RBZ simplifies rules for the 2021 tobacco marketing season. The regulations cope with contractors who use off-shore loans or lines of credit to fund the buying of tobacco, with such funds being banked in separate accounts to avoid mixing with funds from other sources.
Simple and transparent rules have been put in place by the Reserve Bank of Zimbabwe (RBZ) for the 2021 tobacco marketing season to ensure merchants and farmers can retain or be paid 60 percent of their net revenue in foreign currency and 40 percent in local currency.
Contractors will need to have documentary proof of draw-down from offshore finance and receipt of the loan proceeds, a schedule of the inputs advanced to tobacco growers and a letter from the Tobacco Industry and Marketing Board (TIMB) confirming the level of support by the contractor.
This comes as the TIMB last year introduced regulations for contractors to ensure the merchants act responsibly and accountable for their farmer support with everything set out transparently to eliminate disputes or confusion.
In a letter addressed to the TIMB, the RBZ outlined the tobacco marketing and payment arrangements for this season. Where tobacco merchants financed tobacco production using offshore loans and want to offset the amount against tobacco purchases, prior exchange control authority is needed, with only the cost price of direct inputs, excluding interests and mark ups, eligible for offsets.
The schedule of the inputs advanced to growers needs to include the name and prices of the inputs, a list of growers with their phone numbers and the number of hectares contracted, a letter from the TIMB confirming the level of support by the contractor.
All purchases of green leaf tobacco have to be financed using funds drawn-down from exchange control approved accounts or registered offshore lines of credit.
Growers, who must be paid 60 percent of the purchase price in foreign currency, will be helped by the RBZ allowing merchants to open the required special foreign currency accounts holding the money to pay the farmers with more than one bank.
To buy tobacco, merchants are expected to draw-down a specified amount from these tobacco buying transitory foreign currency accounts and sell 40 percent of the proceeds to the RBZ at the prevailing foreign exchange auction rate on the day of the transaction.
The remaining 60 percent shall be retained by the tobacco merchant to pay the tobacco growers 60 percent foreign currency entitlements through transfers to the growers’ foreign currency account.
“For tobacco that is purchased through the auction floors system, tobacco merchants shall put in place mechanisms to ensure that auction floors have the requisite foreign currency to expeditiously pay the tobacco growers 60 percent foreign currency entitlement.
Tobacco merchants who have failed to secure offshore lines of credit for buying tobacco from farmers shall apply to exchange control for authority to use locally sourced funds and proof of inability to secure off shorelines of credit would be required, including a supporting letter from the TIMB.
Meanwhile, TIMB has explained that it was not mandatory for stakeholders and staff working in the industry to get vaccinated. TIMB chief executive, Dr Andrew Matibiri on Monday said vaccination was voluntary.
“Stakeholders and staff are classified as frontline workers and can voluntarily get vaccinated for Covid-19 ahead of the opening of the marketing season on April 7,” he said.
Source – The Herald
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