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Tag: Malawi

  • Enduring Demand

    Enduring Demand

    Photo: Taco Tuinstra

    Malawi burley remains popular even as global smoking rates stagnate

    Even as cigarette sales stagnate in many markets, demand for Malawi burley remains robust. An important component in the toolbox of the tobacco blender, burley is a key ingredient not only in the popular American blend cigarettes but also in roll-your-own and make-your-own products along with pipe tobaccos.

    Due to last year’s short crop, leaf merchants are anticipating strong interest this season. In 2022, the country produced only 69.2 million kg of burley—against an estimated demand of 150 million kg. This year, the Tobacco Commission is expecting 106 million kg.

    While burley is produced in several countries, including in southeastern Africa, industry representatives are confident that Malawi can hold its own against other suppliers. “Malawi is still a preferred origin of burley,” says Joseph Malunga, chief executive of the Tobacco Commission. “Even regionally, our burley is better than that from other origins.”

    Malunga suspects that demand for Malawi burley will increase as the country tackles concerns raised by customers about agricultural labor methods. Traditional rural African practices, such as tenancy, in which a farmer provides workers with food and housing during the season but pays them only after the harvest, or requiring children to help out on the family farm, are frowned upon in Western countries where many tobacco buyers are headquartered.

    The commission has done a lot to communicate what customers want, but some farmers will get the message very late. It will be a gradual transition.

    Joseph Malunga, CEO, Tobacco Commission

    Tobacco companies have been pressuring their suppliers to abandon these habits, and in 2019 the Malawi government banned tenancy. Leading buyers of Malawi leaf have systems in place that not only prohibit their contracted growers from deploying children or tenants but also include elaborate verification mechanisms. In 2020, such systems helped Limbe Leaf, Alliance One International and Premium Tobacco Malawi quickly convince U.S. Customs and Border Protection (CPB) that their supply chains were free of forced labor when the agency temporarily prevented Malawi tobacco from entering the United States based on concerns about forced labor. Impressed by the leaf merchants’ responsible supply chain management, CPB swiftly lifted its ban on tobacco imported by those companies.

    Recognizing the progress made, some customers who left due to compliance issues are now coming back, according to Malunga. “They see that we have been doing our homework.”

    But while the tobacco produced under contract with leaf merchants generally complies with the standards expected by Western governments and customers, the picture is less clear for the independently cultivated tobacco sold at auction, which accounts for approximately 10 percent of Malawi tobacco production.

    The country’s tobacco industry is dominated by smallholder farming. With nearly half a million individuals cultivating leaf in Malawi, many of them living in remote areas and many of them illiterate, it will take a while for the message to reach everybody. “We have made big strides—to the extent of having laws,” says Malunga. “But you cannot expect these practices to stop overnight. The commission has done a lot to communicate what customers want, but some farmers will get the message very late. It will be a gradual transition.”

    Don McAlpin, managing director of Limbe Leaf Tobacco Co., which is affiliated with Universal Corp., hopes the change will come sooner than later. For Malawi to maintain its appeal on the global market, it will be essential for the noncontracted growers to meet ESG targets, he says. “Any perceived concerns about sustainability or ESG issues in Malawi create a reputational risk to the Malawi brand and could impact Malawi tobacco regardless of the percentage that is contracted and compliant.” –T.T.

  • Back to Normal

    Back to Normal

    Photo: Taco Tuinstra

    Following a record low harvest in 2022, Malawi has produced a more typical crop this season.

    After last year’s short crop, the Malawi tobacco trade is looking forward to more normal volumes this season. Typically, Malawi’s rainy season starts in November/December, but in 2022, the rains came much later, delaying the growing season by two months to three months.

    The drought coincided with transplanting in Malawi, causing a good percentage of the tobacco to dry out. Farmers contracted with one prominent leaf merchant alone suffered 35 percent plant mortality. As a result of the adverse weather conditions, Malawi produced 85 million kg of leaf last year—the lowest volume in a decade, according to the Tobacco Commission.

