Buyers denied auction floor operations

A report on the Tobacco Industry Bill has recommended that tobacco buyers should not be allowed to operate auction floors or register to grow tobacco because their financial muscle would drive out smallholder growers.

The recommendation is contained in the report the Joint Parliamentary Committee on agriculture, legal affairs, trade and industry, commissions and statutory corporations, health and natural resources analysed and submitted in Parliament on Tuesday.

Chairperson of the joint committee Joseph Chidanti Malunga said the committee received submissions from tobacco buyers wanted the law to allow them to register as growers or be licensed as auction floor operators.

The report indicates that Clause 79 (2) of the Bill allows any person except a tobacco buyer to apply for a tobacco auction floor operator licence to stimulate competition.

Said Malunga: “Over the years, buyers have yielded so much influence due to activities other than buying that they are doing in the industry. This yield in power has made it difficult for the Commission [Tobacco Control Commission] to regulate the buyers and is in most instances seen as toothless.

“If they are allowed, they pose a risk of yielding too much power and influence in the industry and they may use that to their advantage to force low tobacco prices.”

The committee also recommended that this prohibition should be refined to include parent companies and subsidiaries of buyer in case a tobacco company were to set up a company for the purpose of operating an auction floor.

Further, the joint committee also quashed a proposal from AHL Group to be the sole tobacco auction floor operator in the country, arguing that this should be liberalised to promote competition.

Members of Parliament are expected to debate the committee report on a date to be appointed after which debate on the Bill will resume.