Cumulative revenue from tobacco, Malawi’s main foreign exchange earner, hit $16.7 million (K7bn), a more than 50 percent jump from last week’s $11 million (K4.6bn), according to figures from Auction Holdings Limited (AHL).
The revenue realised is out of 12.2 million kilogrammes (kg) of the leaf sold at the Lilongwe, Limbe and Chinkhoma auction floors at an average price of $1.37 (K575.40) per kg. Mzuzu Auction Floors officially opened on Monday.
This output comprises burley, grown by a majority of smallholder farmers at 12 million kg which raked in $16.4 million (K6.8bn) at an average price of $1.36 per kg and flue cured, mostly the preserve of large estates, which raised $378 110 (K158m) out of 141 019 kg at an average price of $2.68 (K1 125) per kg.
The trickling in of proceeds from tobacco is critical now because it means a boost to Malawi’s foreign currency reserves which could be useful to anchor the kwacha and also help the private sector to procure fuel and raw materials for production purposes.
Malawi heavily relies on tobacco which brings in more than half of the country’s foreign exchange and contributes roughly 13 percent to the gross domestic product (GDP).
But after four weeks into the tobacco sales season, the kwacha is yet to show signs of stabilising, but is drastically depreciating and is currently trading at K420 to a dollar in Authorised Dealer Banks (ADBs).
The import cover, the determinant of the country’s ability to import goods and services in a specified period, is still below one month, an equivalent of $188.1 million (K79 billion) against the internationally recommended minimum of three months [$564m].
Tobacco Control Commission (TCC) chief executive officer Bruce Munthali, in an interview, said the level of proceeds this year is encouraging compared to the same period last year and also that the rejection rate, at 20 percent, is within the acceptable limits.
“If this trend is going to continue, we will have a favourable tobacco market season,” he said.
In its commentary, AHL says in week four, burley prices continued to rise and stood at $1.48 (K621) per kg.
“Volumes delivered and sold continue to rise, but still remain far below market capacities. Week four witnessed the highest season average for burley on the market of $2.60 [K1 092] per kg,” says the leaf’s auctioneer.
Malawi is this year expected to rake in $300 million (K126bn) from tobacco, said President Joyce Banda at the opening of this year’s marketing season at Lilongwe Auction Floors in March.