to AOTTL, and I personally have received my $20,000 into my account from AOTTL, and the payment was made within four days.” According to AOTTL’s agronomy and operations director, Mr David Mayunga, the company was working with several Amcos, out of which, five stood out in terms of good governance, member grower payment, compliance with good agricultural practises, and agriculture labour practises.

“As such, they were awarded laptops to help them close the digital gap and reduce paperwork,” Mr Mayunga noted.

The Deputy Minister for Industry and Trade, Exaud Kigahe (MP), visiting the AOTTL pavilion at the Nane Nane grounds in Tabora, said he was upbeat to hear that all AOTTL-contracted growers were paid in foreign currency and on time.

But while there are some positives with regard to contracted farmers that work with AOTTL, available information shows that the dollar shortage has largely impacted the disbursement of payments to other farmers.

A tobacco grower from Shinyanga Region, Mr Emmanuel Samson, said he has been claiming his payment for quite a long time now and has been given the same answer that the banks do not have sufficient US dollars.

He said he had been told to wait until the currency was available, and he was hoping that the Agriculture minister’s promise that all the farmers would be paid by the end of this month would be honoured.

“I claim $400,000 (Sh978.3 million). On July 13, 2023, they paid me $200 (Sh489,000). They later paid me $10,000, then $300. I don’t know what’s going on. It’s like they are playing games with me. It seems as if they want to justify that they are in the process of paying us,” said Mr Samson.

Another farmer, Mr Makwaya Samweli, told this paper that since May, when he sold his tobacco, he has not received his payment, something that is affecting his preparations for the next season.

“The reasons for not being paid are inconceivable to me. How come the buyer tells me that he has failed to get the US dollars in the bank, but strangely enough, others get those US dollars,” said Mr Samweli, who approximately claims $50,000.