CONSTRUCTION of the multi-million-dollar Cut Rag Processors Limited tobacco processing plant is progressing well and likely to add impetus to the country’s beneficiation and value-addition drive.
The first phase of the giant facility, which is located in the Lochinvar industrial area, Harare, is almost complete.
The project — being funded to the tune of between US$80 million and US$100 million — provides huge momentum to the country’s thrust to grow the tobacco sector to a US$5 billion industry by 2025.
“We started a few months ago; we are actually ahead of schedule,” said a supervisor with one of the contractors at the site, who declined to be identified because he is not authorised to talk to the press.
The company already manufactures cut rag (tobacco cut into fine strips) and cigarettes (Remington Gold).
Repeated efforts to get a comment from Cut Rag managing director Mr Nyasha Chinhara were unsuccessful.
However, in an earlier interview, Mr Chinhara said the plant would consist of primary processing machines and a surface mount technology (SMD) line for cigarette production.
The tobacco manufacturing process starts with the primary production of cut rag blends and then secondary production that involves the making of cigarettes.
Zimbabwe has three major cut rag producers — Cut Rag Processors, Amadol and British American Tobacco (BAT).
Major cigarette manufacturers are BAT, Cut Rag Producers and Pacific.
“This is in furtherance of the company’s broad strategic direction underpinned by the Tobacco Value Chain Transformation Plan, which seeks to boost earnings from tobacco through value addition,” Mr Chinhara said then.
Cut Rag Processors was formed in February 2000.
It is believed to be the first independent cut rag production facility in Zimbabwe, servicing both the domestic and export markets.
The establishment of the company paved the way for the merger of BAT and Rothmans in 2000.
The Government, through the Competition and Tariff Commission, had rejected the merger out of concern the merged entity would create a monopoly.
Between 2012 and 2014, the company scaled down operations when it closed its cigarette plant. A year later, it decided to exit the tobacco business.
Cut Rag Processors provides cut rag processing and supply services to most of the local cigarette manufacturers, as well as regional and international customers.
Tobacco farming is one of the biggest empowerment stories in the history of Zimbabwe.
Prior to the land reform programme, tobacco farming was a preserve of large-scale commercial farmers.
However, the successful empowerment of the sector at primary level has not translated into gains further down the value chain, where superior returns are being made by leaf merchants and cigarette manufactures.
About 98 percent of the tobacco produced in Zimbabwe is exported in green (semi-processed) form by exclusively big tobacco merchants.
With one or two exceptions, indigenous merchants have failed to penetrate this market due to formidable entry barriers.
They include difficulties in accessing low-cost funding, long working capital cycles, challenges in accessing markets in the exclusive “old boys club” of global tobacco and lack of factory processing capacity.
Zimbabwe has three processing facilities owned by Zimbabwe Leaf Tobacco, Tobacco Processors Zimbabwe and MTC.
Overall, Government’s Tobacco Value Chain Transformation Plan, which also envisages growing tobacco output to 300 million kg by 2025, is premised on expanding the leaf production base and setting up processing facilities, as well as cigarette production factories, to maximise revenue from the cash crop.
It also seeks to raise the localisation of tobacco production funding to 70 percent by 2025, and increase the level of beneficiation and value addition to 30 percent from 2 percent. Approximately 96 percent of tobacco funding is foreign.
Tobacco deliveries rose to a record 293 million kg this year, surpassing the projected output of 231 million kg.
Zimbabwe — the world’s sixth-largest tobacco producer — is processing only 2 percent of the yellow leaf. – Sunday Mail