Malawi: Contract Farming Will Reduce Number of Jobs, Growers  

Source from:  The Times Group (blog) 11/16/2012

The Integrated Production System (IPS), also known as contract marketing, which is expected to be adopted in the tobacco industry this year, will impact on the economy negatively as it will result into job losses in some tobacco companies while merchants will control the number of growers to produce the leaf every year, Auction Holdings Limited (AHL) Chief Executive Officer Evans Matabwa has said.

Presenting a paper titled: "A stitch in time: Deleting the Economics of Overdependence" at the Economics Association of Malawi (Ecama) Annual Conference in Mangochi last weekend, Matabwa said while cases have been presented in favour of the IPS, there is need to consider other aspects that will have a negative bearing on the economy.
 
He said, among other things, the concept will not allow all tobacco farmers currently in the business to participate in contract farming as the numbers will depend on what the merchant can afford.
 
"From the face of it, one would think that the farmers left out on this programme will immediately engage into other ventures. But the reality is that this will not be the case instantly," said Matabwa.
 
He said what would happen instead is that this group of left-out farmers will have to deal with an immediate shock of losing out on the traditional revenue from tobacco.
 
He said as the situation stands at the moment, this group could constitute well over 60 percent of the farmers.
 
Matabwa said the system will also affect small and local agro-dealers since designated contract farmers will receive inputs from the merchants who usually source their inputs in large quantities from big suppliers.
 
Matabwa also noted that the transport sector will be affected since the IPS follows a selective order which will see small-scale transporters being cut off.
 
On employment, Matabwa said the IPS will see some tobacco producers being economically stranded as not all will be incorporated into the system.
 
"About 1.06 million Malawians were actively involved in tobacco growing through clubs and estates. In the new arrangement, not all these will have the opportunity to earn revenue from tobacco as not all of them will be contracted," he said.
 
He said the change will also entail adjustments in marketing policies which suggest an exit from the auction system.
 
"There is a high probability of job losses on account of this," he said.
 
Matabwa, however, described the IPS as a strategic business decision which the industry has taken by first of all looking at the obligations of the respective players to their shareholders.
 
"As a country, Malawi has to urgently evolve and figure out how it can best deal with this revolution given the fact that the population has continued to grow, and so has the pressure on the economy," he said.
 
Meanwhile, the Tobacco Control Commission (TCC) said in a statement this week that all tobacco under both IPS and auction systems will be sold through the existing tobacco selling markets, namely Mzuzu, Chinkhoma, Lilongwe and Limbe floors.
 
It said other satellite tobacco selling markets that were in operation in the 2011 tobacco marketing season, namely Mgodi, and Kabwafu, will also operate in the 2012 marketing season. Enditem