Tanzania: Country's Tobacco Budding in the Global Market

Source from:  Tanzania Daily News (Dar es Salaam) 08/30/2011

TOBACCO has of late emerged as one of the main sources of government revenue among total traditional exports, according to the Bank of Tanzania monthly economic review. This comes after the government took decisive measures since 2009 to increase tobacco production from 58,702 tons to 60,000 tons. In the BoT wide range review, produce largely featuring include tobacco, horticultural products, re-exports and other exports. By the same vein, official government figures show that a total of 340bn/- was collected as taxes from tobacco in the last five years. About 52bn/- was collected in 2003/2004, some 59bn/- in 2004/2005 whereas 62bn/-was collected in 2005/2006, and 77bn in 2006/2007. At the same time 90bn/- was collected in 2007/2008. The money was put in the government's fund and used for different public service delivery. Production has risen to 59 million kilogrammes in 2009 from 22 million kilogrammes produced in 2000 resulting in local farmers to get an average of 300,000/- per hectare to 500,000/- the previous season. According to Mr Mark Mason, the Director of Alliance One Tobacco Tanzania Ltd (AOTTL), one of the three tobacco buying companies in the country, Tanzania's total production is estimated to be 122.5 million kilogrammes and will generate an equivalent of $292m this year. He says the Tanzanian market is broadly structured and has an open and transparent methodology in terms of production, price negotiation and has a bright future in terms of competitiveness that is if there is a commitment to improve the welfare of the farmers. "We appreciate the support that the government has given to the industry and believe that the industry has a major role to play in poverty alleviation whilst remaining focused on Health, Education and Environmental issues," he said. He said they have embarked on a number of processes that will enable them become efficient and maintain a viable growth rate. "We have ongoing training programmes throughout all the sections of the company. We offer opportunities for our staff members to travel to other parts of the world to learn from other globalised industries," said Mr Mason. He said they had already embarked on a computerized system of loading and receiving tobacco. "This will help us reduce handling. This will help us remove Non Tobacco Material (NTM) from Tobacco. We have also embarked on using racks to help us in the management of the products," he noted. For now, he said, they also intend to increase their production capacity from 35m kgs per annum to 60m kgs per annum, adding, "we have invested another 10 million US dollars bringing our investment to around $50m in total." He said they were committed to continued investment in the industry and to enhance efficiency in the supply chain coupled with improvements in farmer efficiencies through agronomic assistance, that will help offset some additional field costs in reforestation. The total Tanzania production is estimated at 122.5m kgs at a price of $ 1.60 per kg. Alliance One is expected to buy 45m kgs of FCV and 2 million of DFC making a total expected volume of 47 million kgs. Buying started in the third week of May, this year and to date AOTTL has bought 14.5 million kgs of FCV valued at $21.225 million at an average price of $1.46/KG and 0.05 million kgs of DFC valued at $0.043 million at an average price of US$0.76. They are involved with Tobacco buying, processing, and selling to local and international cigarette manufacturers. With regard to the power crisis facing the country, he said that production has been affected deeply due to unreliable power supply. "We were not getting power during some days in the week so we had to let workers go home," he said. "We are supposed to be running six days a week to meet our customers' demand but this is not the case. Every time there is a blackout, it takes up to 45 minutes to re-start the machines. We lose up to $ 4,000 per hour. The most disappointing part is that we are dealing with a perishable product. This is a big loss both to the company and the government as well." "We buy over 43 million kgs of Tobacco from more than 160 contracted Farmers Cooperative Primary Societies from 7 tobacco growing regions of Tanzania namely Tabora, Shinyanga, Singida, Iringa, Kigoma and Ruvuma," said Mason, adding that the more than 25,000 farmers sell their tobacco to them. He said that effective from the 2009/10 farming season, the government-led changes were introduced whereby tobacco inputs supply was separated from tobacco buying. Under this system tobacco farmers, through their cooperatives and primary societies, are supposed to source their inputs using bank credits. To facilitate that process, a tripartite agreement is signed between primary societies, bank and tobacco buyers. The inputs procured are then distributed to members of the society on loan basis. The members sell their harvested and cured tobacco through their society which maintains an account with the loaning bank. When purchasing the crop, the tobacco buyer pays the primary society through its bank account and the bank deducts the inputs loan until it is fully liquidated before crediting any payments to the primary society account for payment to its members. He said the future for the country's tobacco industry is bright so long as we remain competitive and continue to improve the welfare of the farmers. "We do believe there will be growth in the crop in Tanzania and Africa at large," he said. Globally, there is an oversupply situation resulting from increased worldwide production and reduced consumption due to global economic recession, smoking restrictions/bans, increased taxation on tobacco products and tobacco products regulation. "Almost a quarter a billion shillings," he says, noting it as a figure that they have so far contributed to community projects in the areas of health and education. Enditem