This follows a new green leaf tea trade agreement signed in MalawiÃ¢â‚¬â„¢s commercial city, Blantyre, on Friday between the Tea Association of Malawi (Taml) and the National Smallholder Tea Development Committee (NSTDC), an umbrella organisation for 11 500 smallholder tea growers in Malawi.
The agreement, according to Taml, will mitigate the challenges caused by the prevailing business environment characterised by shortages of foreign exchange, fuel and the rising inflation which hit 10.3 percent in January.
Taml chief executive officer Clement Thindwa said the selling of green leaf in US dollars will hedge the smallholder tea growers against foreign exchange fluctuations and enable them to profit from their sweat.
Ã¢â‚¬Å“Volatility in exchange rate can bring about inflationary pressures. But the growers will benefit from exchange rate gain resulting in exchange rate movement,Ã¢â‚¬Â he said.
Thindwa said the agreement has been reviewed to create a win-win situation, guarantee sustainability of smallholder tea growers and improve their business and livelihoods at the same time create a transparent business relationship.
He said the agreement stipulates that the green leaf pricing committee should comprise 10 people with five representatives from the smallholder growers and the other five from the large estates to create a balance. The Ministry of Agriculture, Irrigation and Water Development officials will also be sitting on the committee as an observer.
“This is a flexible agreement that has come out of a consultative process. We have also revisited the calcuation of bonus to reflect what is happening on the ground. We are using the actual cost other than the estimated average cost as was happening previously,” explained Thindwa.
He observed that in the agreement, the computation of bonuses will be done every six months to share equally the gains that have arisen from the improved prices at the auction.
NSTDC secretary general Wilfred Kasitomu said with the new agreement, the welfare of smallholder tea growers will improve.
“We didn’t expect it [the new agreement] will go this far. Since 1965 to date, we have not sold our green tea in US dollars,” said an excited Kasitomu.
He, however, said quality tea is paramount for them to reap more benefits.
Kasitomu said smallholder growers grow more tea, but that the challenge is that there are not enough factories for processing.
“We want all the tea that we grow to be processed,” he said.
Statistics from Taml show that smallholder made tea sold to large estates has been fluctuating over the years.
In 2008, the smallholder growers sold 3.6 million kilogrammes and the figure went up to 5.6 million kilogrammes in 2009.
It went further to 5.7 million kilogrammes in 2010 before dropping to five million kilogrammes.
This year in January, they have contributed 774 533 kilogrammes, the figures show.
Tea is one of Malawi’s major foreign currency earners. But revenue in 2011 dropped 1.8 percent to K10.7 billion (about $64.07 million) out of 44.9 million kilogrammes sold, according to Taml, due to unfavourable weather conditions.
This is compared to a record K11 billion (about $65.9 million) achieved in 2010 out of 48.6 million kilogrammes of the crop exported to South Africa, United Kingdom (UK) and Kenya.