An important advantage of this system and one reason many farmers like to grow tobacco is that they are paid in foreign exchange on the day the crop is sold. This money can be held in a foreign currency account for up to 60 days and is often used to procure essential imports needed to sustain farm production. Tobacco sold through the auctions then undergoes further processing by merchant companies to remove stems and tips from the leaf before being shipped abroad. This adds 30% to 50% to the crop’s final export value. In 1998, the total value of tobacco exports was roughly USD 582 million. Three main types of tobacco are grown in Zimbabwe including flue-cured, burley and oriental tobacco. Of these varieties, flue-cured is the most important and accounts for around 97% of the total volume. Northern and central areas of Natural Region II mostly produce a Virginia type of tobacco, whereas farmers in the east grow a thicker, slower developing type used for blended cigarettes. Burley tobacco is farmed mainly in the northeast and in the Eastern Highlands and is predominately a smallholder crop. These areas have better rainfall and longer periods of high relative humidity needed for curing. Oriental tobacco accounts for less than 1% of total output by mass and is grown mainly in Masvingo Province. Details of flue-cured and burley production by farm sector for the past two years are given are given in Table 2. A full analysis of flue-cured tobacco showing number of commercial growers, area planted and average price received in each of Zimbabwe’s 15 main tobacco-growing districts is presented in Appendix 2.7 Employment: Tobacco accounts for an estimated 250 000 jobs including direct and indirect workers in growing,vertical garden indoor manufacturing and retailing, about 5% of Zimbabwe’s total labour force.

Many other jobs also stem from tobacco’s forward and backward linkages to other parts of the economy including input supply, transportation, coal mining, hospitality during the auction season and other consumer services. Remittances sent by tobacco workers to family members on communal farms can also help improve smallholder production of major crops like cotton and maize. The analysis shows that both of these traditional crops are much more profitable when small holder farmers can afford the inputs needed for production at medium and high input levels and it is important that LSC tobacco can help finance some of these costs indirectly.Tobacco is also an important source of government revenue through a levy system in which growers and buyers both pay fixed percent on the value of crop sales. This system generates several millions of USD annually as summarised in Table 3. To encourage production, the tax rates have been reduced each year since 1999 as shown. At the new 2001 tax rate and a typical LSC yield of 2 500 kg per hectare, flue-cured tobacco generates an estimated ZWD 7 260 in government revenue per hectare. In the high-potential agricultural areas being considered here, most commercial farm strategies begin with, and revolve around tobacco. Other crops are mainly grown in rotation with tobacco, either to generate cash to sustain tobacco production or as food for on-farm consumption. Tobacco is one of the most profitable enterprises in commercial agriculture and the primary reason many commercial farms exist. Although other cash crops including cotton and even maize are more important for vast majority of communal and resettlement farmers, burley and flue-cured tobacco offer a unique opportunity for exceptionally high producer profits and is grown by around 16 000 of smallholder farmers as shown in Table 2. Tobacco is a 12 to 16 month crop with sowing in the nursery starting in early-June and final marketing ending in October the following year.

LSC farmers typically grow two distinct tobacco crops each year including an early, irrigated crop planted in the field at the beginning of September and a second, dryland crop planted in lateOctober. The primary reason for this is to maximise the use of limited barn space over a longer curing period.Typical plot sizes for flue-cured tobacco range from as few as 20 hectares to more than 80. Smallholder farmers exclusively produce dryland tobacco and mostly cultivate very small plots of no more than 0.5 to 2 hectares at most. An important characteristic of tobacco is that this is a relatively drought tolerant crop that also grows well on sandy soils. Although tobacco is produced in some of the best farm areas of Zimbabwe, it occupies a particular environmental niche in these locations and is generally able to out-perform other crops that demand more intensive irrigation and better soils. Most LSC farmers practice a five-year rotation where tobacco is followed for two years by Rhodes grass or some other combination of crops including wheat, soybeans, maize and groundnuts and then left fallow with grazing for livestock. Smallholder farmers typically follow a tobacco-maize rotation with small plots of groundnuts and other crops grown mainly for home consumption. Per hectare financial indicators for LSC fluecured tobacco are summarised in Table 4. Compared with all other enterprises analysed, these results are extremely favourable and show that tobacco offers excellent potential for high producer profits and employment creation. As shown in the complete data set in Part Two, only roses, paprika and some coffee scenarios offer a potential for greater net profits. Export vegetables are normally triple cropped each season and so also offer a potential for similar earnings on a per hectare basis as tobacco, but are normally grown over a smaller area because of intensive management requirements. Importantly, the data in Table 4 also show that LSC tobacco is very expensive to grow. Tobacco not only demands a heavy application of fertilisers, but also makes intensive use of pesticides, herbicides and other special inputs and so demands greater cash expenditure before harvest than almost every other enterprise analysed. Although the share of costs that need to be financed with seasonal credit vary from farm to farm, this clearly represents a large challenge for Zimbabwe’s banking system. Traditionally, LSC farmers have been able to use land as collateral to cover their bank overdraft but, as a result of current resettlement policy, farmers are now being denied this opportunity and many have been forced to scale back their operations. Other crops have also been affected by this situation, but tobacco has been especially hard hit because of very high up-front costs. In terms of employment creation, the data show that LSC tobacco is one of the most labour intensive crops analysed. Although other enterprises including roses, paprika, coffee and export vegetables are also very labour intensive,vertical garden indoor system tobacco is grown on a much larger scale and the calculations here suggest that the flue-cured tobacco is likely to account for 34 million days total of employment with and a wage bill of around ZWD 2.6 billion .

