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TRADE-MALAWI: Tobacco Industry Going Up in Smoke

Pilirani Semu-Banda

BLANTYRE, Mar 31 2007 (IPS) - Tobacco prices and production levels are dropping amid pressure from the anti-smoking lobby and the general downturn in agricultural produce markets. But Malawi has still not made adequate progress in promoting crops to replace its primary foreign exchange earner.

Green gold is the term that Malawians use for the country’s tobacco. The nation derives up to 70 percent of its foreign exchange earnings from the crop and 80 percent of the country’s labour force works in the tobacco industry. Historically, the leaf has been regarded as an economic lifeline in a country without rich mineral endowments.

The southern African country is a major tobacco exporter in the world, accounting for five percent of the world’s total exports and two percent of world’s total production. In terms of burley tobacco, Malawi produces about 20 percent of the world’s total, according to the World Bank.

The Tobacco Association of Malawi (TAMA), which promotes and protects tobacco farmers’ interests, says that the leaf also accounts for 13 percent of the country’s gross domestic product and makes up 23 percent of the tax base.

The crop is treasured because of historical associations. Commercial production can be traced back as far as 1889 when it was introduced by settlers from Virginia in the United States.

However, in recent years the tobacco industry has been struggling for survival. It is fighting global anti-smoking campaigns led by public health activists, backed by the World Health Organisation. Poor auction prices and a dearth of buyers are also among the challenges that Malawian tobacco producers are grappling with.

Caught in the middle of these challenges are the country’s small-holder tobacco farmers. One of them is 55-year-old Dongo Msiska. All his life he has known nothing but tobacco cultivation.

At the age of 24, he took over a 50-hectare farm from his father. Since then the livelihoods of his family and those of his 33 employees have depended on the production of the leaf.

In the past three years, Msiska’s income has dwindled rapidly in the face of poor auction floor prices. He has since been forced to cut production by half.

”I could not afford to buy enough production inputs with the little money I got for last year’s crop. I had to reduce production and have since had to let some of my workers go,” he says.

Msiska’s woes were a result of last year’s catastrophic decline of 15 percent in tobacco sales. Sales figures from the Tobacco Control Commission (TCC) indicated that the crop raked in 162 061 893 US dollars in 2005 but only 137 834 528 US dollars in 2006.

Malawian president Bingu wa Mutharika, himself a farmer, has admitted that the tobacco industry is not as viable as it used to be.

He and the ministries of agriculture and trade have urged tobacco farmers to consider diversifying production to cotton, cassava, pigeon peas, ground nuts, soya, dairy products, beans and rice as alternatives to tobacco.

Up to 40,000 farmers have heeded the calls to diversify in the past six years and have since abandoned tobacco production, according to the TCC.

But despite his calls for diversification, Mutharika has continued to fight for the survival of the tobacco industry. Major buyers of Malawi’s tobacco were last year ordered by the president to leave the country or offer better prices on the auction floors. He accused them of running a cartel and fixing prices.

Mutharika imposed a minimum price of 110 cents per kilogram and, for higher grade leaf, 170 cents per kilogram but the buyers boycotted the market, forcing the government to concede defeat. The president has no kind words for the buyers and has since branded them ”thieves” and ”exploiters” for defying his price setting.

Meanwhile, Malawi is pursuing a deal that addresses issues of collective marketing as well as value-adding with the other tobacco-producing countries of Zambia, Tanzania, Zimbabwe and Mozambique. They aim to position the industry better in the world markets so that the countries can reap more from the crop, says the trade ministry.

The government is optimistic that handling the problems dogging the tobacco industry at a regional level will yield more positive results than working in isolation.

Despite the pressure on the industry the majority of Malawian farmers, through TAMA, have resisted a diversification strategy that excludes tobacco because the commercial value of the crop still remains the highest.

TAMA executive secretary Felix Mkumba argues that the leaf has a readily available market which is well guaranteed since everything that they produce is still sold, despite the low prices. ”Accepting total diversification will be suicidal.”

David Mkwambisi, a lecturer at the Bunda College of Agriculture at the University of Malawi, disagrees with TAMA. He does not consider tobacco to be the backbone of the country’s economy anymore.

This is because the government and stakeholders have failed to introduce measures which would enhance crop production, he argues. The growers have been penalized with taxes which have not been ploughed back into the sector.

Therefore Mkwambisi contends that the global problems besetting the tobacco industry are not the primary concern. Domestic politics is the source of much of the tobacco industry’s difficulties.

He also has questions about how the government is approaching the issue of diversification. ”Even though cotton was identified as a crop to replace tobacco, nothing has been done to promote cotton.

”Why did the president rush to announce the diversification towards cotton? Do we have markets for cotton, cassava, soya and beans? Why should we expand cultivation to those products if we have not found the markets yet?” asks Mkwambisi.

He says that even if tobacco was not facing the current public health campaigns, it is extremely bad planning to depend on one crop for economic growth. ”As a country we have been standing on a slim edge economically by relying on tobacco only,” warns Mkwambisi.

Meanwhile Malawi’s tobacco production levels are plunging. The TCC has indicated that tobacco yields this year (2007) are down by 18 million kg from 158 million kg last year. The country’s international buyers are demanding 170 million kg, which means that the supply from Malawi is short by 30 million kg.

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