Tag: Malawi

Good prices predicted
Tobacco growers in Malawi are being told to expect good prices for their leaf because production is thought to be well down on demand, according to a story in The Maravi Post.
After its second tobacco assessment, the Tobacco Control Commission (TCC) has put the country’s all-types tobacco production at 147. 8 million kg down by almost 14 percent on buyers’ requirements of 171 million kg.
The smaller-than-targeted crop has come about because of prolonged dry spells that affected some districts in the southern and central regions.
The TCC is optimistic that the smaller crop might attract high prices.
The marketing seasons is due to open on April 9 in Lilongwe, on April 11 in Chinkhoma, on April 16 in Limbe, and on April 23 in Mzuzu.
March 27, 2018
Time to move on
The Foundation for a Smoke Free World (FSFW) has told tobacco growers in Malawi that there is a need to shift to other crops that could take over as the country’s main foreign exchange earners, according to a story in The Nyasa Times.
The vice president of the FSFW responsible for agriculture and livelihoods, Jim Lutzweiler, was said to have made this remark while speaking on Wednesday on the side-lines of a consultative meeting on alternative crops that was held in Lilongwe.
Lutzweiler said tobacco was becoming less acceptable on the world market, which meant that alternatives ought to be identified before it was too late for economies that were dependent on tobacco.
“In the event that tobacco has completely phased out as a reliable cash crop in Malawi, we would like to mobilize interest of people and many other stakeholders to think of an alternative cash crop with a formal market, to help farmers be able to move on economically,” he said.
Malawi’s farmers, he added, could replace tobacco with soya beans, “provided everyone understands the importance of this idea well ahead of time as tobacco has globally been proved a health risk for people.”
Tobacco is thought to contribute about 50 percent of the country’s foreign exchange earnings.
The FSFW, which was set up last year with initial funding of $1 billion over 12 years from Philip Morris International, is legally independent of PMI. Two of its main aims are to provide funding for research into accelerating the ending of tobacco smoking, and to prepare for the consequences of any success in reducing smoking that will be felt by smallholder tobacco farmers.
Meanwhile, the Ministry of Agriculture, Irrigation and Water Development’s director of extension services, Albert Changaya, said the issue of an alternative crop to tobacco was not new; so it would be necessary to look at what previous advocates had done and to learn from their successes and failures.
And the Parliamentary Agriculture Committee’s deputy chairperson, James Munthali, said diversifying from tobacco had to be done in a realistic way.
He said parliament had enacted the Warehouse Receipt Law which could help in identifying more valuable crops to be sold through structured markets such as the AHL Commodities Exchange and Agriculture Commodities for Africa.
“In my understanding, we are not going to replace tobacco overnight, but we need to gradually replace it,” he said.
“The volumes we used to sell in the past have dropped, which is a wake-up call.”
Speaking at the meeting on behalf of the Tobacco Control Commission, Patricia Kasamale said her organization would keep on watching the efforts being taken. “We support all initiatives being undertaken by FSFW to find crops that will complement tobacco,” Kasamale said.
There was a word of warning, however, from Hugh Saunders, MD of Alliance One, about the conflicting information being sent to farmers about switching from tobacco to other crops, given that no crop had yet been identified as a replacement for tobacco.
“The solution is to have an alternative crop,” he said. “Tobacco is a high value crop and there are factors that need to be taken into consideration when pondering on this issue.”
March 5, 2018
Malawi crop down
Malawi’s Tobacco Control Commission (TCC) says the first crop assessment for this season has put the all-types volume 12.8 percent below the trade requirement of 171 million kg, according to a story in The Maravi Post.
The dip in the estimated volume has been put down to prolonged dry spells in some districts of the southern and central regions of the country; but the commission was said to be optimistic that rain could still lift the volume.
TCC CEO, Kaisi Sadala, was quoted as saying that a second crop estimate would be made in the coming weeks, which would assist in determining the market opening date.
Sadala said the TCC expected that the second volume estimate would be up on that of the first because most parts of the country were currently enjoying good rains.
He said the Commission was impressed with farmers abiding by the restrictions of the quota system, something that would help to reduce over production, which affected prices.
TCC figures show that 42,303 farmers registered to grow tobacco during the 2017/2018 season, down from about 45,000 in 2016/2017.