    This season, by contrast, is looking more promising. The trade is anticipating some 128 million kg of leaf, closer to the normal figure of 130 million kg. Burley accounts for most of the volume (81 percent), followed by flue-cured Virginia (16 percent) and dark air-cured tobacco (3 percent). Initial surveys indicate a good quality leaf as well.

    Nixon Lita

    Industry representatives cite favorable weather during the growing season, with rain falling in the right places at the right times and in the right volumes—until Tropical Cyclone Freddy struck southern Africa. The system—the longest-lasting on record—pulled warm air from the Intertropical Convergence Zone and the Congo over the southern and central parts of Malawi for much of February and March, resulting in perpetual overcast and rainy conditions in those regions. When it hit Malawi on March 11, it brought torrential rains and gale force winds, dumping up to 300 mm of rain in a 24-hour period. Cyclone Freddy caused massive landslides and flooding, killing more than 1,000 Malawians. Tobacco companies have been contributing to relief efforts through the Tobacco Processors Association.

    But while the storm devastated lives and infrastructure, it largely spared Malawi’s tobacco crop, and the market opened as scheduled on April 12. That is because most Malawi tobacco is grown in the country’s central and northern regions whereas the storm hit hardest in the south. According to Nixon Lita, chief executive of the TAMA Farmers Trust, the little tobacco that is grown in southern Malawi matures earlier than the leaf produced in the central and northern regions. “By the time the cyclone hit, many farmers had already reaped their tobacco,” he says.

    Despite the increased volumes, Malawi will still fail to meet demand (see “Enduring Demand“), which is estimated at 150 million kg this year. According to Lita, it’s hard to double production in 12 months, especially with the significantly higher cost of production (see “Coping with the COP”) this year. If burley shortage results in good prices, as predicted, it should encourage more farmers to plant tobacco next year. –T.T.

  • Fungi Fever

    Fungi Fever

    Photo: Volodymyr Herasymov

    Mushrooms sprout new opportunities for Malawi

    As Malawi seeks to diversify its economy, button mushrooms are emerging as one of the promising alternatives. Not only are the fungi popular among Malawians, who like to eat them as pizza toppings and in other foods, the country’s climate and growing conditions are also conducive to its production. To date, domestic production has been minimal, however. In the 1980s, a government research station cultivated limited numbers, but the organization failed to invest in farmer training. Over time, domestic production fell by the wayside. Today, Malawi imports 92 percent of its button mushrooms from South Africa.

    Lilongwe-based JAT Investments seeks to change that by promoting domestic cultivation. According to founder and Managing Director Temwani Gunda, mushrooms offer many advantages to the farmer. For starters, they require less land than other crops. “You can grow them in a small shed,” she says, adding that this also protects them to a degree from the impacts of climate change.

    The labor, meanwhile, is easy compared with tobacco. “You don’t need to go into the fields and be exposed to the elements,” says Gunda. “This means it is an inclusive commodity; even old people manage them.” Selling for approximately MKW10,000 ($9.75) per kilogram, mushrooms also offer attractive yields. A shed of 3.5 meters by 5 meters can produce 250 kg of mushrooms. One growing cycle takes about two months, allowing farmers in Malawi to grow three times per year. “And that’s the production from just one shed,” says Gunda.

    Farmers venturing into mushrooms should also have no trouble selling them. A consultant hired by JAT Investments estimated domestic demand at between 70 tons and 75 tons.

    Temwani Gunda, founder and managing director, JAT Investments

    Farmers venturing into mushrooms should also have no trouble selling them. A consultant hired by JAT Investments estimated domestic demand at between 70 tons and 75 tons.

    The greatest challenge for Malawi mushroom producers is seed (spawn). Because there is no domestic production, it must be imported from South Africa or elsewhere. This adds not only cost and time but also risk—if the shipper does not properly control the temperature, the seed won’t germinate.

    With the help of the Centre for Agricultural Transformation (CAT), JAT Investments expanded its farmer base from two to seven farmer “clubs,” each of which contains between 10 and 15 mushroom growers. The CAT also assisted with seed procurement, infrastructure and farmer training, allowing the number of farmers to grow at a much faster pace than it could have managed otherwise.

