Malawi’s tobacco output for the 2012 marketing season is said to be the worst in 18 years. But what does that mean to the future of the tobacco industry in the country?
The year 2012 will go down in history as the year when Malawi’s tobacco production and revenues dramatically dropped.
The drop happened at the time the tobacco industry faced pressure from the World Health Organisation’s Framework Convention on Tobacco Control (WHO-FCTC) guidelines which seek to ban tobacco growing in the long run.
Tobacco remains Malawi’s major export product, wiring in about 60 percent of the country’s total export earnings.
The green gold, as it is fondly called, contributes about 25 percent to Malawi’s gross domestic product (GDP) and employs 12 percent of the country’s population.
Engine of economic growth
This simply means tobacco is the country’s engine of economic growth at both micro and macro levels.
Tobacco experts, who attended the 2012 Tobacco Industry Seminar in Mangochi early this month, were stunned to learn that this year’s tobacco production was the worst the country has produced in 18 years.
Tobacco Control Commission (TCC) regional manager for the Centre, Richard Chinthunzi, told the meeting that Malawi’s overall tobacco production for 2012 was 79.8 million kilogrammes which he described as the least volume the country produced in 18 years.
The 2012 volume was 66 percent shy of the 236 million kilogrammes produced in 2011.
Chinthunzi said the drop did not come as a surprise as the 2011 tobacco season was characterised by bottom-rock prices which discouraged most farmers from producing more leaf in 2012.
“There was also reduced grower income realised in 2011 which could not adequately finance the 2012 growing season and producers were not adequately informed about the 2012 trade requirements,” he added.
Chinthunzi said the 2012 tobacco marketing season saw very little tobacco flowing to the auction floors because of fuel scarcity. He added that some growers withheld the leaf in anticipation of the devaluation of the kwacha.
Falling tobacco prices
Experts, however, agreed that fluctuation in tobacco production was also due to the country’s deficiencies in the global tobacco market intelligence.
The Tobacco Association of Malawi (Tama) chief executive officer Graham Kunimba told Business News in Lilongwe last week that low tobacco production was mainly due to poor prices the leaf fetched in the 2011 growing season.
Kunimba advised government to double its efforts to diversify the economy to avoid similar disappointments in future.
In its diversification programme, government is promoting the mining, tourism industry and the growing of beans, pigeon peas, groundnuts, soya beans and other legumes which are said to have a good market in Europe and Asia.
TCC public relations officer Juliana Chidumu in an interview last week said tobacco still has a bright future despite setbacks such as its underproduction and the pressure from anti-smoking lobbyists.
“The only thing we have to do is to grow tobacco that is competitive enough to meet the current and future global demands,” she said.
Chidumu said Malawi should reduce its overreliance on tobacco by coming up with other meaningful sources of foreign exchange.
Probably the underproduction of tobacco in the 2012 was a blessing in disguise as most farmers smiled all the way to the banks due to improved prices of the leaf after the devaluation of the kwacha.
And fears of overproduction of tobacco cannot be ruled out this year as most farmers have expressed interest to grow the leaf on the account of good prices it fetched last season.
As at October 5 2012, for instance, TCC had doubled the number of farmers willing to grow the crop to 24 193 from 10 660 registered during the same period last year.
“We have seen an increase in all types of tobacco, but much of the increase is in burley tobacco and flue-cured tobacco,” TCC chief executive officer Dr. Bruce Munthali told Business News in October.
Government is also optimistic that tobacco market is bound to be buoyant next year on account of the newly introduced tobacco growing system , the Integrated Tobacco Production System (IPS).
Minister of Agriculture Professor Peter Mwanza told Business News in September that under the IPS system, farmers will be able to access bank loans through the sponsored crops which in a way integrates the farmers to the trade requirements.