The registered quota was 169,785,243 kg, below the buyer requirement of 171 million kg.
February 8, 2018
Quality issues in Malawi
Concerns have been expressed in Malawi about the quality of some of this season’s tobacco, though no official assessment has yet been made, according to a story in The Times.
The concerns center around a dry spell that has hit some tobacco growing regions.
The CEO of the Tobacco Control Commission (TCC), Kaisi Sadala, was quoted as saying the dry spell was a matter of concern, but he implied that there was still time for the rains to resume and make a difference to the crop.
“We are getting reports that, in some areas, the crop has started to wither,” Sadala said.
Meanwhile, the CEO of the Tobacco Association of Malawi, Matthews Zulu, said the association was assessing the situation “to give a true reflection on the ground”.
Zulu, too, implied that there was still time for the rain to make a difference, but he added that the current situation painted a gloomy picture of tobacco production this season.
The TCC says that the results of the first round of crop assessment will be ready by the end of this month.
Figures from the TCC show that, as of early December, 41,784 farmers had registered to grow 162 million kg, short of the buyer ‘demand’ for 171 million kg.
Even so, Sadala warned that farmers who were growing tobacco without having registered with the commission might find it difficult to sell their crops on the action floors.
January 17, 2018
Best Malawi season for JTI
Fries Vanneste
JTI Leaf Malawi (JTILM) says that the 2016-2017 season was the most successful for the company since it entered the Malawi market in 2009, according to a Malawi Voice story.
MD Fries Vanneste said that during the 2016-2017 season, JTILM had recorded a contract market share of 31 percent against an average of 17-18 percent in previous years.
He said that while the overall national crop volume had been down by 54 percent, JTILM had managed to deliver “all of its committed volumes”, which he described as “a milestone for the company”.
He said the season’s outcome had shown how close collaboration between farmers, leaf technicians and grower associations, combined with the company’s ongoing support for growers was bearing fruit.
JTI’s contract farmers had been “very receptive” to the company’s Grower Incentive program called Mlimi Wozitsata (model farmer), which was launched in June 2017. There had been clear improvements in both the quality and yield of the growers’ tobacco.
Vanneste said also that the better quality and higher yield had had a direct and positive impact on the growers’ revenues and profitability.
All of JTILM’s growers had paid off their financing loans this year,” Vanneste said.
JTI is currently working on having its Integrated Production System (IPS) recognized in Malawi’s legislation.
Vanneste said that Malawi’s Tobacco Control Act had been last amended in the 1970s, an era when sustainability, traceability or contract growing were not high on the agenda.
An updated tobacco act, he said, could provide an improved legal framework that supported IPS implementation, protecting the interests of the farmers as well as JTILM’s investments. It could eventually create greater stability for the future of tobacco farming in Malawi overall.
Meanwhile, Vanneste said that by investing more than US$2 million in its factory during the past two years, JTILM had reduced its energy consumption by 53 percent, by enough to light an additional 1,365 households.
November 3, 2017
Tobacco losing its allure
In the face of declining revenues, most of Malawi’s tobacco growers are ‘slowly abandoning’ the crop in favor of others, such as soya beans, sorghum, and groundnuts’, according to a story in The Nyasa Times.
The switch out of tobacco was described as a survival mechanism.
Malawi has for decades relied on its annual tobacco income to run its economy, and the government is said still to be ‘glued’ to it. Officials have indicated several times that Malawi will continue to grow the crop.
This is even though figures from the Tobacco Control Commission (TCC) show that tobacco revenue has, since 2010, declined by a third in dollar terms from $410 million to $275 million this year.
And this is even though most prominent tobacco growers, including members of the Tobacco Association of Malawi (TAMA), are now said to be backing off from the crop.
In a Times interview, TAMA CEO Mathews Zulu confirmed that a number of TAMA members were backing off from the crop in the face of declining tobacco-grower revenues during the past five years.
Zulu said even TAMA had a diversification plan that was looking at ensuring its own survival in response to demands from its members to grow other crops.
He said that so far three out of the 49 co-operatives under TAMA had signed contracts with Chibuku Products Limited to start growing sorghum beginning this year.
“Apart from sorghum, we are also looking into crops such as soy beans, sunflower, groundnuts and other commercial crops that tobacco farmers who are our members are now growing,” he said. “In this new strategy, we want to go towards contract marketing so that farmers should be producing for the market and not producing before they identify the market.”