    According to Gunda, growers, including many tobacco farmers, have been lining up to join the project—and they appear to have been pleased with the performance of the fungi. “Just one crop of mushroom allowed me to pay school fees and buy fertilizer for my maize,” says one JAT grower. A colleague lauds the fact that, unlike tobacco, mushrooms are good for health and don’t require him to chop down trees.—T.T.

  • From Imports to Orchards

    From Imports to Orchards

    Photos: Taco Tuinstra

    Rebuilding the banana value chain

    Until the late 1990s, bananas were big business in Malawi. The industry employed between 2 million and 3 million people and completely satisfied domestic demand. But then a nasty plant virus hit. Banana bunchy top virus (BBTV) wiped out production, forcing many former Malawi banana farmers to find alternative livelihoods. Today, the country relies almost entirely on imports. More than 90 percent of bananas consumed in Malawi are now purchased in Tanzania and Mozambique, which demand to be paid in precious foreign currency.

    Supported by the Centre for Agricultural Transformation (CAT), Lilongwe-based Hortinet is working to reestablish banana production in Malawi. Through its efforts, it aims to create employment, reduce imports and offer Malawi an additional source of income while diversifying the country’s economy and reducing its heavy reliance on tobacco exports.

    Bananas are a popular food in Malawi, so there is opportunity for import substitution, according to Frank Washoni, executive director of Hortinet. “Currently, we are exporting jobs,” he says. “This is something our smallholders could be doing if they get the appropriate support.”

    The strategy to deal with BBTV requires banana growers to uproot and burn their infected bananas and replace them with disease-free imported planting materials. The biggest challenge has been accessing clean planting materials. Until recently, there were no proper banana seed systems in Malawi. Because the existing crop strand had outlived its economic lifespan, there were no proper systems to supply banana growers with clean planting materials to reestablish their orchards.

    To address this problem, Hortinet in 2019 established Malawi’s first commercial banana tissue culture lab, allowing it to produce large quantities of planting materials in a short time. Hortinet gives plantlets to smallholder growers, negotiates production contracts and provides extension services. “At the end of the season, we buy the product—banana fruit—for either distribution or value addition,” says Washoni. Among other things, bananas can be used to make flour and chips.

    However, while Hortinet has the experience and technology, it lacked the means to scale up its out-grower project and supply the desired 700 farmers. So the CAT, as part of a five-year project, helps Hortinet train potential banana growers at its smart farm. The idea is that, after five years, Hortinet will have sufficiently grown to self-finance its continued expansion to more smallholder farmers.

    Washoni believes the potential domestic market is considerable. “According to the ministry of agriculture, we lost more than 25,000 hectares representing at least 10 metric tons of bananas each,” he says. “Today, we are importing 20,000 tons per year, supporting only the urban areas—so there is still a big deficit.”

    Hortinet is determined to make a dent in that deficit. By the end of next year, it wants to distribute at least 1 million plantlets and establish a minimum of 500 ha of banana production with its contracted smallholders. With a plan to add 500 ha each year, Hortinet will have supported the establishment of 2,000 ha by the end of four years.

    Washoni views bananas as a good opportunity for farmers looking to diversify. At the CAT smart farm, Hortinet demonstrates how profitable the fruit can be compared to other crops. While the initial payback period is longer than for tobacco, bananas offer multiple returns each season. “Once in the ground, you might harvest on a quarterly basis,” says Washoni. At 15 tons per acre, the potential yield per unit of area is also high. And other than water, bananas require few inputs. Farmers can get away with organic manure and limited amounts of inorganic fertilizer. What’s more, bananas require relatively little land. “Even on a plot of only 20 [meters] by 20 meters, it might make economic sense for the farmer to put in an orchard,” says Washoni.

    The next step will be to establish a structured market. Unlike tobacco, which has multiple players, a dedicated regulator and a well-developed system for selling and buying, there is no comparable infrastructure for bananas in Malawi. According to Washoni, it’s a work in progress. “Once we hit a critical mass, we will need an organized market,” he says. Right now, our priority is to get production going.”—T.T.

