Malawi tobacco earnings dip 17 percent

Malawi better think of alternative ways of easing its foreign exchange shortage since the first three weeks of tobacco marketing does not seem to offer much hope with a 17 percent drop in sales registered this year compared to the same period last year.

 

The country has in the first three weeks of tobacco marketing earned $3.1 million (K501 million) which is 17 percent shy of the $4 million (K668 million) the leaf generated last year, according to Tobacco Control Commission (TCC) figures.

Although things do not seem rosy, TCC chief executive officer Dr Bruce Munthali on Tuesday sounded optimistic, saying this year, the market will be better than last year because of the drop in rejection rate from 40 percent to 20 percent when the market opened.

Tobacco remains the country’s number one foreign exchange earner, wiring in over 60 percent of total foreign exchange cash.

According to a TCC update sourced over the weekend, the average price for the leaf during the first three weeks was $1.08 per kilogramme (about K180) which shows a 42 percent increase from last year’s 75 cents (about K125) per kilogramme.

But the $1.08 average price is still way below government’s minimum price for burley of $2.20 (K367) per kg.

Less tobacco

This time, according to TCC, about three million kilogrammes of burley tobacco has been sold against 5.2 million kilogrammes marketed last year.

This year tobacco market opened on a low note on March 26 with farmers offered as low as 85 cents (about K142) per kilogramme.

Recently, TCC bemoaned low flow of tobacco to the country’s auction floors and warned farmers against hoarding the leaf or smuggling it to neighbouring countries.

But Tobacco Association of Malawi (Tama) said some farmers were hoarding tobacco because they were dissatisfied with prices at the auction floors and others were anticipating a devaluation of the kwacha, which would have caused them to earn more money.

The Central Region Tobacco Growers Association (CRTGA), however, seems satisfied with prices.

Better prices

CRTGA president Ernest Chadzunda in an interview on Tuesday said so far most farmers under the association have expressed satisfaction with prices, especially with the contract marketing at the floors.

“We carried out random interviews which showed that there were significant improvements in terms of prices. Last Tuesday, price went as high as $2.55 per kilogramme, which to me is a significant improvement,” he said.

Last year, tobacco earned the country $292 million (about K49 billion) which represented a 30 percent drop from $410 million worth of revenue earned in 2010.

Currently, tobacco contributes 15 percent of Malawi ’s gross domestic product (GDP) and continues to anchor the country’s balance of payments (BoP), an overall measure of the country’s trade performance with the rest of the world.