One of the major tobacco buyers in the country, Alliance One Tobacco Company, was said to have announced recently that it was diversifying its operation by growing legumes in Dowa, one of the districts that is traditionally known for growing tobacco.
Alliance MD Hugh Saunders said the diversification initiative was a response to the pressure that was threatening the future of tobacco, especially Burley.
An economics professor at the University of Malawi’s constituent Chancellor College Ben Kaluwa said the move by TAMA was a wake-up call to the government and other tobacco stakeholders.
“Over the past years, tobacco has not been performing well in terms of revenue, and coupled with the global anti-smoking lobby, the future does not look good,” he said.
October 5, 2017
Malawi average ‘good’
Malawi’s 2017 leaf-tobacco grower-prices have been described as ‘good’ by the Tobacco Control Commission’s (TCC) CEO David Luka, according to a story by Grace Phiri for The Nation.
“This season has run smoothly with no market interruptions as well as low rejection rates averaging between 10 and 20 percent,” Luka was quoted as saying.
“Again, prices were good this season as on average the leaf fetched $2.00 (K1,466) per kg against last year’s $1.50 (K1,099) per kg,” he said.
However, while this year’s average price might have been up on that of last season, which was poor; there seems to be a question mark over what were the prices in 2017 and 2016. The story seems to give the grower revenue for 2017 as US$212 earned from the sale of 124 million kg, which would suggest an average price of US$1.71 per kg. And the 2016 revenue on the sale of 194 million kg is given as US$275 million, which suggests an average price of US$1.42 per kg.
The average price of US$2.00 per kg cannot be explained as being the average price for one of the tobacco types because the story gave the various averages as: US$1.36 for dark fired tobacco, US$1.80 for Burley, and US$2.92 for flue-cured.
Even at US$2.00 per kg, the average price was down on that of 2013, for instance, when it stood at US$2.11 per kg, according to an APA News Agency story.
August 23, 2017
Play it again, Sam
Farmers are being encouraged to follow ‘proper methods’ in growing their tobacco in a bid to produce quality leaf and realize ‘significant earnings,’ according to a Capital Radio Malawi story.
But while the story suggested that quality was the key to ‘significant earnings’; it suggested too that the fall in prices that had occurred was due to tobacco-product volume declines.
‘The tobacco industry is facing numerous challenges on the international market, due to the anti-smoking lobby championed by the World Health Organization (WHO),’ the story said.
‘This has led to a decline in prices as well as markets for the crop, which is Malawi’s major foreign exchange earner.’
The Capital Radio story said that during the 2016/2017 growing season, Malawi had reduced the quantity of tobacco it had produced from that of previous years, without saying by how much.
The story did not say, either, how the average grower price this year had compared with that of previous years when more tobacco had been grown.
The story did say, however, that this year’s market, which opened in April and closed last month, generated US$199 million, down US$77 million or about 28 percent from that of 2016, $276 million; and down US$138 million or about 41 percent from that of 2015.
The Tobacco Control Commission’s acting CEO, David Luka, was said to have told Capital FM, that ‘despite low production, the quality of the leaf improved this year’.
Luka said this was mainly because farmers were now using certified seeds, and were properly monitored and inspected.
August 15, 2017
Minister ‘thrilled’ with prices
quite content
Malawi’s Deputy Agriculture Minister Aggrey Massi expressed satisfaction with tobacco prices during a tour of the Lilongwe Auction Floors earlier this week, according to a report by Malawi24.com. Leaf was fetching prices as high as $2.60 on the day of his visit.
The minister started the tour with a visit to tobacco selling under auction before proceeding to check how the leaf was faring under contract buying.
Speaking at the JTI floor space, Massi said he was encouraged by the price tobacco was selling this year and hoped buyers will continue rewarding growers with better prices as the trend has been since the market opened in April.
“I am impressed with both the quality of tobacco on display and the price you are giving to growers. This is good, and please continue looking after these growers,” said Massi.
JTI Leaf Malawi Corporate Affairs and Communication Director Harold Msusa said his company believes in rewarding quality and that was evidenced by the good prices the leaf was fetching.
