Tobacco Earnings to Fall

Source from:  by Aubrey Mchulu 07/08/2004

Earnings from this year's tobacco sales are expected to drop from the estimated K20 billion (US$182.6 million) due to a crash in dark-fired tobacco prices and plastic contamination in the leaf, authorities have said. Tobacco Control Commission (TCC) general manager Godfrey Chapola said in an interview Wednesday he will have to revise the estimated earnings downwards because the assumptions they were based on have changed. "Those estimates will have to be revised downwards because prices of the dark-fired leaf have badly crashed and also the issue of plastic contamination. We will have to assess the impact," he said. In the 2004 tobacco marketing season progress report and projections dated May 10, 2004, TCC said the country was expected to earn about K19.9 billion (US$182.6 million) foreign exchange from this year's sales, representing 26 percent more revenue over the previous year if the projected average prices were attained. Chapola said in the report that last season tobacco sales earned Malawi K15.8 billion (US$145 million) in foreign exchange which was not enough to stabilise the local currency against the US dollar amid withholding of budgetary support by donors. Reserve Bank of Malawi Governor Elias Ngalande was banking on revenue from tobacco sales to stabilise the kwacha and the impending downward revision of earnings is, therefore, likely going to affect the monetary authorities' expectations. But financial securities house Continental Discount House said in its June 2004 economic review that as of June 24, 75.52 million kilogrammes of tobacco had been sold at the floors out of the projected 148 million kilogrammes for the season, representing a 2.09 percent increase over last year's sales. "Accordingly, total proceeds are higher this year at US$92.15 million compared to US$84.92 million in the previous year, representing an increase of 8.51 percent," reads the CDH report. Prevalence of non-tobacco related materials, mostly plastics and feathers, in tobacco bales threatened to throw the country's major forex earning crop in turmoil as international buyers delayed to confirm orders totalling 10 million kilogrammes as of three weeks ago. But Chapola said yesterday that the orders have now been confirmed and the industry has started processing the exports. He said cigarette manufacturers and other tobacco processors have given a go-ahead. But he could not reveal quantities involved saying this was privileged information to the industry. He said two weeks from now sales volumes at the floors, which were reduced, should reach a semblance of normality. "We reduced sales volumes from 20,000 bales per day at all the three floors to 12,000 per day," he said, adding that from July 12 the volume should reach 16,000 per day before normalising at 20,000 bales from July 19. Chapola said the issue of plastics cannot be resolved overnight because there are more than 100,000 growers who have to be sensitised. In this regard, Chapola said TCC has organised a day-long mid-season seminar for captains of the tobacco industry and growers' representatives this Friday to discuss means to quickly resolve the plastics issue. Enditem