  • Coping with the COP

    Coping with the COP

    Photo: Taco Tuinstra

    Like their counterparts around the world, tobacco growers in Malawi have suffered from the rapidly rising cost of production. In addition to domestic headline inflation of 26 percent, farmers had to contend with a significant increase in the price of fertilizer, which more than tripled over the past three years to four years. According to Nixon Lita, CEO of the TAMA Farmers Trust, this was due more to Covid-19-related shipping disruptions than to the war in Ukraine. Traditionally oriented toward the West, Malawi imports most of its fertilizers from the Middle East rather than eastern Europe, he says—but the result is the same as for countries relying on Russian and Ukrainian fertilizers: substantially higher prices.

    Because virtually all inputs for Malawi tobacco production are imported, there’s little the industry can do about this part of the equation—so it focuses on the factors it can control. Contracted farmers enjoy an advantage over their noncontracted colleagues because they benefit from the tobacco buyers’ scale and global reach. “Due to bulk buying, we can get fertilizer on time in Malawi and price it competitively for farmers,” says Simon Peverelle, managing director of Alliance One Tobacco Malawi. “For auction growers, that is harder.”

    The other way to offset rising production costs is by boosting farmers’ incomes. “We try to negotiate with our buyers, asking them to increase the farmers’ margins based on cost of production,” says Joseph Malunga, chief executive of the Tobacco Commission. “That doesn’t always go well because the buyers, too, are in business and want profit—but we try.”

    Under pressure from their customers to control costs, the merchants prefer to focus on boosting output. The leading leaf dealers employ or contract significant agronomy departments to help their contracted growers maximize both the quality and the yield of their tobacco, which in turn improves the net return on their crops, according to Don McAlpin, managing director of Limbe Leaf Tobacco Co. Size matters in this regard. Peverelle says that scaling up is necessary for farmers because it is increasingly difficult to earn a living income from smaller plots.

    The Tobacco Commission, meanwhile, is promoting natural solutions to improve farmers’ margins. For example, it encourages flue-cured tobacco farmers to establish woodlots and use “live barns”—curing facilities built using living trees—so they don’t have to buy wood for curing or construction. “This not only reduces costs but also promotes sustainable development,” says Malunga.—T.T.

  • Malawi Earns $64 Million From Tobacco

    Malawi Earns $64 Million From Tobacco

    Photo: Taco Tuinstra

    Malawi has earned $64 million from tobacco sales since the markets opened on May 12, reports the Nyasa Times.

    According to AHL Tobacco Sales, which among other enterprises operates the Lilongwe tobacco sales floors, farmers have sold 30.09 million kg of leaf to date at an average price of $2.15 per kilogram.

    At the same time last year, Malawi had earned $22.37 million from 11.03 million kg selling at an average price of $2.02 per kilogram.

    Malawi has been struggling with a balance of payment crisis, leaving it with insufficient foreign exchange to import many necessities. The crisis has led to shortage of fuel and other items.

  • Malawi Growers Encouraged by Prices

    Malawi Growers Encouraged by Prices

    Photo: Taco Tuinstra

    Tobacco growers in Malawi have been pleased with prices as the 2023 selling season progresses, according to an article by Xinhua

    The tobacco market opened on April 12. According to Auction Holdings Limited (AHL), which runs the tobacco sales floors in Lilongwe, the average sales price rose from $1.8 per kilo to $1.88 per kg during the first sales days.

    Farmers at the Limbe Auction Floors in Blantyre, the country’s commercial hub, said they would do very well if the trend persists. “I’m very excited with the prices, and going like this, I’m optimistic that I’ll make more gains than I’ve ever anticipated,” tobacco grower Ben Sakwi was quoted as saying by Xinhua on April 18. 

    Tobacco Association of Malawi Trust President Abel Masache Kalima Banda said the good prices would help offset the significantly increased cost of production during the recent growing season.

    Tobacco is Malawi’s leading foreign exchange earner, accounting for more than half of the country’s exports. 