“The quality of the leaf growers have produced this year is good,” said Msusa. “In addition, we explained to the minister that we have recorded significant reduction in cases of non-tobacco related materials and this is reflected in this year’s good prices,” said Msusa.
As of June 23, Malawi had earned $144.5 million from 74.8 million kg of tobacco selling at an average price of $1.93 per kilogram.
During the same period last year, Malawi sold 69.5 million kg at an average price of $1.51, earning the country $104.6 million.
July 5, 2017
On the map

(Photos: Taco Tuinstra)
Keen to remain a leading leaf source, Malawi moves to get a better handle on its volumes while continuing to promote leaf that complies with customers’ increasingly discerning specifications.
By Taco Tuinstra
Following several disappointing seasons, Malawi tobacco growers have reason to smile again. At press time, the price per kilogram of leaf averaged $1.91 for all tobacco types, compared with $1.42 in the full 2016 selling season. The highest price for burley at the time of writing was $2.80 per kilogram.
The price increase reflects both quality and quantity. “The leaf we’ve seen so far indicates a traditional ‘feminine’ ripe Malawi burley crop with good color intensity,” says Craig Perepeczko, planning and efficiency manager of Limbe Leaf Tobacco Co., a subsidiary of Universal Corp.
It is also in short supply. The Tobacco Control Commission (TCC) estimates that Malawi’s farmers produced 102 million kg of burley, 18 million kg of flue-cured Virginia (FCV) and 3 million kg of dark fire-cured tobacco this year, against an anticipated demand of 152 million kg.
Last season, by contrast, growers brought to market 195 million kg of tobacco (all types)—considerably more than required. Predictably, prices plummeted, farmers failed to recover their expenses, and many abandoned tobacco—resulting in this year’s small crop.
The fear now is that this season’s firm prices will prompt Malawians to rush back into tobacco, setting the stage again for overproduction and poor prices, along with renewed frowns in the country’s fragile farming community.
Keen to break the boom-bust cycle that has bedeviled the Malawi tobacco market since its liberalization, the industry is working to get a better grip on production. It is taking measures to make volumes more predictable, improve farmers’ livelihoods and ensure leaf that complies with increasingly stringent corporate and regulatory requirements. The goal is to keep Malawi competitive in a rapidly changing global leaf market.
It is hard to overstate the importance of getting it right. Tobacco is Malawi’s main cash crop, accounting for 60 percent of the country’s export earnings. The industry is Malawi’s largest employer after the civil service and one of its biggest taxpayers, according to the TCC. That means the wild swings in production and prices are a problem not only for sellers and buyers but also for the country at large.
Until the late 20th century, tobacco growing was a tightly controlled activity in Malawi, limited to a privileged few and dominated by commercial production. At the urging of the World Bank, the government opened the business in 1994. Eager to get their share of the country’s “green gold,” Malawian smallholders flocked to tobacco, with most opting for burley tobacco, which is easier and cheaper to produce than the FCV variety.
Today, the country’s tobacco industry is characterized by small-scale farming and broad participation. Even after the exodus of tobacco growers in the wake of last year’s depressed marketing season, the TCC still registered a whopping 40,000 farmers for the 2017 crop. The typical tobacco farm, however, measures only between 0.1 and 2 hectares.
Critics say liberalization has increased volumes regardless of demand but lowered quality. Most smallholders lack the assets to finance their own operations or qualify for bank loans, which makes it difficult for them to secure the inputs required to produce the desired leaf quality. The sheer number of growers, meanwhile, makes it challenging to manage crop sizes.
Fredrick Kamvazina
To get a better handle on tobacco volumes, the TCC several years ago started allocating production quotas according to anticipated demand and farmers’ plot sizes. “A sustainable burley volume for Malawi is 140 million to 150 million kg,” says Fredrick Kamvazina, technical and operations manager at the TCC. Because the commission lacked resources to verify declared land holdings, however, the practice did little to prevent overproduction. Guided by the philosophy of “more is better,” farmers grew as much tobacco as they could.
Double registrations were rampant, to the extent that the land declared for tobacco production at times exceeded the territory of Malawi. The practice inspired some to jokingly speculate that farmers were growing tobacco in Lake Malawi, which covers a significant share of the country’s area. Excess land declarations not only facilitated overproduction, but they also paved the way for intermediate buyers—unregistered traders who take advantage of farmers’ vulnerability during the lean period of the tobacco production cycle.
