Oct 12, 2012
Northern Tobacco and Contract Farmers in Nyazura and Harare, Zimbabwe
The company is involved in the production, processing and marketing of tobacco. Production is by approximately 140 large scale commercial farmers and 4,000 small scale commercial farmers. The company intends increasing the small scale outgrower program annually with primary constraints currently revolving around the processing facility due to lack of reliable electricity supply. Currently the processing facility is not operating anywhere near capacity due to this problem.
Northern Tobacco’s IB model is to engage small scale farmers on a contractual basis to produce tobacco. Small scale farmers are individually contracted in areas chosen by the company for specific reasons. In each of the four small scale production areas – Nyazura/Odzi, Macheke, Marondera and Karoi, there is a resident large scale tobacco farmer/ex-farmer who manages the scheme. Also employed in each area are an Irrigation Manager, Senior Leaf Technicians, Leaf Technicians and a Reaforestation Technician. Farmers are selected on merit to join the program in the areas of operation.
The farmers use their own land and are assisted in planning, training, land preparation, inputs on credit and in relevant cases can qualify for irrigation scheme and barn building credit. Adherence to tried and tested production methods is required by the company and non-performers without extraordinary circumstances are removed from the program for non-performance or side selling. Northern Tobacco facilitates the aggregation and distribution of inputs on credit including firewood, chemicals and fertilisers. The farmers are required (a recent development) also to produce their own seedlings in their own seedbeds. The seedbed aspect of the program having recently begun is progressing very well with good results. Farmers reap their tobacco, cure it, pack it into bales and deliver it to Northern Tobacco’s buying and processing facility in Harare. Payment is facilitated by a bank opposite the NT premises and is done on the same day as the sale.
Contract farming (which includes small and large scale farming) was born in part out of a national liquidity problem. ie, Farmers could no longer borrow from banks when Zimbabwe’s economy deteriorated in the early 2000’s as a result of the Fast Track Land Reform program. Corporates such as Northern Tobacco realised that if they were to stay in business, they would have to take more risk and finance the growers themselves.
The primary reason that encouraged Northern Tobacco to start up their Inclusive Business component was recognition that small scale farmers had great potential not only as producers but as partners. As a result of this recognition, some of the commercial farmers producing tobacco for the company were approached to begin supporting small scale farmers around their farms. Of particular note was the scheme started by Simon Ballance in Nyazura, Manicaland Province. Starting with 12 small scale producers in the first year, Simon and the company quickly realised that their offer to assist was reciprocated with high quality performance from the producers. The Nyazura/Odzi scheme now has in excess of 3,000 producers.
The success of engaging small scale producers has become a valuable component of the companies supply chain which the company recognises in part by ensuring fair prices are paid, normally significantly higher than competitors. Small scale producers are now queuing up to join the Northern Tobacco scheme. The company, focussing on quality over quantity can only take on a limited number of new producers each year to ensure that they maintain the high performance levels that the company has become used to throughout its operations.
What are the results?
1) The company has built a reliable supply of tobacco
2) Communities have economically and socially been uplifted. Not only the tobacco farmers themselves, but wages paid by some of the larger growers (US$4/day) benefit a greater part of the community. Other businesses and traders also benefit from the greater circulation of money in the area.
3) Company employees from the communities in which they work are on generous salaries. This injects more money into the community and gives the better farmers the opportunity to be employed as well as farm tobacco so they receive two forms of income. The company also pays generous performance bonuses.
4) The government is benefiting from this upliftment both financially in the form of taxes and in that these communities require less support even in difficult times.
Average small scale farmer results from 1ha:
Inputs US$1,100 (On credit:Training, firewood, chemicals, fertiliser.)
Profit US$2,635/annum (Excludes own labour consideration)
Considering that the national agricultural minimum wage equates to an annual figure US$845, the results are very encouraging.
The directors and management of the business understood that small scale farmers had potential which when combined with adequate training and supply of materials and equipment, would translate into economic gain for both the farmers and the company – a win-win situation. In addition, the company had good relationships with key large scale farmers who were interested in working with small scale farmers to spread their knowledge and experience. Bringing all the factors together resulted in a strong mix of energy, skill, perseverance and ultimately, economic benefit.
For further information please contact: SNV Zimbabwe Country Office, 6 Caithness Road, Eastlea, Harare, Zimbabwe. T +263 4 776136/7, +263 772 127119, F +263 4 746875, E firstname.lastname@example.org