    The Tobacco Commission expects 126 million kilos of tobacco to be sold this season, up from 85 million kilos produced last season. 

    The high prices are a result of strong demand for Malawi leaf, which is estimated at 170 million kilos, according to the AHL. 

  • Malawi Tobacco Auction Floors Open

    Malawi Tobacco Auction Floors Open

    Photo: Taco Tuinstra

    President Lazarus Chakwera is set to preside over the official opening of Malawi’s tobacco marketing season at Lilongwe Auction Floors today. He will announce the minimum prices for the leaf as well, reports Nyasa Times.

    The opening of the tobacco market brings hope for foreign currency availability. Malawi has been struggling with a shortage of foreign currency this year, in part due to comparatively low tobacco export volumes in 2022.

    The Tobacco Commission stated that about 20,000 bales have been presented to market, and 2,600 are expected to be sold on opening day.

    Production is expected to increase from 85 million kg last year to 126 million kg this year.

    Auction floors at Chinkhoma, Limbe and Mzuzu are set to open on April 13, April 17 and May 2, respectively.

  • Deloitte Fined for Audit of Malawi Leaf Company

    Deloitte Fined for Audit of Malawi Leaf Company

    The Institute of Chartered Accountants in Malawi (ICAM) has fined Deloitte Malawi after finding the auditing firm guilty in cases involving its audits of Malawi Leaf Company.

    ICAM conducted investigations through the Ethics and Investigations Committee and convened disciplinary hearings through the Disciplinary Committee on cases of its members, according to Malawi24.

    In one case, ICAM says Deloitte did not give due diligence to the procedures in auditing Malawi Leaf Company (MLC) , a subsidiary of Auction Holdings Limited. Deloitte assured that AHL Group had complied with the applicable International Financial Reporting Standards.

    The company was found guilty for this and the ICAM council has imposed on Deloitte a maximum penalty of a severe reprimand and a fine of 1.5 million Kwacha.

    Between 2014 and 2016, ICAM says Deloitte did not give due diligence to the procedures in auditing and assured financial statements for the years in question that had errors and misstatements because they included fictitious sales made to Eastern Tobacco Company for $1.2 million.

    The company was found guilty for this and the council has imposed on Deloitte a maximum penalty of severe reprimand and a fine of 1.5 million Kwacha.

    However, Deloitte was found not guilty on a third charge related to overvaluing stocks in financial statements for 2014, 2015 and 2016.

  • Mixed Sentiments as Markets Open in Africa

    Mixed Sentiments as Markets Open in Africa

    Photo: Taco Tuinstra

    Farmers earned more than $243,500 from the sale of 94,453 kg of flue-cured tobacco on the first day of Zimbabwe’s 2022 marketing season, reports The Herald. This reflects a 40.54 percent increase over previous year when growers earned $173,256 from 92,106 kg on the first day of sales.

    On the first day of the 2022 marketing season the average price was $2.58 per kg, compared with $1.88 on the first day of 2021, according to the Tobacco Industry and Marketing Board (TIMB).

    TIMB Chief Execute Meanwell Gudu said prices are expected to be firm this year due to reduced volumes.

    “Brazil is likely to be 80 million kg short of their usual production level because of drought. This creates less competition for us. India has fixed its 2021-2022 production of flue-cured Virginia up to 270 million kg, against 236 million kg in the previous year,” he said.

    “Due to anticipated reduced volumes in Zimbabwe this season, there will be more pressure on the demand side to take the crop, which should naturally increase prices upwards. This is likely to be experienced in the medium to filler grades.”

    Farmers in Malawi, meanwhile, were dissapointed with their earnings, with some asking President Lazarus Chakwera to intervene, according to The Nyasa Times.

    On April 1, the highest price offered on the auction floor was $1.75 per kg and the highest offer on the contract market was $2.30.

    Chakwera assured the farmers that the government would intervene. However, he also advised them to grade their tobacco properly to satisfy buyers’ requirement.

    According to the Tobacco Control Commission there were more than 1,000 bales on the Lilongwe Auction Floors on the first day of the 2022 tobacco marketing season.