Intermediate buying is illegal under Malawi law, which states that all tobacco, including that grown under contract, must be sold at one of the country’s four marketing centers. Because intermediate buying requires cash, it is usually practiced not by peasant farmers but by relatively well-off townspeople.
To be able to sell tobacco, the intermediate buyer unlawfully obtains a registration number by declaring nonexistent land. In the run-up to the selling season, when many Malawi farmers are without income, the intermediate buyer offers “cash now” in exchange for a steep markdown, knowing that he will receive at least the government-mandated minimum price when reselling the tobacco at auction. The transaction prevents the farmer from realizing the full value of his crop. If the tobacco was grown under contract, it also deprives the legitimate buyer of his leaf. For the industry as whole, intermediate buying means reduced traceability.
Eager to address these issues, the industry this year debuted a new farmer management system (FMS). Funded by tobacco buying companies and administered by the TCC, the system aims to improve the quality of data and step up its enforcement. One of the challenges in registering tobacco growers has been the absence of a national identification document in Malawi; there was no good way of confirming that people were who they claimed to be. A new biometric system should help the industry keep better track. “All applicants are now fingerprinted,” says Kamvazina.
The system also allows administrators to scrutinize individual growers rather than estates and growers clubs—a feature that will not only make it easier to manage volumes but also increases responsibility. “If a farmer delivers contaminated tobacco or misbehaves at auction, for example, we will be able to hold him to account personally,” says Kamvazina. While it is still early days, the FMS already appears to be paying off. Kamvazina attributes part of the recent drop in farmer registrations to better record keeping. The next step, he says, will be to map Malawi’s tobacco land with GPS technology, which is already being used by some of the buying companies.

Contracting
Perhaps more important even than controlling crop volumes is ensuring product quality, a term that encompasses more than just particle size, moisture levels and smoking properties these days. Cigarette manufacturers, especially the “Blue Chip” customers, insist on tobacco that complies with the highest regulatory and corporate standards governing agricultural and labor practices. They have rules on who can work on tobacco farms (consenting adults), what seeds may be used (certified ones) and what crop protection agents can be applied, in addition to regulations aimed at minimizing the environmental impact of tobacco production, through reforestation, for example. Confronted with ever-stricter legislation, customers also insist on full traceability.
Because it’s next to impossible to comply with such requirements if you are buying tobacco at auction from tens of thousands of anonymous small-scale farmers, leaf merchants started contracting directly with growers. In Malawi, the trend began in FCV around 2003 and later expanded to burley tobacco. In 2009, cigarette maker Japan Tobacco International (JTI) took control of its leaf supply chain by integrating several tobacco leaf operations. It now works directly with farmers in Malawi and elsewhere. In many cases, the contracting agreements include a financial and agronomical support package, known as the integrated production system (IPS). By carefully monitoring inputs and production practices, the buyers ensure they get leaf that closely matches their specifications.
Hugh Saunders
The shift has changed Malawi’s tobacco marketing environment beyond recognition. Whereas at the start of the century all tobacco in the country was sold through auctions, today 80 percent of leaf is produced under contracts—although all sales must still take place at one of the country’s four marketing centers, per Malawi law.
For the leaf merchants, it has meant a tremendous change in their operations and risk profiles. The agronomy department of Alliance One Tobacco Malawi (AOTM), for example, increased from 15 to 300 people in just a few years. JTI employs 114 leaf technicians—about one for every 100 of its growers—and operates an extensive fleet of four-wheel drive vehicles and motorcycles to reach growers in even the remotest parts of the country. Both companies aim to visit each of their contracted growers nine times per season.
The IPS has boosted productivity. Leaf buyers have witnessed a doubling of burley yields per hectare, to 1,500 kg or more, since implementation of the system. Yet Hugh Saunders, managing director of AOTM, insists there is no great science involved. “It is about doing the right things, at the right time and in the right amounts,” he says.
The productivity gains not only generate more tobacco income; they also create opportunities for new revenue streams, as land previously reserved for tobacco growing can be released to other crops. “Thanks to the close collaboration between our leaf technicians and the farmers, we continue to optimize the quality and yield per hectare,” says Fries Vanneste, vice president and managing director of JTI leaf services in Malawi. “Today, we need only half the area we needed when we started.”
