No New Tobacco Buyers

Source from:  by Taonga Sabola, 15 January 2007 01/16/2007

The rains are here again, and for Andrew Nkhono, a burley tobacco farmer from Nyezerera in Phalombe, it's business as usual. Economic Report found him supervising his tenants who were weeding tobacco and applying fertiliser in his farm, hoping against hope that he will get better offers for his leaf this year. Unlike last year, Nkhono was unlucky this growing season. A victim of the messy logistics that have dogged this year's government-funded Fertiliser and Seed Subsidy Programme, the man has not accessed the cheaper input. Like many farmers in his position, he has had to pay through the nose an average of K3,500 for a 50 kg bag of D-Compound fertiliser instead of K950 had he accessed the subsidised input. "Farming has been difficult this year. We have been made to part ways with a lot of money to buy fertiliser and other farm inputs in addition to paying our workers. Let's hope prices will improve this year, otherwise we are in trouble," said Nkhono. Tobacco prices at the auction floors fell sharply in the country from an average of US$1.60 (around K222) and (US$2.25 (about K312) in the late 1990s for burley and flue respectively to an average of US$0.60 (K84)/kg last season. According to the Agriculture Research and Extension Trust (Aret), the prices buyers offer farmers are too low for growers to recover the cost of producing the leaf. Some pundits, while agreeing that the World Health Organisation-backed anti-smoking lobby remained the major contributing factor to the price crash, blamed it on government interference which set reserve prices in what should be a free market, angering buyers in the process. Other commentators, like renowned British attorney Clive Stanbrooke, said in his 2005 report on Malawi tobacco that the low prices were due to a cartel of local buyers. With falling tobacco prices over the past years hitting farmers and the economy hard, President Bingu wa Mutharika swung into action and imposed prices on buyers in a last ditch effort to help growers reap more from their toil. The President proposed US$1.10 (about K154) as the minimum price for low quality tobacco and US$1.70 (about K238) as a minimum price for high quality leaf. When buyers ignored the minimum price, a frustrated Mutharika threatened to throw buyers out of the country, having called them "thieves." Later, senior government officials announced that they were galivanting around the world looking for new buyers to compete and possibly replace the traditional ones. Former Agriculture Minister Uladi Mussa told The Nation last May that government would attract buyers from Egypt and Asian countries like China and India to enhance competition in the local tobacco market. But, apparently, government has not succeeded in identifying new buyers, according to Tobacco Control Commission general manager Godfrey Chapola. Chapola said his body, which regulates the tobacco industry, has neither received an application nor registered any new tobacco buyer. Thus, for farmers like Nkhono, it is back to square one unless industry players break the deadlock. "I think the issue of buyers needs to be well understood by Malawians. The buyers are in business just like any other business person and there is no way government can drag them to come to Malawi. "What we have done is to remove all the obstacles or to clear the way so that they can come and buy our tobacco. The ball is now in their court if they want to come and invest here or not," said Chapola. Asked what measures are in place to ensure that auction prices improve this year since no new buyers have come in, Chapola said TCC is still discussing with players to address the problem ahead of tobacco sales expected to start in March. "We hope that by the end of this month we should be able to find a solution to that problem," added Chapola. Secretary for Agriculture and Food Security Patrick Kabambe could not be reached for comment. But he told Economic Report two weeks ago that government was still working on the tobbacco price problem. By press time, efforts to talk to Tobacco Exporters Association of Malawi chairman Charles Graham were unsuccessful as we could not reach him to comment on the price concerns. Malawi is fresh from a disastrous year for tobacco, the country's leading foreign exchange earner which accounts for nearly 60 percent of export revenue. Despite a production increase of about 13 million kilogrammes from 148 million kilogrammes in 2005 to 158 million kilogrammes last year, revenue from the 'green gold' fell 15 percent. Official tobacco sales figures from the TCC indicate that proceeds from last season's tobacco sales amounted K19.2 billion (US$137, 834, 528), K3.4 billion less than the K22.7 billion (US$162 061 893) raised the previous year. It's a costly trend for Malawi. Enditem