An investigation into the causes and impact of side-marketing in contract farming in the tobacco industry in Zimbabwe: Implications for contract farming business strategies (March 2008-June 2013)

Abstract

Contract farming, a strategic tool for agribusinesses to ensure greater realibility of supplies of agricultural products has its own challenges, chief among them is side-marketing. The purpose of this study was to investigate the causes and impact of side-marketing in contract farming in the tobacco industry in Zimbabwe and assess the implications for contract farming business strategies over the period March 2008 to June 2013. The study adopted a quantitative deductive research approach and used the survey strategy, in which all tobacco companies and all small and large scale contract tobacco farmers in Zimbabwe constituted the population of study. A combination of stratified and simple random sampling methods was used to select 110 farmers and 6 tobacco companies for the sample, of whom 101 and 6 respectively responded to the survey. The data collection instruments used in the survey were structured interviews and self-administered questionnaires. The research’s major findings were that low price offered to farmers, poor yield and farmers’ greed were the main drivers of side-marketing in the tobacco industry in Zimbabwe. Tobacco contracting companies were found to be charging high interest rates or administrative charges on loans extended to contract farmers. The study recommended that contracting companies offer above-market prices for contract tobacco whilst government spearhead the education and training programmes for farmers to ensure higher yields. The research recommended that specific legislation on contract farming be provided which ensures that both farmers and companies’ interests are protected. The study also recommended that companies initiate group lending pilot programmes, where inputs are issued to groups of farmers who share liability and monitors each other internally thus reducing the risk of default. The study discovered tobacco contracting companies were mainly using cohesive methods of asuring loan repayments, of which the research recommended that the companies embrace persuasive measures such as risk sharing strategies and addressing of farmers’ social issues.The research recommended assessment of the role of relational contracting in improving the contract farming business strategy and the implication of land reform on side-marketing in the tobacco industry in Zimbabwe as areas of further research.