Vanneste believes this is a win-win situation. “We get the quality leaf we’re after, and farmers can count on greater incomes,” he says. Not only will growers be able to sell their higher-quality tobacco at a higher price; they can also cultivate the freed-up land with alternative crops, generating new sources of income.
That is a welcome development. The tobacco industry has been frequently criticized for hogging precious farmland, and Malawi has been under pressure from international health activists to abandon tobacco in favor of food and other crops. Few people with on-the-ground knowledge see a ready substitute for tobacco, however. Not only does tobacco yield higher returns than any other local crop, but it also benefits from the most sophisticated marketing structure in Malawi.
“We don’t believe there is a crop that can single-handedly replace tobacco,” says Erica Maganga, principal secretary at the Malawi Ministry of Agriculture, Irrigation and Water Development. “But we encourage the cultivation of crops in addition to tobacco.”
Industry critics may be surprised to learn that Malawi’s big tobacco traders are preaching—and practicing—the same message. IPS support often extends to nontobacco crops. Through its contracted farmers, AOTM produces more maize than it does tobacco, according to Saunders.

Compliance
In addition to greater yields, the IPS has contributed to product quality in the broadest sense of that term. For example, the system is helping the industry tackle deforestation. Although tobacco growing accounts for a lower share (between 7 and 10 percent) of Malawi’s tree loss than some headlines suggest, the sector has accepted responsibility. “Tobacco is blamed with some justification—but we are the only ones doing something about it,” says Perepeczko. Most deforestation in Malawi is due to harvesting wood fuel for cooking. The brick-making business, too, is a major culprit but has managed to remain largely out of the crosshairs of environmental activists.
Because there is no silver bullet, reversing deforestation requires a multipronged approach. In addition to providing tree seedlings and requiring contracted farmers to reserve a share of their properties for trees, tobacco companies are experimenting with new barn designs. Rocket barns burn wood more efficiently than do traditional ones, and “live barns” avoid the need to cut trees. To further reduce the pressure on Malawi’s forests, tobacco companies have been supplying their farmers with efficient wood stoves and regenerating sources of fuel and building materials, such as bamboo.
Walter Pohl and Ellington Mataya
Nontobacco-related material (NTRM), meanwhile, remains a major focus in the industry’s commitment to delivering a compliant product. Needless to say, foreign objects such as strings and plastics must be avoided at all costs. Sand, in particular, is an issue in dusty Malawi—not so much because of toxicity but because of its damaging effect on processing equipment. According to Walter Pohl, managing director of Premium Tama Tobacco Malawi, it can account for between 7 and 8 percent of tobacco weight. “We have the most expensive sand in the world,” he jokes.
The industry has invested millions of dollars in instruments that detect and remove NRTM during processing. They are technological marvels, considering that some factories process up to 15 tons of leaf per hour, but trade representatives agree that the best place to tackle the problem is at the source, on the farm. Companies require their contract farmers to keep tobacco separate from potential contamination sources, such as livestock and plastic. Some even pay farmers for each piece of plastic that they collect and remove from the farm. “Slattered” baling tables are helping reduce sand by keeping tobacco off the ground.
The IPS has also been instrumental in addressing child labor—a tricky subject in a country where children are expected to help with family chores, including farm work, from a young age. “It can be difficult to differentiate between child labor and activities that are part of the normal socializing process in Africa,” says Jimmy Gray Kasamale, general manager of Malawi Leaf Co., the country’s only indigenous leaf merchant. “We need to distinguish between child work and child labor,” echoes Maganga of the ministry of agriculture, recalling the many hours she spent in her youth helping with common household chores such as fetching water. Child labor, by contrast, is generally understood to involve activities that expose a child to “adult” risks, such as chemicals or sharp tools, or tasks that prevent them from getting an education.
The industry has zero tolerance for child labor in its tobacco growing contracts. It is also addressing the issue by investing in education in its sourcing areas. As of June 2016, JTI had provided 121 scholarships and refurbished seven schools, reaching 12,000 pupils in Malawi. Simple measures can have dramatic effects. For example, female enrollment at Chitukula primary school, near Lilongwe, shot up after JTI constructed new classrooms and latrines.