In addition to about one full-time worker per hectare, tobacco demands an additional 70 to 160 days of casual labour per hectare for specific tasks . Irrigated tobacco requires more labour than dryland tobacco because of additional yield and time spent moving sprinkler heads and pipes. Finally, it is worth noting that the sensitivity indicators for LSC tobacco are all very robust and show that a relatively large drop in price or yield is required before the crop returns a financial loss. This finding is especially important given the mounting pressure on tobacco from health groups, new trade protocols and changing consumer tastes and suggests that Zimbabwe is well positioned to continue as one of the world’s leading tobacco exporters under progressively difficult market conditions. Although LSC farmers are likely to feel some pressure to diversify in order to protect themselves from the risk of diminishing tobacco markets, therefore, tobacco still has many useful roles to play in the development of Zimbabwe and is likely to remain an important part of most farm systems for many years to come. Summary data for communal, resettlement and SSC fluecured tobacco are given in Table 5. Overall, these data tell a similar story as for LSC farmers and show that tobacco offers smallholder growers excellent potential for very high producer profits but is also expensive to grow. Some merchant companies now offer input support to selected SSC and other smallholder farmers on an out grower basis whereby the cost of fertiliser, pesticides and other inputs given on loan are deducted through the auction using a stop-order on the farmer’s final payment. Opportunities to participate in these programs, however, are still limited and reserved for the best, most trustworthy smallholder growers. The high costs of production for fluecured tobacco, therefore, are a disincentive to most cash-poor smallholders in tobacco areas and an important factor limiting the area cultivated and choice of management technology. Compared with LSC tobacco, one notable difference is that the financial rates of return for smallholder farmers are generally more favourable. From the farmer’s point of view, these very good rates of return help justify the large expenditure on variable inputs and show that growers who are able to afford these costs are likely to be well rewarded. With respect to labour, the data show that flue-cured tobacco is likely to require at least some hired labour at each management level. Although precise requirements depend on the availability of family workers, this can be an important constraint and must be considered in deciding how much area to plant. In addition to flue-cured tobacco, six levels of smallholder management for burley tobacco have also been considered. As shown in Table 2, smallholder farmers account for 90% of all burley growers by number and 60% of total production. Nearly two times as many communal and resettlement farmers grow burley tobacco compared with flue-cured tobacco. One important advantage of burley tobacco is that this is an air-cured crop and so does not demand a large investment in expensive barns or firewood and coal for curing.On the other hand, burley tobacco needs relatively high humidity for curing and so is not suited to production in all areas. The financial indicators for smallholder burley tobacco are summarised in Table 6. Compared with flue-cured tobacco, these data show that burley tobacco is less expensive to grow but also provides a lower net income. Although still relatively expensive compared with most other smallholder crops like cotton and maize, the data for communal and resettlement farmers indicate that burley tobacco costs between ZWD 6 000 to 9 000 less per hectare than flue-cured tobacco. For SSC farmers, the estimated savings are even greater and range between ZWD 21 000 to 40 000 . This savings can be an important incentive to smallholder farmers and, in addition to local climatic conditions, helps explain why more smallholder farmers cultivate burley rather than flue-cured tobacco.Just as total costs with burley tobacco are lower, however, so too are the estimated net profits. Based on the average gross profit for all smallholder models, the data show that the returns from burley tobacco are about 50% lower compared with those for flue-cured tobacco, equal to some ZWD 28 000 per hectare. Burley tobacco still offers a potential for very high profits compared with most other smallholder crops, although paprika and high input cotton both offer an opportunity for greater income and better rates of return to the expenditure on cash inputs and investment of family labour. With the right types of support, the data also show smallholder coffee could surpass burley tobacco in terms of total income. Importantly, burley tobacco and coffee are already produced in similar geographic regions where growing conditions are well suited to both crops. The traditional field crops considered here all cost considerably less to grow than tobacco, but also provide much less income. With many crops, LSC farmers even appear to earn a net loss indicating that these activities do not cover the annual depreciation cost of fixed assets. Nevertheless, these enterprises still play an important role by helping to provide the steady cash flow needed to sustain the production of tobacco and other more profitable crops. For smallholder farmers, traditional crops are not only important as a source of cash income, but are also essential part of most household food security strategies. Maize and groundnuts, for example, are grown primarily for family consumption, with only small surpluses sold for cash in most cases. The next summary table compares the labour requirements and total wage bill for traditional LSC field crops with those for flue-cured tobacco.