By drilling boreholes, tobacco companies do more than just provide access to clean water; they help improve living standards. Having clean water readily available does not only support farming activities, but it also helps the community to better hydrate, improve sanitation, prevent diseases and use time more efficiently. Fetching water is traditionally a woman’s job in Malawi, and girls can spend many hours walking between their villages and natural water sources—time that can now be spent on other activities, such as studying.

The tobacco industry in Malawi is heavily involved in corporate social responsibility initiatives
The tobacco industry is heavily involved in corporate social responsibility activities, especially in countries like Malawi, where the government lacks the resources to carry out basic duties. Some dismiss such support as patronizing, saying that the industry would do better to pay growers more for their tobacco. Paulo Saath, director of leaf operations at JTI, believes such criticism overlooks the challenge of financial discipline that exists in many sourcing countries. Too often, he says, growers will spend their earnings instantly, leaving no cushion for lean times. Traders tell stories of farmers marrying extra wives or buying multiple bicycles in the wake of their tobacco sales—only to go hungry during the planting period, when income dries up.
With education and special savings accounts, among other measures, tobacco companies try to increase financial literacy among their contracted farmers.
Tobacco executives in Malawi are also keen to dispel the notion that they want to keep farmers hooked on loans, as critics have suggested. Because smallholder farmers lack collateral to obtain bank loans required to fund their operations, leaf merchants assist with financing—but this is not the dealers’ preferred business model. “While we are continuously looking for ways to support our farmers, banking should not be our core business,” says Vanneste. “At JTI, we support farmers who want to be able to finance their own operations over time. We work together with them to identify solutions to make sure they eventually become self-sufficient.”
By increasing yields and quality, the company hopes to improve growers’ earnings and thus graduate them out of loan dependency.

Moving forward
While the IPS has increased tobacco yields and quality, and the FMS should help the industry get a better handle on volumes, plenty of room remains for further improvement. Many believe the supply chain could be more efficient, for example. “There are too many middlemen,” says Saath. Between baling, transporting, warehousing and other activities, tobacco is handled 19 times from the time it leaves the farm until it arrives at the factory gate. Not only does this reduce yields through leaf degradation, but it also adds costs, as each service provider demands a fee. Too many levies and rents embedded in the current market structure continue to create a burden, reducing returns for the farmer. Especially transportation represents a high cost to farmers, according to the Phindu Tobacco Growers Association.
Some would like to get rid of the requirement for contracted tobacco to be purchased at auction, having farmers deliver their leaf directly to the factory instead. Bypassing the selling floors, proponents argue, would save sellers and buyers money. Others favor the current system because they believe it promotes transparency. “It makes it easy for the government to collect taxes and for farmers to compare prices,” says Mark Ndipita, corporate affairs manager at AHL Group, which manages Malawi’s tobacco auctions. Without the public scrutiny of at-auction sales, he says, farmers could be taken advantage of.
Industry representatives would also like the IPS to be recognized in Malawi’s legislation. Dating from the 1970s, Malawi’s tobacco act was written for a different era, before sustainability, traceability and contract growing. Currently, the IPS operates under a ministerial directive, which in theory could be revoked at a moment’s notice. Tobacco companies prefer the certainty of an act. “We’d like to have a stronger guarantee of our investments, and we must protect the interest of the grower, who is the anchor of our business,” says Vanneste. A new tobacco act was set to be debated in parliament at press time, but industry representatives were skeptical about the prospect of quick passage, considering the glacial pace of the process to date.
The world, by contrast, is changing quickly. Stagnating cigarette sales and tobacco-saving technologies have reduced demand for tobacco. “Tobacco companies can make a lot more cigarettes from a kilo of tobacco than they could in the past,” says Pohl. New products, such as e-cigarettes, are unlikely to compensate for the decline of combustible cigarettes, as they require less leaf tobacco.
To reduce cost and complexity, tobacco companies have been bringing down the number of sourcing areas. The task for Malawi is to remain on the map. To remain relevant and agile in the rapidly changing environment, the country will have to ensure its growers are competitive not only domestically but also internationally. Only by producing leaf that meets the highest standards in terms of quality, compliance and traceability will it be able to weather the global downturn in tobacco. Industry representatives acknowledge that Malawi has its work cut out, but they are determined to succeed. As one trader puts it, “We will be the last ones to switch off the lights.”
Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.

July 1, 2017